Roger Gothmann, Ph.D., is co-founder and CEO at Taxdoo, an automatic platform for monetary compliance in e-commerce.
Digital interfaces, platforms and marketplaces type a key layer within the digital infrastructure behind e-commerce, serving as gatekeepers between shoppers and producers of digital content material or digitally offered merchandise.
These gatekeepers supply third-party corporations entry to a world market by offering their very own infrastructure. It’s subsequently not stunning that their development is commonly pushed by a robust inflow of third-party corporations, which may broaden internationally with their merchandise and content material with out having to construct their very own technological infrastructure.
An growing variety of on-line retailers use such platforms for his or her e-commerce companies, which has made these platforms an integral a part of compliance procedures.
The EU VAT reform
On July 1, 2021 there was a giant change within the European Union’s Worth Added Tax (VAT) regulation, impacting on-line retailers, marketplaces and their e-commerce companies throughout the EU. Since 1993, the VAT regulation within the European Union regarding cross-border e-commerce was largely unchanged and was initially launched for mail order companies that used catalogues.
However EU member states realized a number of years in the past that EU VAT regulation was now not on monitor with the developments happening within the e-commerce ecosystem.
Within the worst case, non-compliance with these rules will imply that VAT won’t have been paid for hundreds of transactions.
This has led to many issues for marketplaces like Amazon, as they’ve a big variety of third-party retailers based mostly outdoors the EU. For instance, third-party retailers account for about 50%-60% of Amazon Germany’s income, and greater than half of those retailers based mostly in China.
The VAT issues that come up from this led to huge tax losses up to now, as a result of third-party retailers, particularly these from China, didn’t declare the VAT that was really due within the EU, giving them an enormous market benefit over the EU retailers. The EU has acknowledged this and initiated the VAT reform, which primarily locations duty on the marketplaces.
The EU VAT e-commerce package deal, beneath particular circumstances, could make on-line sellers and marketplaces liable to pay VAT and results in sure challenges and dangers.
Since July, it has been key for marketplaces to find out the VAT due for each transaction and set up associated processes equivalent to VAT charge willpower, invoicing, submitting and reporting. That is relevant to marketplaces when they’re liable to pay tax on transactions by sellers not based mostly within the EU or for distance gross sales from non-EU international locations.
Marketplaces have to concentrate on further oblique tax rules to keep away from large tax and monetary dangers. Not adapting to the brand new rules can lead to paying VAT and curiosity retrospectively for the gross sales made on the platform. In Germany, this could imply paying 19% VAT on the web gross sales, with fines and curiosity added on high. In international locations like Italy, the surcharges can attain as much as 240%.
Broad vary of VAT charges throughout the EU
It’s not solely vital for on-line retailers to find out the VAT charge for his or her merchandise, however market operators, being answerable for VAT beneath sure circumstances, even have to make sure the appliance of the proper VAT charge in each EU member state.