Recent Changes in German Tax Laws: What You Need to Know

Introduction

Amazon has become the world leader in providing a vast network of E-commerce services for online sellers and buyers. Undoubtedly, Germany is one of the well-known countries that serve as an attractive market for Amazon sellers. However, it is essential for an Amazon seller to understand the significance of including German VAT in their products’ total sales prices for growing their business in the German market. For this purpose, one must clearly understand German VAT and its role in online selling on Amazon.

Understanding German VAT

VAT (Value Added Tax) is a tax that sellers add to the good’s prices in Europe. However, VAT is charged on an entire supply chain that starts from the supplier of raw materials to the manufacturer to the wholesaler the retailer to the consumer. Everyone in this supply chain pays this tax as it is added to the product’s original price.

What are the VAT Rates in Germany?

The standard VAT rate in Europe is at least 15%. However, each European country has a different VAT rate. For instance, if the price of a product in Germany is €7, its selling price would be €8.33 with the VAT, as Germany has a VAT set of 19%. This way, the consumers pay the total amount, including tax, while buying the product, and you recover the tax you paid when you purchased that product.

Significance of German VAT Registration

Since Amazon sellers need to register for German VAT, knowing the specific threshold required in your sales for its registration is significant. Germany’s threshold amount is set to €20,000, which makes your German VAT registration mandatory once you reach or exceed this amount in your sales. This threshold amount is not only limited to your sales in Germany but also applied to your overall sales in the European Union.

German VAT Registration Process

To register for German VAT, you must go through an application process in which you need to provide the necessary business details. These details must include the organization’s name, address, tax identification number, documents, and your passport. Note that every company requires a distinct VAT registration.

You can also avail of a tax advisor’s assistance, who can guide you throughout the process with all your documents and information. Once you are done with the registration, wait for it to be approved, after which you will receive your German VAT ID number.

VAT Invoicing and Collection

Once you are registered for German VAT, it is essential to provide proper VAT invoices to your Amazon customers. You will also need to adjust your product prices on Amazon, as you will collect VAT with every sale from your customers.

Filing VAT Returns

Besides, you must file your VAT returns regularly by recording your transactions in a report and submitting it to the tax authorities. This VAT information will let them know about how much VAT you have paid to suppliers, collected from customers, and have to pay or receive in a certain amount of time. In Germany, the standard time for filing VAT returns is one month. Wait for the confirmation after submitting the VAT return, after which you can pay your bills.

VAT Deduction

The best part about German VAT in Amazon is that you can reclaim your VAT invested in your business expenses, such as shipping, marketing, Amazon commissions, and company equipment. This way, you can deduct the VAT you spent on your business activities from the VAT that your customers paid you.

For VAT deduction, you must record every detail of your business expenses, including the amount you have spent, the necessary VAT invoices, and timely VAT filing. Remember that VAT deduction is only valid for the business’ expenses, not personal or other purposes.

Handling German VAT on Amazon

On Amazon, you must organize your products with the correct VAT rates. In fact, your product listings must be in a way that lets your customers know whether VAT is included in the product price or if they have to pay while checking out.

In addition, registered sellers who belong to a non-EU country can submit their VAT ID number to Amazon so they can be identified as registered sellers on Amazon. Not only that, but Amazon also provides its sellers with a feature called the Marketplace Selling Program, which helps you with VAT collections, payments, and calculations.

The Consequences of Non-Compliance with VAT Regulations in Germany

For every Amazon seller in Germany, it is mandatory to strictly follow the VAT rules, as non-compliance with VAT laws can have multiple consequences. These consequences can affect your business in many ways, including financially, legally, and ecologically.

The foremost and quick step the German tax authority will take against your business due to non-compliance is imposing penalties and interest charges. Also, if your VAT calculation and reporting have errors, they can ask you to refund your underpaid VAT. Tax violations can also lead your business to tax investigations, which take enormous time. These factors are enough for severe financial damage to an Amazon seller in Germany.

Furthermore, non-compliance may also damage your image as an Amazon seller. It will result in making your customers lose their trust in your products and business. The tax authorities may take serious legal actions against your company in case of extreme violation of VAT regulations, like criminal charges or imprisonment. Non-compliance with VAT laws may also trigger the authorities to pause your business activities or shut down your company.

Conclusion

Amazon has provided many online sellers with a broad platform to grow their businesses. However, understanding the concepts and procedures of German VAT helps them build a successful business at a faster pace.

Although the procedure of German VAT on Amazon seems challenging, it provides many significant benefits in addition to legal compliances that every seller must avail. Remember that non-compliance with German VAT may also lead you to various complications. So, apply for your German VAT registration and actively participate in the flourishing E-commerce network.