International tax barometer – Traps global online vendors can avoid
Dealers are advised to inform themselves properly about registration requirements, VAT rates and thresholds with respect to online trade not only within the European Union. There is no uniform regulation on how goods are taxed in different parts of the world. This is why Ecovis has turned to its international partners to discover what fiscal conditions apply elsewhere.
René Schubert in Muldestausee, Germany, sells women’s fashion online via his company ixens-fashions, using Amazon. The internet giant offers dealers an option to warehouse and despatch the goods on their behalf. Anyone doing so has to comply with Amazon’s strict requirements. Dealers pay Amazon an additional 50 cents per article for warehousing goods in Germany, on top of the usual fees.
It is cheaper for dealers to allow the internet giant Amazon to warehouse their goods in Poland and the Czech Republic. However, this is not always the best solution. René Schubert has brought his goods back to Germany from the warehouses abroad, even though he has now to pay Amazon 50 cents per article sold. “Fiscal registration abroad is an incredibly complex job. It is less complicated for me to warehouse the goods here in Germany,” he says. Nicole Steffek, his Ecovis tax adviser in Leipzig, advises online dealers to check whether it is worthwhile warehousing their goods in neighbouring countries, considering the effort required. “It is best to see what the options are and, where necessary, to ask for professional advice. This is because registration is complicated and takes a lot of time. There are considerable tax and legal risks”.
It is possible that storage in Germany is the “better option” despite having to pay additional fees, she thinks. In cases where the goods are kept in warehouses in Poland, the requirements of Polish tax law apply to the dealer and all movements of goods between the warehouses in Germany and Poland need to be reflected fiscally in both countries. An additional factor is that the VAT rate in Poland is 23%. However, this depends on the volume of goods transacted. “It may indeed be worthwhile for large dealers to warehouse their goods abroad. The fee of 50 cents per article can add up to a pretty sum for them”, says Steffek.
EU turnover thresholds
There is a special feature pertaining to mail order business within the EU with respect to sales to private customers: where an online dealer exceeds a certain volume of turnover for deliveries to a certain country (known as a turnover threshold), he or she must be registered in that country and is liable to VAT.
The most common turnover threshold is 35,000 euros. “This threshold is, for example, applicable in France”, says Cedric Perreta at Ecovis in Paris. The threshold between Germany and Luxemburg is 100,000 euros. “Turnover thresholds are typical for the European Union. Non-EU countries do not necessarily make a difference in online trade between businesses and private customers. In these cases import duties are sometimes applied, the rate depending on whether there are any free trade agreements between two countries”, says Alexander Weigert, a director of Ecovis.
One example given by Hiroshi Tsumaki at Ecovis in Tokyo is that goods of which the value does not exceed 10,000 yen (about 75 euros) are exempt from customs duties and taxes. States particularly relevant from the EU perspective are, besides Japan, the expanded Asian free trade area ASEAN and the North American NAFTA.
More obligations for Amazon, eBay and the like
Occasionally certain countries impose special conditions: Torsten Weller at Ecovis in Peking reports that all dealers in China are obliged to register for turnover tax, besides which “an incorporated company with proper tax registration has to apply for a general tax payer status”. The situation in Australia is somewhat different. Here “the administrative burden for collecting the goods and services tax (GST) falls on the provider of the platform”, says Scott Hogan-Smith at Ecovis in Sydney. eBay has even threatened “to implement geo-blocking preventing Australians from acquiring goods or services from non-Australian eBay resellers”, their reason being that some of the latter charge GST but do not pay it on to the tax authorities. Germany is planning similar amendments: the federal and state ministries of finance want to prevent foreign dealers charging VAT for their goods via platforms such as Amazon and eBay, only then in some cases to retain it instead of passing it on to the tax authorities.
The survey, which was conducted among Ecovis partners throughout the world, shows enormous differences in how different countries deal with online trade revenues. “And, as always with fiscal law, the devil lies in the detail”, says Alexander Weigert, “but our international network of partners is able to answer all and any questions about this in over 60 countries”. They know where there are free trade areas, customs duties and tax-exempt sales thresholds, and whether dealers need export licences, as in Israel, for example. Ehud Ozery at the Ecovis office in Israel reports, for instance, that an export licence has to be presented for every export transaction. Exports valued at less than 250 dollars are subject to less stringent requirements.