Taxes in an Online Shop – Which Taxes Apply

Online shops are receiving more and more attention nowadays. What used to be the first branch in Germany is now often your own online shop or a presence on well-known online marketplaces such as Amazon or eBay. The e-commerce industry continues to grow every year and has become part of everyday consumer behavior. It is completely normal today to order a product in an online shop and have it delivered to your home. The advantages of online shops speak for themselves. Your online shop is available to customers around the clock and does not incur rental costs for showrooms to present your products.

Taxes and Online Shops – Income Tax, Corporate Tax, Trade Tax and VAT

Regardless of whether online or offline, income taxes (income tax, corporate tax and trade tax) are incurred on the profit of a company. The amount of trade tax depends on the company location, as each municipality has its own trade tax assessment rate. Corporations pay trade tax (usually about 15%) and corporate tax. Sole proprietors pay income tax and trade tax, whereby the trade tax is often fully deductible from the income tax and therefore the income tax is the essential factor.
A webshop written in the German language of a foreign company does not in itself establish income tax liability in Germany. For this, a permanent establishment must exist. We are happy to help you with questions regarding this complex of topics.

An important tax for entrepreneurs in online trade is value added tax. It applies regardless of a permanent establishment. Thus, depending on the type of products sold, either 19% or 7% must be remitted in Germany on the invoices to private customers.
Foreign companies, for example Danish companies, that do not maintain a permanent establishment in Germany and deliver goods to German private customers, can use Danish value added tax up to a certain annual turnover and save themselves the registration in Germany. However, they can also waive the delivery threshold and benefit from German value added tax from the very first euro.

Together with us, make use of the already existing digital data of your webshop in order to ensure a connection to bookkeeping and the value added tax advance return through interfaces to our system. Simply contact us by email or call us for this purpose.

Online trade at the same time also defines new requirements for your sales process – order confirmations, invoices and payment processing as well as monitoring, or the handling of returns, which are processed exclusively digitally.
We communicate with you or your IT service providers in Danish, English or German and are happy to coordinate with your group accounting department and your Danish auditor.

In addition, we can import the data from your bank account (the prerequisite is currently still an account with a German bank) and automatically post incoming invoices in the X-Invoice format. We are also happy to provide assistance if you yourself do not know how to create X-Invoices.

Our Services for Your Online Shop

• Automated import of relevant data from your online systems into our financial accounting
• Communication in Danish, English, or German
• Assessment of VAT consequences of your activities – reliable, personal, and month by month
• VAT registration in Germany
• Co-operation with your Danish auditor
• VAT advance returns
• Annual VAT returns
• Monitoring of delivery thresholds
• Ensuring compliance with the German principles of proper bookkeeping (GoBD)
• Assessment of corporate tax and trade tax implications, including potential tightening of the OECD permanent establishment definition (status: February 2018)

Online Shops with International Activities

Danish VAT is 25%, the same as in Finland and Norway. The Swedish VAT rate is 24%. Compared to German VAT rates, these are relatively high. Companies selling from Denmark or other parts of Scandinavia to private customers in Germany without using the German VAT rate are therefore unnecessarily giving up part of their profit margin.

We explain how you can apply the more favourable German VAT rate for German private customers. In addition, we take care of the administrative work for your company so that you can focus entirely on running your business.