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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.
Taxpayers
may supply “combined goods” that consist of a variety
of goods that would be subject to different VAT rates
(standard and reduced rates). The German Federal Ministry
of Finance (BMF) issued an ordinance on March 21, 2006
further specifying the conditions under which the supplier
may subject such combined supply to a single VAT rate, to
ease his compliance burden.
What
rules apply to indirect e-commerce transactions?
Indirect
e-commerce transactions within Germany
When
a German vendor sells tangible goods to a German buyer
through an indirect e-commerce transaction, the standard
rules of VAT shall apply. That is, the German vendor bills
the German buyer.
Indirect
e-commerce transactions within the EU
When
goods are dispatched from one member state to another in
an indirect e-commerce transaction, VAT on the supply of
goods depends on the nature of the persons concerned for
VAT purposes. If the vendor and the buyer are both taxable
persons with respect to VAT law, the supply of goods is
regarded as an intra-community supply of goods that is tax
exempt in the country of the vendor but is a taxable
intra-community acquisition by the buyer. Hence the vendor
will invoice the VAT as applicable in the buyer’s
country. The vendor must register for VAT purposes in the
buyer’s country. If the goods are supplied to buyers who
do not qualify as taxable persons for VAT purposes, there
will be no tax free intra-Community supply of goods. In
such a case, VAT will be payable in the country of the
Vendor. An exception to this rule is when the total value
of the goods, less the VAT, exceeds the equivalent
national currency of Euro 100,000 in the country of the
buyer. In this case, VAT will be payable on the goods in
the country of the buyer.
Export
of goods or services outside the EU
Where
goods are supplied to buyers who are not residents of an
EU member state, German VAT does not have to be charged,
irrespective of whether such buyers are working as private
individuals or a business. The supply of goods from
outside the EU is subject to importation VAT where the
buyer is a taxable person for VAT purposes.
What
rules apply to direct e-commerce transactions?
Direct
e-commerce transactions (for example, downloads of
software, films, music, etc.) are subject to a relatively
diverse VAT treatment since such transactions involve the
supply of information and consequently qualify as services
within the meaning of Article 9(2) (e) of the VAT
Directive. The vendor selling software pursuant to a
direct e-commerce transaction is deemed to render a
service, not to deliver goods, within the meaning of EU
tax law.
Direct
e-commerce transactions within the EU
When
a vendor is domiciled in the EU and provides services to a
buyer domiciled in Germany, German tax law provides for a
VAT exemption (so-called “Zero-Regulation”) provided
that the German buyer is a taxable person under applicable
VAT law and is entitled to a refund of input VAT without
limitations (governmental agencies, universities, etc.
will not qualify for the Zero Regulation). Accordingly the
vendor need not charge such a German buyer (taxable
person) VAT. If the German buyer is not a taxable person,
the vendor must charge VAT as applicable in its home
country.
Exporting
to other EU-countries (Intra-Community Sales)
A
prerequisite for treatment as an intra-community
VAT-exempt sale is that the purchase must be subject to
VAT tax in another EU member state in which the buyer is
located. Importantly, the buyer must actually be the
recipient of the goods. The buyer and actual recipient of
the goods can differ, but in this case, the buyer’s VAT
ID number will not suffice for the seller to claim VAT
exemption on the sale.
Direct
e-commerce transactions from the EU to a buyer outside the
EU
If
a buyer of services pursuant to a direct e-commerce
transaction has his principal place of business or his
domicile in a country outside the EU, no VAT is to be
charged to the buyer.
Direct
e-commerce transactions from non-EU vendors to EU buyers
The
supply of services by a vendor who is not an EU resident
to a buyer who is domiciled within the EU must be treated
in the same way as intra-community supplies of services.
The EU is considering an extension of VAT taxation on
direct e-commerce transactions from abroad into the EU.
Also, it is considering imposing taxation on the
destination of the services rather than on the place of
origin of the services. This entails an obligation for
non-EU vendors to register within one of the EU
jurisdictions. But some professionals foresee that the
latest EU proposal will not make it into law.
Source
: By support@businessassurance.com (BusinessAssuranc...,
dated 12/2007
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