Tax Evasion by Online Merchants on Ebay due to missing Certificate according to § 22f UStG (German Turnover Tax Act)

In recent years, it has happened time and again that online merchants who offer their goods on Ebay, for example, have not taxed their profits correctly. The legislator has put a stop to this by introducing § 22f Umsatzsteuergesetz (UStG). Since January 2019, the operators of Internet platforms (Ebay, etc.) have been liable for the turnover tax of the commercial sellers registered with them. In order to protect themselves from tax liability, Internet platforms now threaten their traders with the deletion of their profile if no certificate can be presented stating that a tax-correct declaration is being made. Traders who are unable to submit a certificate are not only threatened with the deletion of their Ebay profile. It is also likely that criminal proceedings will be instituted for tax evasion.

Tax evasion by online merchants on Ebay due to missing certificate according to § 22f UStG (Turnover Tax Act)

1. Tax Evasion on eBay

The possibilities for tax evasion on Ebay are manifold. The spectrum ranges from small entrepreneurs, who do not take the formal requirements very seriously, to internationally organised cartels. In the past, for example, there have repeatedly been spectacular lawsuits against Chinese traders who founded front companies in Germany under whose names goods were sold on Ebay. For this purpose, straw people were often used as GmbH owners and managing directors who did not even know what their name was being misused for. Such fictitious companies are often re-established at regular intervals. It often took the tax office several months to identify the criminal companies. Meanwhile, it was possible to set up new fictitious companies on a regular basis.

Such a “cat-and-mouse game” with the tax office is clearly made more difficult by the new regulation of § 22f UStG. The tax investigators can now determine within a few seconds whether the Ebay sales are properly taxed, in particular whether the sales tax (VAT) is correctly paid.

2. Who has to present a Certificate according to § 22f UStG?

In the last few months Ebay has unmistakably requested its commercial traders to prove that the sales and income generated through online trading have been declared to the tax office:

“So that your eBay account is not blocked, you only have to upload the “certificate according to § 22f UStG” from your tax office.

A sales tax identification number (USt-IdNr.) must be noted on the corresponding certificates. It must be issued, stamped and signed by the responsible tax office.

Ebay requires those sellers to submit appropriate certificates that are internally classified as commercial based on turnover or number of sales. It is irrelevant whether the seller describes himself as a commercial seller. It is also irrelevant whether a corresponding trade has been registered with the Trade Licensing Office. For a commercial activity in the sense of turnover tax law, it is sufficient if goods are regularly sold with the intention of making a profit. For example, a trade has already been assumed in cases where a mother sold her baby’s used clothing in more than five auctions per month. Commercialism can also be assumed if there are only a few sales, but these concern high values, for example in the sale of works of art.

All sellers based in Germany are subject to turnover tax. The same applies to the sale of goods stored in Germany or delivered to private individuals in Germany.

For each Ebay account, the platform requires a separate, separate certificate according to § 22f UStG.

3. Are small Entrepreneurs also affected?

Yes, because the so-called small entrepreneur regulation according to § 19 UStG only intervenes if the corresponding invoices refer to the status as a small entrepreneur. This is not observed by many dealers, even if the turnovers do not exceed 17,500.00 euros in the previous calendar year or 50,000.00 euros in the current calendar year.

4 What happens if no Certificate can be presented?

Ebay will block the accounts of sellers who cannot submit a tax certificate in accordance with § 22 UStG. This can destroy the existence of a trader who, for example, has built up good valuations over many years.

Ebay traders who have not declared and paid VAT in the past, although they would have been obliged to do so, have a problem. Because they will not receive a certificate from the tax office.

In addition, the probability that the tax office will become aware of the transaction is very high. Ebay is not obliged under the new legal regulation to report the “black sheep”, i.e. those traders whose account is blocked, to the tax office on its own initiative. The probability that the tax office will detect the underlying VAT evasion is nevertheless very high. Because the tax office has the possibility to make a collective enquiry to Ebay traders without any reason. In other words, the tax office only has to call Ebay and request a list of all affected merchants. It does not have to give any special reasons for this.

The probability that the tax office will make use of the possibility of such requests is very high. It is precisely the purpose and aim of the new version of the law to filter out the “black sheep” among online traders quickly and comprehensively using modern IT. Ebay will also answer the enquiries of the tax office, because otherwise the online platform itself would be liable for the traders’ non-paid taxes.

By the way, forgeries of a certificate according to § 22f UStG might be discovered quickly. The tax office can automatically determine which certificates are genuine without much effort.

In the past, it also happened that (dubious) traders used the turnover tax numbers of other (serious) traders on their invoices in order to give the impression of tax honesty at short notice. Such “identity theft” is also likely to come to light quickly in the future.

5. Tax Self-Reporting by Ebay Dealers which exempts them from Penalties

If criminal tax proceedings are initiated, there is a risk that the responsible dealers will be punished. Depending on the amount of tax evaded, a monetary penalty or imprisonment may be imposed. In the case of lower evasion sums, it is also possible to discontinue the criminal tax proceedings against the payment of a fine in accordance with § 153a of the German Code of Criminal Procedure (StPO).

For Ebay traders who have not taken the tax so seriously in the past, there is a way to at least escape the threat of punishment for the evasion of turnover tax (VAT):

Pursuant to § 371 of the German Tax Code (Abgabenordnung – AO), tax evasion can result in a tax self-reporting exemption from punishment. This paragraph has been amended several times in recent years. To contact the tax office before making an effective voluntary declaration would, however, be a fatal mistake. The consequences of a hastily and badly made self-disclosure are at the latest since the case of the Uli Hoeneß of a broad public admits. A fiscal punishment-exempting self-disclosure is in the meantime only something for professionals. It is however still possible and in many cases also meaningful.

Ebay dealers, who now receive requests to submit a tax certificate in accordance with § 22f UStG and are not in a position to do so, should therefore contact a lawyer who specialises in criminal tax law. With fast acting the possibility exists of getting off cheaply.

If an effective voluntary declaration is submitted in good time, there is also the chance of soon receiving a tax certificate from the tax office – and thus saving the Ebay account.

6. Special features for Foreign Traders

Traders domiciled in other EU member states who do not exceed the threshold of 100,000 euros with deliveries to Germany must prove this to the marketplace operator (e.g. with the help of the VAT ID), but do not have to submit a registration confirmation. Likewise, the certificate does not have to be presented if the delivery is made directly to Germany from a third country (outside the EU/EEA) and the recipient is deemed to be the debtor of the import turnover tax.