This will probably come as a relief for many e-commerce sellers who dreaded having their accounts potentially shut on Ebay or Amazon German marketplaces.
In October 2019, the European Commission decided to send a letter of formal notice to Germany, to remove the country’s recently enacted legislation on distance sales of goods facilitated by online marketplaces.
As we wrote in a previous blog post, the German law currently specifies that as per October 01st 2019, a marketplace would become jointly and severally liable for the VAT due on the goods sold by EU based companies, through its platform, when transport of the goods would begin or end in Germany. However, online marketplaces can bypass this new liability if they obtain a paper VAT certificate provided by the German tax office to sellers using their online platforms.
In the eyes of the EU Commission, this new obligation not only is inefficient but also hampers the free access of EU-based businesses to the German market, and therefore violates the EU Law.
Additionally, this German law turns out to be at odds with the measures already signed off by the EU member states and coming into force in 2021 as part of the Digital Single Market Strategy for Europe.
The decision to send a letter of formal notice to Germany was made public by the Commission as part of its October Infringements package, which gives public access to the key monthly decisions made to ensure that EU Community law is rightfully applied.
Can the EU Commission force Germany to withdraw this law?
Absolutely, as the ‘Guardian of the Treaties’ the EU Commission is responsible for identifying potential infringements of the EU laws, following an audit or even complaints from EU citizens and other stakeholders.
If one of the EU member states fails to comply with the EU directives – either by not fully transposing the provisions into its national legislation or simply violating the EU law – the Commission has the power to open a formal infringement procedure against that member state.
So, what’s next for Germany?
The European Commission gave Germany two months to act and remove the amendment to its legislation. If it fails to do so by the given deadline, the Commision is likely to take it a step further and send the German authorities a reasoned opinion. So far, we have not seen any satisfactory replies from Germany, but we will keep a close eye on what the authorities have to say.
This is a post by Louise Boussemart, VAT Researcher at SimplyVAT.com