Suche
Contact
14.04.2020 | KPMG Law Insights

US online retailers targeted by German financial and law enforcement authorities

US online retailers targeted by German financial and law enforcement authorities

Task Force “The Unknown Taxpayer – U.S. Companies with Electronic Services in Germany” at the Tax Investigation Office in North Rhine-Westphalia

I. Task Force at the Hagen Tax Office
The tax investigation authorities in North Rhine-Westphalia are currently conducting systematic investigations to uncover U.S. companies that provide electronic services via the Internet or apps to German non-entrepreneurs but are not registered for VAT purposes in Germany with the Bonn-Innenstadt tax office responsible for U.S. companies and thus do not subject the services to German VAT.
To this end, a further task force was set up at the Hagen Tax Office for Criminal Tax Matters and Tax Investigation – in addition to the existing task force for real estate acquisition tax, which is operating with considerable investigative success – to investigate corresponding US companies that have not yet been registered for VAT purposes in Germany. It has already obtained extensive data from publicly available sources and is currently evaluating it.
If the evaluations reveal that companies have performed such services but have not declared and paid the German sales tax due on them to the tax office, it must be assumed that, in addition to the taxation proceedings, criminal investigations or fine proceedings will be initiated on suspicion of tax evasion and/or breach of supervisory duty pursuant to Section 130 OWiG.
This primarily affects U.S. companies that provide electronic services to German private individuals. In principle, however, all foreign companies that provide electronic services to German private individuals but are not registered with a German tax office for VAT purposes are likely to be the focus of the German tax authorities.

II. Background under value added tax law
If digital products are made available by granting access on the Internet or sold for downloading via the company’s own websites or freely accessible online marketplaces, these are so-called electronically supplied services for VAT purposes. According to § 3a para. 5 S. 2 No. 3 UStG, this includes services that are provided via the Internet or an electronic network, including networks for the transmission of digital content, and whose provision is highly dependent on information technology due to the characteristics of the other service; i.e., the service is essentially automated, is provided with minimal human involvement, and is
would not be possible without information technology (section 3a.12 paragraph 1 UStAE).
These include, for example, apps, e-books, online publications, hosting and streaming offers, online courses, databases or the provision of images, texts, films or music via the Internet.
The provision of these electronic services for consideration by foreign entrepreneurs to German non-entrepreneurs is subject to VAT in Germany.

Distribution via own websites
If these electronic services are provided to non-entrepreneurs (in particular private individuals) in Germany via their own websites, the foreign service provider is liable for German VAT and must register for VAT in Germany and declare and pay the German VAT on the electronic services to non-entrepreneurs in VAT returns.

Distribution via online marketplaces
Until December 31, 2014, this also applied to electronic services provided to non-entrepreneurs in Germany via an online marketplace. In these cases, too, the foreign entrepreneur was subject to registration in Germany and had to register and pay German VAT for services provided electronically to German non-entrepreneurs via online marketplaces until December 31, 2014.
Services provided electronically by foreign traders via online marketplaces as of January 1, 2015, are subject to the taxation pursuant to Section 3 para. 11a UStG is defined by the statutory fiction of the inclusion of the marketplace operator in the service relationships as other services to an entrepreneur subject to VAT within the meaning of Section 2 UStG (online marketplace operator). Accordingly, the foreign supplier is no longer required to register for electronic services provided as of January 1, 2015, which it provides to an online marketplace operator, which in turn provides these services electronically to non-entrepreneurs in Germany. If the online marketplace operator is domiciled in Germany, the service is subject to VAT in Germany and the online marketplace operator rather becomes liable for German VAT on the electronic service provided to it by the foreign supplier. This does not apply if the provider of the electronic service is expressly named as the service provider by the marketplace operator and this is expressed in the contractual agreements between the parties.
In summary, it can be stated that foreign companies that provide other services electronically to non-entrepreneurs in Germany for consideration owe German VAT on the services provided and are therefore required to register in Germany,

  • if the electronic services are provided via their own websites,
  • to the extent that electronic services were performed via online marketplaces by December 31, 2014, and
  • insofar as electronic services are performed via online marketplaces as of January 1, 2015, but without the involvement of the online marketplace operator in the service relationship.

