Amazon.de Germany’s VAT Tax Certificate/Declaration issue FINALLY SOLVED!

Let’s talk taxes. Yes, I know, I know! One of the most popular topics of all time, especially when it comes to Amazon and VAT. As much as I would like to not think about it and go into the head-in-sand mode, the reality is that we simply can’t avoid the issue of tax. Moreover, with the recent changes in how Germany handles VAT, we now have no choice but to face the issue head-on and find an effective solution.

I have already created a very detailed post about VAT for Amazon sellers, and it has quickly become one of the most popular posts on the blog. I have covered the basics of how VAT works in that post, so I won’t repeat that information here today.

This particular article is all about the newly created VAT situation in Germany, how it will affect Amazon sellers (especially those of us based on the UK), and what you need to do to stay compliant and not lose your seller account.

Just a quick disclaimer before we move forward:

I’m not a tax advisor, accountant or international law specialist. Everything I write in this post is purely my own observations and nothing more. DO NOT use this as legal advice under any circumstances! If you feel that you’re not comfortable with this information, seek legal advice.

Ok, with that disclaimer taken care of, let’s jump right into it! Firstly, if you’re new to selling on Amazon, you might be wondering what all the fuss is about. Let’s find out!

Germany’s new Marketplace
VAT liability LAW

On November 9th 2018, the German Parliament passed a new law that makes online marketplaces potentially liable for unpaid VAT by third-party merchants on their platforms.

In simple terms, the German government was fed up with missing out on all the tax money generated by online sales, so they took action and introduced this new law. The new law basically makes online marketplaces LIABLE for their sellers’ VAT tax obligations. And by online marketplaces, they basically mean eBay and Amazon.

Previously, eBay and Amazon basically told the government that they can’t know what their sellers do, they can’t police them to pay tax, etc., but now, with this new German law, there are no more excuses. The German tax authorities can and most likely WILL follow through on this and hold these large marketplaces accountable for their sellers’ unpaid VAT.

So, what are the actual VAT obligations for the everyday Amazon seller in Germany?

As I already explained in my ultimate VAT guide for Amazon sellers, there are certain criteria for when you need to register for VAT in Germany and start doing tax returns there. I am looking at this from a UK perspective, but if you live in any other EU country, the same rules will apply to you. The criteria are:

• You store inventory and fulfill orders from Germany. This basically means that when you start using Amazon’s Pan-European program OR if you selectively sell on Amazon.de and send your stock to Germany, you’re obligated to register for VAT in Germany. This is nothing new and this law has been in place for years.

• Your sales to German customers exceed €100,000 per year across all sales channels. fulfil is the distance sales threshold and is calculated per CALENDAR year —it is NOT a rollover of the last 12 months. Again, this law has been in place for years now, so it’s nothing new.

So, if you (or Amazon) send goods to Germany and store them there for order fulfilment, you need to register for VAT in Germany. Also, if in any calendar year, your TOTAL COMBINED sales across all channels (eBay, Amazon, online shop, etc.) goes over the 100k EUR threshold, you need to register for VAT.

All basic stuff, right? So what’s the problem?

The problem is that with the new German law, marketplaces (Amazon, eBay, etc.) are now responsible for ensuring their sellers meet these regulations, AND, if they can’t do a good job on this, they can even be held liable for any unpaid taxes. We won’t cover the mechanics of this, but detailed in the new law are the procedures marketplaces will have to follow, the data that will need to be collected and shared with German tax authorities, etc.

Before this new law came into effect, Amazon had already started to ask for VAT numbers for sellers in their Pan-European program, as it allowed them to easily see/track which sellers store goods in other European countries. They even introduced special VAT programs and initiatives for sellers, covering the cost of VAT registration numbers and tax returns for one whole year. This is the program I am personally currently involved with, and I will be doing a separate post on it soon when I receive all the VAT numbers.

Up to this point, everything is relatively simple. If you have stock in a country, you need a VAT number there.

The problem starts with the €100k distance sales threshold. Of course Amazon can easily see the value of the sales you make to German customers in any given year, BUT they don’t know what you’re also doing outside of the Amazon platform!

It could be that you only sell €10k worth of products to Germany via Amazon, while simultaneously selling €150k worth of products via eBay! Combined, that would be €160k—way beyond the threshold—but how would Amazon know that?

In this example, your numbers would most likely be caught by eBay as they will see that your sales are over €100k on their platform alone, but what about scenarios where sellers don’t reach that threshold on any one platform?

Let’s take a look at another scenario: your sales to Germany are €70k via Amazon and €60k via eBay. Combined, you have sales to Germany to the value of €130k, so you definitely need to register for VAT. However, neither Amazon or eBay can know that you have reached this threshold as they don’t share such data with each other.

With the new law in place, in a scenario like this, both Amazon and eBay are responsible for this tax evasion situation and can be held accountable. I don’t know how it could be enforced in reality (and there’s most likely a procedure where sellers are still the FIRST person to be punished/fined, etc.) but it doesn’t change the fact that the days of Wild West VAT are well and truly coming to an end, and things are changing for sellers very quickly.

Very soon, almost every seller doing business in the EU will need to register for multiple VAT numbers in various countries. Luckily, in the very near future (2021 or 2022), the EU will introduce a brand-new VAT system that will eliminate this problem altogether. EU sellers will be able to do VAT calculations from one place, in one country, for sales across all of the EU (just like we currently do with digital products).

But until that happens, we need to go through the costly and time-consuming process of registering for VAT numbers in each and every country separately, starting with Germany—or do we? Do we actually need to register for VAT in Germany? Let’s sort this out once and for all!

