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Launching the One-Stop Shop in Germany—a Journey Into the Unknown

Dec. 20, 2021, 8:00 AM

The launch of the value-added tax (VAT) One-Stop Shop platform in Germany was not problem free. The Federal Central Tax Office (Bundeszentralamt für Steuern, BZSt) experienced some technical issues from the start.

This article will focus on the launch of the One-Stop Shop (OSS) in Germany—and the difficulties the tax authorities encountered.

First things first: The original launch of the OSS was postponed from Jan. 1, 2021 to July 1, 2021. Germany insisted on this as the tax authorities were not able to deliver on time—and Covid-19 served as a fig leaf for the delay.

Many tax advisers with mandates for e-commerce clients could see that the German tax authorities had reached their limits with the development of such a complex platform, regardless of the pandemic.

Many tax firms had invested in automated processes, and were then taken by surprise that no interface, or at least the possibility to upload their clients’ transaction data, would be available at least until the third quarter of 2021.

Yet the very nature of e-commerce mandates is that they are all about big data. Transferring that data to the tax authorities via manual systems—not forgetting the risks associated with inconsistencies in these systems—seems completely out of date considering we live in a digital era.

However, the situation got even worse: If a tax adviser patiently transmitted the transaction data manually, they would often receive cryptic error messages at the end of the process. These messages would state that something was “not plausible” and therefore “could not be processed conclusively.”

It was not the data transmission that was erroneous: The system itself was corrupted.

The OSS was drawn up too hastily: It is obvious that its “creators” were not aware, for example, of the specific warehouse and delivery structures that dominate on Amazon and what kind of transaction data results from this. The most serious error concerned online sellers who used the Amazon FBA program and were unable to report such warehouse structures correctly in the OSS.

Federal Central Tax Office Lost Sight of Tax Advisers and Merchants

Merchants and tax advisers who tried to submit their reports through the OSS on time by Oct. 31 were for a long while uncertain as to whether their reports made it on time to the BZSt. Overall, that question mark remains for almost all of those affected by the errors described above.

It was only two days before the deadline expired that the BZSt announced on its website that under certain conditions the deadline would be met even if the submitted report was considered to be “not plausible.” However, it is important to point out that, for most online sellers and tax advisers, it is difficult to assess whether there was a harmless or harmful transmission error.

Developing software in such a complex RegTech environment as EU-wide VAT regulation is a challenge.

In addition, the BZSt always sits on the fence: From the federal government’s point of view, it has to ensure the homogeneity of taxation in virtually every tax office across Germany, while it also has to take into account its own IT infrastructure, as well as other regional sensitivities of Germany’s 16 federal states. These framework conditions could not be more detrimental to agile software development.

Nevertheless, the BZSt also made many cardinal mistakes in modern software development.

Test Environments and Communication are Key

In contrast to other EU countries, there is still no publicly available test environment in Germany. Many of the errors that are now occurring could have been identified in advance.

Communication is also anything but up to date: For a very long while the BZSt did not share any statements with the public and only provided answers to individual requests. There were no electronic interfaces to submit reports for the first quarter, and all data had to be reported manually through the My BOP website. Online merchants and their tax advisers only found out about this when someone called the BZSt.

Furthermore, it was not until the penultimate working day before the deadline for submitting the first OSS report that the first public statement from the BZSt appeared. It was then only of limited help since the coding errors in the OSS system were not addressed.

Germany was not the only large EU country that struggled: Spain, for example, faced similar problems. However, for some smaller countries like Austria, which implemented the OSS earlier and provided merchants and tax advisers with a test environment, it has been smooth sailing.

If the EU has learned anything in the last few weeks, it is that harmonized VAT regulations will hardly work without harmonized standards when it comes to the development of corresponding technical processes on the part of national tax administrations.

Lessons Learned?

At the time of writing, the issues, and to a large extent the causes of the errors, were known. The German tax authorities have not yet communicated that those problems have been resolved.

As things now stand, countries like Germany have done a disservice to the European Commission’s efforts to develop the OSS into a central compliance platform for all types of transactions concerning VAT law. The implementation of the OSS was a disaster.

Given the European nature of the VAT E-commerce package, Germany and the BZSt need to become aware of one important point: Their old way of working, which means having authorities developing software in secret, and behind the scenes—which taxpayers end up using in any event—no longer works.

Without comprehensive test runs with real data, the next OSS quarter will begin as the last one ended—with frustration for all parties involved.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Roger Gothmann PhD is co-founder and co-CEO of the automated platform for financial compliance in e-commerce, Taxdoo, headquartered in Hamburg, Germany.

The author may be contacted at: roger.gothmann@taxdoo.com