EU VAT system, E-Commerce
The Price Indication Reguation (German Preisangabenverordnung, PAngV) takes effect as soon as companies offer their goods or services to end consumers. Whether in traditional retailing, mail order or internet trade, the customer should be informed about the prices in order to be able to compare them. This should strengthen the consumer's rights vis-à-vis retailers and promote competition.
Price Indication Regulation: What rules apply to online retailers?
The PAngV enjoys a bad reputation in e-commerce, as it repeatedly serves as a basis for warnings. In order to be on the safe side, online merchants must pay attention to a few points:
According to PAngV the total price must be indicated. The total price is the amount the customer pays. Included are the sales tax and additional costs such as customs duties.
The PAngV requires online merchants to indicate that the total price includes sales tax. A legally binding notice can be made directly with the total price (for example: "including VAT"). An alternative is offered by an asterisk reference (*including VAT).
It is not allowed to advertise with the net price.
The shipping costs must be clearly indicated in online trade as part of the price or as extra costs. The information on the shipping costs must be clearly recognizable and assignable. A reference with asterisk is again possible.
Customers have a right to know how the shipping costs are composed. The amount of the shipping costs does not have to be shown directly with the offer, but for example on a linked overview page that lists how they are calculated. A reference in the terms and conditions is not sufficient.
A special feature applies to products offered by online retailers according to weight, volume, length or area. In such cases, the PAngV requires that the basic price be stated in close proximity to the total price. Examples are food or care products.
The unit of measure for the basic price is 1 kilogram, 1 liter, 1 cubic meter, 1 meter or 1 square meter depending on the type of goods. If the nominal volume or weight is not more than 250 grams or milliliters, 100 grams or 100 milliliters can be used as the unit for the basic price.
- Whenever a price is indicated in the advertising for the product, the basic price must be visible, too.
Special features when importing into the EU
The PAnGV also applies to traders from third countries if they sell their goods in the EU. They have to take the (import) sales tax into account when quoting prices as well. In addition, the PAnGV requires that the total price be indicated and that customs duties or other price components be taken into account accordingly. Third-country traders are obliged to register with the respective national tax authorities and to declare and pay the sales tax. While the import sales tax from July 1, 2021 will apply from the first cent and not, as previously, from 22 euros, customs duties will continue to apply from 150 euros value of goods. The new regulation is intended to reduce VAT fraud, as some retailers have so far deliberately declared foreign parcels with less than 22 euros, even though they contain more valuable goods. According to the EU, an external study based on real purchases showed that 65 percent of shipments from third countries did not comply with EU VAT regulations. Estimates put the resulting tax loss at five billion euros annually.
Value-added tax in intra-European online trade
For trade within the EU, the problem with customs duties or the reduction of import turnover tax does not arise. Although this makes it easier for sellers to state the total price correctly, it does not make it easier for them to deal correctly with VAT and the risk of not declaring and paying taxes in accordance with the law. When a French retailer sells shoes to Germany, he deducts the French tax rate of 20 percent if he does not generate more than 100,000 euros in turnover in Germany. However, as soon as he exceeds the delivery threshold of 100,000 euros, he is obliged to register for sales tax in Germany and pay the taxes to the German tax authorities. Then the German tax rate of 19 (or currently 16) percent applies. In addition to the temporary change in tax rates, retailers must also be aware of any national exemptions for their products - and this for every EU country to which they sell.
With ClearVAT, online merchants can display product prices including the [currently applicable value-added tax on their store pages] (https://newsroom.clearvat.com/de/cleartax) and receive timely warnings before delivery thresholds are reached. The full-service approach also includes the collection of VAT from the consumer as well as the payout to the national tax authorities. This saves sellers the need to register for VAT and the risk of a tax audit abroad.
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