III. need for action
The regulations on the sales taxation of electronic services to non-entrepreneurs by foreign companies have been in place for several years and have now become the focus of the tax authorities due to the steadily increasing sales growth in the digital industry.
There is an urgent need for action for all foreign companies, especially U.S. companies, that sell electronic services to German non-entrepreneurs. If such services have been provided for years
If the goods were exported, but no VAT was paid in Germany, there is a risk of high interest payments and possibly penalties and fines in addition to the subsequent assessment of 19% VAT.
Companies should review their digital services in this regard and, in the event of incorrect or incomplete sales taxation in Germany, disclose this to the responsible tax office without delay. At the same time, careful consideration should be given in these cases to whether the disclosure to the tax office can or should be structured at the same time as a self-disclosure exempting from penalties or fines.
If the tax authorities have become aware of the case before a timely registration or submission of VAT returns has taken place, further correspondence with the authorities should be conducted with particular care. In the event of a (tax) inquiry by the tax investigation department pursuant to sec. 208 para. 1 No. 3 AO, it is still possible to file the (late) report in such a way that it also fulfills the requirements of a voluntary report that is exempt from penalties and fines.
We will be happy to provide you with advice on turnover tax and preventive advice with a view to a voluntary declaration made as a precautionary measure, as well as in the context of defense in preliminary proceedings already initiated, together with our tax experts at KPMG AG Wirtschaftsprüfungsgesellschaft.

You are also welcome to contact our experts at KPMG AG Wirtschaftsprüfungsgesellschaft, Dr. Stefan Böhler and Wendy Rodewald.

Explore #more

13.06.2024 | Press releases

Handelsblatt and Best Lawyers honor KPMG Law Experts

Best Lawyers has once again identified the best commercial lawyers in Germany for 2024 exclusively for Handelsblatt. A total of 28 lawyers were honored by…

27.05.2024 | KPMG Law Insights

Agreement on ecodesign regulation: products to become more sustainable

After lengthy negotiations, the Council and Parliament of the European Union reached a provisional agreement on the Ecodesign Regulation on the night of December 5,…

22.05.2024 | KPMG Law Insights

The AI Act is coming: EU wants to get a grip on AI risks

For many people, artificial intelligence (AI) is the great hope for business, healthcare and science. But there are also plenty of critics who fear the…

17.05.2024 | KPMG Law Insights

Podcast series “KPMG Law on air”: When the family business is to be sold

Around 38,000 family businesses are currently handed over each year. In most cases, the change of ownership takes place within the family. But more and…

03.05.2024 | KPMG Law Insights

Doubts about inability to work? What employers can do

The certificate of incapacity for work (AU certificate) serves as proof of incapacity for work due to illness. However, only if the certificate meets certain…

27.03.2024 | KPMG Law Insights

EU Buildings Directive: life cycle greenhouse potential becomes relevant

On March 12, 2024, the EU Parliament approved the amendment to the EU Buildings Directive. The directive obliges member states and, indirectly, building owners and…

19.03.2024 | Business Performance & Resilience, KPMG Law Insights

CSDDD: Provisional agreement on the EU Supply Chain Directive

The EU member states agreed on the CSDDD, the EU Supply Chain Directive, on March 15, 2024. Germany abstained from the vote. Negotiators from the…

21.02.2024 | KPMG Law Insights, KPMG Law Insights

The Digital Services Act – what does it mean for companies?

The Digital Services Act (DSA) is a key component of the EU’s digital strategy and came into force on November 16, 2022. As a regulation,…

15.02.2024 | KPMG Law Insights

Data compliance management: How to implement it in practice

Part 3 of the article series “Professional tips for data compliance management”   The third part of this series of articles deals with data compliance

14.02.2024 | Business Performance & Resilience, PR Publications

Guest article in ZURe: Monitoring the implementation of the LkSG

The current issue of ZURe (p. 20 ff.) contains a guest article by KPMG Law Partner Thomas Uhlig (Head of General Business and Commercial Law),…

Contact

Dr. Heiko Hoffmann

Partner
Munich Site Manager
Head of Criminal Tax Law

Friedenstraße 10
81671 München

tel: +49 89 59976061652
HHoffmann@kpmg-law.com

Arndt Rodatz

Partner
Head of Criminal Tax Law

Fuhlentwiete 5
20355 Hamburg

tel: +49 40 360994 5081
arodatz@kpmg-law.com

Philipp Schiml

Partner

Tersteegenstraße 19-23
40474 Düsseldorf

tel: +49 211 4155597150
pschiml@kpmg-law.com

© 2024 KPMG Law Rechtsanwaltsgesellschaft mbH, associated with KPMG AG Wirtschaftsprüfungsgesellschaft, a public limited company under German law and a member of the global KPMG organisation of independent member firms affiliated with KPMG International Limited, a Private English Company Limited by Guarantee. All rights reserved. For more details on the structure of KPMG’s global organisation, please visit https://home.kpmg/governance.

 KPMG International does not provide services to clients. No member firm is authorised to bind or contract KPMG International or any other member firm to any third party, just as KPMG International is not authorised to bind or contract any other member firm.

Scroll