Dear colleagues,
I am almost finished writing an article about Chinese sellers on Amazon.de or other European Amazons and the VAT issue.
I would kindly ask you to give me your opinions if you spot faults in my argumentation since the issue seems to be so clear and yet so difficult to verify.
According to Amazon: approximately 2 million external sellers use the platform of Amazon whereas sellers from Hong Kong and China have been growing 65% per year. Overall 40% of the total business of Amazon is done by third-party seller.
A Chinese seller (BestWe is one typical seller example) presents his products on Amazon.de and the webpage of Amazon.de says VAT included (MWSt. inkl.). The impressum of the Chinese seller does not show a European VAT identification number (although he could apply for one via MOSS).
So the customer buys from a Chinese seller on Amazon.de assuming that VAT is included (and declared). Nevertheless Amazon informs that Amazon only withholds VAT for their commission portion according to EU directive 1042/2013 and the rest is paid out to the Chinese seller.
In Europe, according to EU Directive 112/2006 for B2C product sales VAT shall always be declared in the country of the seller.
Letter shipment from Hong Kong to Europe is €1-2 for products like smartphone covers. Wholesale price in Hong Kong is way lower than €1 and sales price on Amazon €6-8
The Chinese seller has three options to deliver to the German buyer
1) Value incl. shipping less than €22 and shipped from China
Customs does not stop the shipping (for administrative reasons of low value) and the seller should declare VAT directly to the tax office on his own. It is free of import VAT but this does not mean it is free of VAT. And on Amazon it is shown with VAT so it has to be declared.
2) Value above €22 and shipped from China
Customs stops the shipping and either the buyer pays import VAT or it is returned or destroyed. A contradiction because the buyer has paid VAT according to Amazon already, the seller has received the whole value and has to declare VAT. And how then does the buyer get his original money back if he does not pay VAT to customs?
3) Seller uses FBA-Service (Forward by Amazon meaning that the seller stocks large quantities of a product at Amazon and it is then shipped from inside the European Union warehouses)
The seller pays import VAT on e.g. 1.000 smartphone covers but since they have not been sold, he declares import VAT on wholesale price and not end price. E.g. €1 value per cover instead of €8. When he then sells, the VAT on the €7 sales price difference has to be declared by the seller at that stage.
So what I see is a massive tax fraud for lower price products. In Europe every chewing gum sold carries VAT but here it seems to vanish somehow.
The question is now also how Amazon comes into this. One could claim that Amazon is somehow assisting tax fraud. Another arguement could be that Amazon is in violation of the European Union Directive 31/2000. It protects portal providers in Article 14 by defining that providers are not responsible for the content they host as long as they are not informed of its illegal character, and they act promptly to withdraw access to the material when informed of it. The obligation to react (in Germany within 24h) has been confirmed in a multitude of court cases. Therefore although Amazon is not responsible for the content created on their websites, they are responsible for the displayed information over time if they do not stop it. And this carries large financial penalties.
By the way, I have made test purchases for all three cases and in each case I was rejected an invoice showing the VAT - which I paid according to Amazon.de
Looking forward to your comments and guidance.
Lieber Herr Kollege Demmelhuber,
ihre Themenstellung ist nicht nur sehr aktuell und interessant sondern auch gesellschaftlich von großer Bedeutung. ihre Argumentation ist überzeugend und konsistent. Ich empfehle Ihnen, Ihren Beitrag den mittelländischen Händlern zur Kenntnis zu bringen.
Viel Erfolg und beste Gruesse
guenter Schweiger
Business based in the UK and sell digital products online, then the EU rules on automated digital services may apply (varies from 0 to 20 or 30%)
http://www.mykeblack.com/blog/ecommerce/vat-for-ecommerce-websites
It is a common problem with platforms like Amazon. The risk is that foreign companies 'abuse' the rules by not collecting VAT to gain a competitive edge over local suppliers. In those situations, VAT is no longer neutral. The solution I see, is a change in the Directive to the extent that platforms like Amazon are deemed to act as commissionaires (buy/sell companies) and, thus, make Amazon responsible for collecting and remitting the VAT.
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