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The new German VAT law has existed since January 2019, and was designed to eliminate VAT fraud in Germany by making online marketplaces liable for any unpaid VAT from third-party sellers on its platforms. According to research, VAT fraud costs EU member states as much as €50 billion per year. Therefore, it is pivotal that online marketplaces ensure their sellers are tax compliant to avoid this liability. However, eBay and Amazon advised the government that they could not control what their sellers do and neither can they monitor them to ensure that they pay their taxes. The German tax authority decided to support online marketplaces by issuing sellers with an F22 VAT Certificate which validates that the seller is tax compliant.

What is the F22 VAT Certificate?

The new German VAT law certificate validates that sellers are German VAT registered and that they’re up to date on compliance. The law was designed by the German government to eradicate ecommerce related VAT fraud in Europe. The regulation was first introduced on 1st March 2019 for non-EU sellers and was subsequently extended to EU sellers on 1st October 2019. Merchants are thus responsible for providing online marketplaces with an F22 VAT certificate to ensure that they have the right to sell goods on their platform. If a seller is unable to provide this document, then the online marketplace has the right to block their account. Otherwise, the marketplace will be held accountable for any unpaid VAT if they allow the seller to conduct business on their platform.

So what’s new?

On 10th October 2019, the European Commission (EC) submitted a formal notice in Germany requesting to withdraw the requirement for obtaining the F22 VAT certificate which they consider to be an inefficient and disproportionate measure preventing the free access of EU businesses to the German market in breach of the EU Law. The European Commission pointed out that other EU member states have agreed on more efficient anti VAT fraud measures for 2021. Germany has until the 10th December 2019 to respond to the notice and failing to do so, or if the response is inadequate, it may cause the European Commission to send a reasoned opinion asking them to amend the requirement in their VAT law. Failure to co-operate could result in a referral to the European Court of Justice.

Shall I still apply for the F22 Form?

Yes, you should still apply for an F22 certificate to ensure that you remain VAT compliant. Please take note that this is only a discussion about abolishing the F22 VAT certificate, and therefore no action has been made yet.

This legal provision has been active since the start of 2019 and is still valid to this present day. In other words, the F22 form which is also called compliance certificate is still needed until further notice. Therefore, non-compliance will result in severe penalties, account closures and exclusion from the platform.

Even though it is uncertain what’s going to happen to the F22 document, the obligation for ecommerce businesses to provide one once they start trading online, is still very much legally effective. So please, do not ignore it.

It is speculative if it might or might not get revised to increase its effectiveness. There are more efficient anti VAT fraud measures such as the split payment mechanism which has proven to be successful in other European countries, including Italy and Poland.

If you need any assistance in obtaining an F22 VAT certificate, please do not hesitate to contact us on 0191 378 0287, to speak to one of our advisors, alternatively, you can drop us an email to vatdurham@jpaccountant.com.

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