Amazon.de German
VAT Certificate Drama

If you’re already selling on Amazon, you will know this story very well as it has been talked about over and over on the Amazon Sellers forums, various blogs, and even within my Amazon Sharks Facebook group.

To cut a long story short, Amazon initially interpreted the new law in a way that required ALL sellers to upload a German tax certificate. If you don’t comply with this requirement, you can’t sell to Germany anymore. Yes, even if you didn’t store goods in Germany via the Pan-EU program or directly, Amazon still wanted you to upload the tax certificate.

This created massive chaos on Amazon and uproar in seller communities because many (I assume the majority) sellers didn’t actually need or have a tax certificate as they didn’t exceed the €100k per annum distance selling threshold. And they didn’t store any goods in Germany.

I do understand why Amazon did it, though. Just like I explained, under the new German law, marketplaces are held liable for third-party VAT evasion, so they took the obvious route and removed all responsibility from their shoulders by simply asking everyone to register for VAT in Germany.

It was only when the last-minute deadlines were approaching that Amazon suddenly changed their stance on this. I don’t know if they found a loophole in the system or their lawyers found a way around it, but luckily for us, they did change their approach and requirements. Now, you may still need to register for VAT in Germany, but only if you meet ONE or both of these two requirements:

• You keep stock in Germany.
• Your sales to Germany across all channels are more than €100k per calendar year.

If you don’t meet at least ONE of these requirements, you don’t need to register for VAT in Germany.

I do feel sorry for all the people who, in the middle of the chaos, started and completed the VAT registration process in Germany. They thought it was the only way out, even though they didn’t need it. If you’re one of those people, don’t forget that you can deregister from VAT quite easily. If you feel that you won’t need that German VAT number any time soon, just deregister to avoid having to do regular VAT returns there.

For everyone else, here’s what you need to do…

German Tax Declaration

When Amazon changed their mind on the whole situation, they created a special German Tax Declaration that basically states that sellers are not obligated under the new law to have a VAT number in Germany.

You can find this declaration via your Seller Central account under Tax Settings or by going there directly via this link:

This is the actual text taken from that page:

German tax declaration

This declaration applies to selling partners who are legally established in non-European Union countries, who are not required to be tax registered in Germany.

For selling partners who are not carrying out taxable sales according to the provisions of the German VAT Code and are therefore not required be tax registered in Germany and to obtain a German Tax Certificate, Amazon, as a marketplace operator, must obtain this declaration if you wish to continue to sell goods to customers in Germany. The declaration asks you to confirm relevant facts that show you have no tax registration obligation in Germany.

Exclusive shipments from places outside of Germany:

1. I am not generating taxable sales in Germany by delivering goods from a German warehouse or any place in Germany. I exclusively ship goods from places outside of Germany.
2. If I ship goods directly from outside the EU to German customers for all these shipments there is no tax liability in Germany since the conditions specified in Section 3 para 8 German VAT Code are not fulfilled.
3. If I ship goods stored in other EU countries and deliver directly to German customers all such deliveries are less than 100,000 EUR in the current calendar year and have been less than 100,000 EUR in the previous calendar year (according to Sec. 3c para. 3 German VAT Code)
4. I will inform Amazon immediately as soon as I exceed the threshold of 100,000 EUR for the first time in a calendar year based on my sales on any marketplace.

The first sentence actually makes you believe that this is only for non-EU sellers:

This declaration applies to selling partners who are legally established in non-European Union countries, who are not required to be tax registered in Germany.

However, I think there’s a mistake or formatting issue (missing and/or) OR they’re playing games? Slightly different versions of the information appear in various FAQ/help pages and, on every page, Amazon clearly state that they don’t provide legal advice, you need to consult a tax advisor, etc.

I still don’t understand how such a simple declaration can be enough to take the responsibility fully off of Amazon’s shoulders. The new German law is very clear on the fact that the marketplaces can and will be held accountable.

I don’t know what games Amazon are playing here, but luckily for us sellers, this is a quick and easy way out of the German VAT situation. Simply log into your account, ACKNOWLEDGE this declaration, and you’re good to continue selling to Amazon customers in Germany—as long as you don’t store stock Germany OR reach the €100k sales threshold per calendar year.

You can learn more about the technical process of registrations and this declaration via this helpful FAQ page.

The deadline to acknowledge this declaration for EU sellers is October 1st, 2019, so there’s no rush. I personally haven’t done it yet. I do plan to store stock in Germany, so I am waiting for my German VAT number to come through.

However, if you don’t plan on doing this and you can’t see your sales exceeding €100k this year, you can safely acknowledge the declaration and forget about this whole thing. Well, for now at least. In truth, no one knows for sure how this will play out in the future and whether Amazon has actually done it the right way. It’s quite possible that they are simply taking a HUGE bet on tax liability right now.

What matters today, though, is that if YOU stay within the line of the law and are not required to be VAT registered in Germany, you’re not at risk. You’re not breaking any laws. The new VAT tax law targets marketplaces specifically and they’re the ones that need to sort their game out and put a simple system in place to eliminate tax evasion.

Ok, that’s it for today! I really hope that I have managed to explain the whole German VAT situation in a simple, easy-to-understand way. If you have any questions, feel free to leave them below the post and I will do my best to help you out. But, again, please note my earlier disclaimer: I’m not an accountant and can’t help with complicated or specific tax situations.

If you’re new to selling on Amazon or new to the whole VAT thing, I highly recommend you check out my ultimate VAT guide for Amazon sellers first.