Combating VAT fraud in e-commerce in Germany

Why foreign online retailers should make sure to be ready to register…

Mario Wagner, HLB Germany

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In August 2018, the Federal Government of Germany passed the bill to combat VAT fraud in trade in goods on the Internet. From January 2019 onwards, operators of electronic marketplaces should collect certain data from their retailers. Otherwise, operators are liable for unpaid sales tax from trading via their platform. Unregistered online retailers are threatened to be excluded from the platform.

In particular, companies based in third countries that are not tax registered in Germany often violate their existing tax obligations on electronic marketplaces. In particular, they do not pay sales tax on their sales generated from B2C sales in Germany. The annual tax loss for the German tax authorities is estimated in the hundreds of millions.

In order to combat tax evasion via online marketplaces, a reform of e-commerce from 2021 onwards was decided already in 2017 by the European Commission. Due to the high tax losses, Germany’s government anticipates the EU-wide project with the draft law on a national level.

The draft law includes two core elements:

  • All operators of electronic marketplaces should be required to collect certain data from sellers and to transfer them on demand to the competent tax office. This data includes among others name, full address, tax number, shipping and delivery address, time and amount of sales.
  • The operators are liable for unpaid taxes from deliveries beginning and ending in Germany that have been legally justified on their own electronic marketplace. They can get rid of this if they fulfill certain recording obligations or exclude tax-relevant traders from their marketplace.

As a positive proof of the proper tax registration of a trader in Germany, the so-called “registration certificate” issued by the competent tax office on demand of the online retailer (!) will be valid in the future. If online retailers from states that do not belong to the EU or the EEA apply for this certificate, the application must be associated with the designation of a recipient’s authorized representative in Germany. It is intended that the Federal Central Tax Office will provide the operator of an electronic marketplace by means of an electronic query with information about the certificate stored there. However, pending the introduction of this inquiry procedure, the certificate will be temporarily issued to the online retailer on paper.

After the announcement of the law (expected) in December, all online retailers should apply for the registration certificate and once granted, proactively provide the marketplace operators with them. Otherwise, they are threatened with an exclusion from the trade via the notification to the marketplace operator.

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Talent scarcity: A top threat to business growth in the CEE region

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When you ask business leaders across the globe what’s high on their agenda, chances are recruiting and retaining top talent is on the list. For countries within Central and Eastern Europe (CEE), finding the right talent is an even greater worry. Economic growth in this region is outperforming the EU average and businesses are growing fast. At HLB’s recent CEE regional meeting in Budapest, talent scarcity was identified as a top threat to business growth. We took a snapshot survey among finance and accounting graduates from Poland, the regions largest economy, in an attempt to better understand the views and expectations of young talent entering the CEE labour market. What are the take-aways for business leaders? What can businesses do to attract graduates and young professionals?

Promote a good work-life balance

When it comes to recruiting Millennials and Gen Z talent, businesses need to understand how important work-life balance is to this group. Our snapshot survey showed that 65% of graduates are aiming for a good balance between their personal and professional lives compared to only 17% for whom a high income is their main objective. Through building trust with your workforce and allowing for flexibility in time and space, you don’t just become more attractive as an employer, it is also the type of behaviour that drives innovation for your business. Just think about it for a moment. I’ve you are a business owner or part of the leadership team, does your brain just log-off when it’s 5 o’clock and you physically remove yourself from the office? It doesn’t! Same goes for highly engaged individuals working for you. It doesn’t matter where they physically are or what time of day it is, ideas to grow value for your business can spark anywhere. Don’t be afraid of allowing your people more flexibility.

Invest in tech to recruit tech talent

It seems like such a cliché thing to say, but young talent cares about the technology available to do their job. To them – and perhaps to all generations nowadays – it seems bizarre that their own personal devices (smart phones, tablets, voice assistants, you name it) are lightyears ahead of the corporate devices you’re using in the office. Often consumers apps have more UX design, functionality and capability than some commonly used, pricy enterprise software. If you want to recruit digital talent, invest in your technology.

Work on your employer branding

What is the reputation of your company from an employee’s perspective? Your employer brand describes your reputation as an employer, and its value proposition to your employees, as opposed to your more general corporate brand reputation and value proposition to customers. When we asked the question ‘when it comes to the reputation of a future employer, what is most important?’ 65% of students responded ‘friendly & respectful environment’ opposed to 13% who answered ‘authority & prestige’. Businesses that are most successful recruiting top talent are those who understand the value of employer branding.

Offer a competitive base salary

Just a friendly work environment that promotes work-life balance is not enough. There is more demand for top talent than there is supply. And in today’s globalised world, you’re competing with global employers who are happy to invest in talent mobility and drain talent from the region to other parts of the world. You can’t expect to recruit the best talent, if you’re not offering the right price. However, going back to my previous point, Millennials and Gen Z do take a good employer brand and friendly work environment into consideration when choosing an employer. It’s a package deal.

In short, overcoming the talent scarcity challenges in CEE is not easy. The corporate culture and tech element of the workplace, together with compensation and the basic needs or working conditions influence young CEE professional’s decision-making when choosing the right company to work for. These elements will separate the winners from the losers in CEE’s competitions for top talent. Does your organisation have a plan in place to implement these elements in your people strategy?

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