German sales tax July-Dec. 2020

As part of a stimulus package, as response to the Corona crisis, Germany has introduced a temporary reduction in sales tax to be applied from July 1 to December 31, 2020. We have created this short Q&A, based on the questions we have received from our clients:

Q: What are the detailed sales tax reduction rates?

A: The standard tax rate drops from 19% to 16%, the reduced sales tax rate from 7% to 5%. (the reduced tax rate is used for categories like food, plants, animals, books etc.)

Q: When can we change the rate to the new lower rate?

A: In the case of physical deliveries of goods, the sales tax liability arises at the time of shipping. If possible, the goods should be handed over to the shipping company between July 1 and December 31 in order to benefit from the reduction in sales tax. If you ship the same day as you receive an order, this should also be the date you change the sales tax rate in your shop.

Q: When do we need to change the rate back to the higher rate?

A: Again the important point in time is when products are handed over to the shipping company. If you expect 2-3 days to fulfill the order we would recommend to change back to the normal rate on the December 24. This leaves 3 working days for you to pack and ship the orders.

Q: What happens if I use the wrong (current) tax rates during the period from July 1 to December 31?

A: The German consumers are fully aware of the reduced sales tax and charging the higher rate will reduce the conversion rate in your shop and create unnecessary customer service calls. On top of this, the mistake can lead to disputes over differences between invoiced sales tax and the amount paid to the authorities. If you are selling BtB, the German company will not be able to deduct the full (wrongly) invoiced sales tax, but only the reduced rate. This leads to customer service issues and manual settling of differences later.

If you have other questions to the German tax rate reduction, please don't hesitate to call or write us!

Sources:

• https://www.ihk-muenchen.de/de/Service/Recht-und-Steuern/Steuerrecht/Absenkung-der-Umsatzsteuer/

• https://www.haufe.de/steuern/gesetzgebung-politik/absenkung-des-mehrwertsteuersatzes-2020-probleme-in-der-praxis_168_517790.html

• https://legal.trustedshops.com/blog/2020/06/12/mehrwertsteuersenkung-ab-1.-juli-darauf-muessen-sie-unbedingt-achten

Launch your new webshop in a new country in four weeks!

Sometimes launching a webshop in a new country can seem overwhelming and it can be difficult to see where to start. We know where to start and it can be done in 4 weeks.

We agree. There is a lot to do and you will depend on help from others to get through this in 4 weeks. In the model above we have highlighted (in orange) the areas where many will need some help. It is also fair to say that we can only guarantee you are online in 4 weeks if you or your web agency can prepare the technical platform.

Or said in another way, if your platform is prepared for new countries, we can add the local language skills and e-commerce knowledge needed to get you live in 4 weeks.

Where to start

Getting on top of the technical tasks is a very good place to start and the top priority in our timeline above. First of all, you need to take some decisions in terms of selecting partners before you can start doing the technical setup. This part often depends on external resources at your partners and in addition from your own web agency or internal IT-team. Many people involved requires more time!

Get started on texts

First of all, the product texts can take some time if your product range is broad, but at the same time getting adaptation of your webshop texts started, is equally important. This is not only a translation but the text needs to be rewritten to the business processes and local legislation in the new country. Doing this part has always been in our DNA - and our name. Read more about it here.

Marketing done right

Selling in a new country can be tough as your business/brand/product is very likely unknown. You know less about the market and the marketing channels and all together this requires a different approach.

You need to be more data-driven and it also allows you to use marketing initiatives you can't use in your home market. We think Growth hacking is the best approach. Read more here about how we use Growth hacking in international e-commerce.

A local hero

At the end you need to let a native e-commerce specialist from the country test your webshop. We call it a Site check and do it often. This is critical in order to secure the conversion rate you need, to grow in a profitable way.

The Global Ecommerce Playbook

We have read the entire 64 pages of Shopify’s “The Global Ecommerce Playbook”, so you don’t have to. Here are the top 8 take-away points with a few extra tips from us at MakesYouLocal.

1. Selecting the right market from the start is crucial. Mistakes are costly in particular when you base your strategic decisions on gut feelings more than facts. Which products or services are you planning to offer, who are your key competitors, and how do you reach your customers?

2. Use your current data to reveal patterns. Social media channels and google analytics can be great indicators of international traffic to your webshop. Use it as a reference for further investigation.

3. Do your homework before launching. Compare your pre-selected markets, look at the local competitors and your potential customers. Where do you have The best chance against the local competition, and will your webshop be profitable?

4. Sometimes you win, sometimes you learn! The top mistake your business can make with international expansion is investing significantly up front before validating that your brand resonates with target consumers. You should test, learn, and repeat.

5. Do not ignore local rules and regulations - When launching your webshop internationally, you will be doing business outside of your home territory. That means you need to understand and adhere administratively. It is not only VAT and customs. Get help and remember the cost of doing it right from the beginning is often far less, than sorting out the legals when you realise you did wrong.

6. You need to localize the customer experience. International consumers should never suspect you’re from another part of the world when visiting your international online store. If anything is off, you might never earn their trust—or business. You need to localize the customer experience. 75% of consumers prefer to buy products in their own language, and 59% never buy or rarely buy from English-only webshops.

7. How would you like to pay? International consumers shopping online have varying preferences in terms of payment. Make sure you understand what is required in your markets.

8. How to reach your potential customers online: Don’t assume that the same marketing channels work the same everywhere. What is the cost of marketing where you are planning to operate, and how are you going to generate traffic to your webshop?

If you would like your own get started guide for international e-commerce, then please do not hesitate to get in touch with us.