VAT | 10. September 2020

Price Indication Regulation in cross-border online trade

The Price Indication Ordinance regulates how goods prices must be shown to customers. In cross-border e-commerce, it poses challenges for merchants. by

The Price Indication Regulation (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 to compare them. This should strengthen the consumer’s rights in relation to retailers and promote competition.

Price Indication Regulation: What rules apply to online retailers?

The PAngV enjoys a lousy reputation in e-commerce, as it repeatedly serves as a basis for warnings. To be on the safe side, online merchants must pay attention to a few points:

  1. 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.
  2. The PAngV requires online merchants to indicate that the total price includes sales tax. A legally binding notice can be made directly with the full price (for example: “including VAT”). An alternative is offered by an asterisk reference (*including VAT).
  3. It is not allowed to advertise with the net price.
  4. The shipping costs must be indicated in online trade as part of the price or as extra costs. The information on the shipping costs must be recognizable and assignable. A reference with an asterisk is again possible.
  5. Customers have a right to know how the shipping costs are composed. The shipping costs do 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.
  6. 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 close to the total price. Examples are food or care products.
  7. The unit of measure for the basic price is 1 kilogram, 1 litre, 1 cubic meter, 1 meter or 1 square meter, depending on the types of goods. If the nominal volume or weight is not more than 250 grams or millilitres, 100 grams or 100 millilitres can be used as the unit for the basic price.
  8. 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 also have to consider the (import) VAT when quoting prices. In addition, the PAnGV requires that the total price be indicated and that customs duties or other price components be considered accordingly. Third-country traders must register with the respective national tax authorities and 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 actual purchases showed that 65 per cent 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 per cent 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 must 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) per cent applies. In addition to the temporary change in tax rates, retailers must also be aware of any national exemptions for their products – for every EU country they sell.

With ClearVAT, online merchants can display product prices, including the [currently applicable value-added tax on their store pages] 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.