EU VAT in Germany on e-commerce transactions

A recent article explains, how Value added tax (VAT) is charged depending on the rates of the seller’s country as well as whether the transaction is a B2B or B2C transaction.

The European Union (EU) believes that e-commerce would be more effective if VAT were charged at the rate of the buyer’s country. Many e-commerce firms shop around for the lowest VAT rate nations and establish their businesses there. Germany does not want to change the VAT regime ahead of a planned rise from 16% to 19% in its own VAT rates.

The current German law restricts the ability of a vendor to limit its liability to the buyer. This applies to both Business-to-Consumer (B2C) and Business-to-Business (B2B) e-commerce transactions. A vendor who operates an e-commerce business in the German market will normally choose German law as the applicable law for any indirect or direct e-commerce transactions that are conducted in Germany, although in B2B relations, the vendor is free to choose the law of another country as the governing law. Under EU directives, the VAT rate applicable in the country of registration for e-commerce transactions is applied to all B2C transactions.

Source : By support@businessassurance.com (BusinessAssuranc..., dated 20/12/2007