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Booking of a foreign PayPal receipt and the procedure with VAT

February 22, 2022 | 35,00 EUR | answered by Steuerberater Knut Christiansen

I am a sole proprietor and prepare the EÜR annually as my profit determination. I do NOT use the small business regulation.

For the following "business model," I am not sure how I can correctly declare it for tax purposes or make it credible to the tax office:

1. I buy a product on an online marketplace.
2. I publish a product review for this product and receive a regular full refund of the purchase price from the seller via PayPal (from abroad, primarily China).
3. I sell the product in my own online shop at a lower price after this zero-sum game.

Point 1 is unproblematic: I receive an invoice with 19% VAT.
Point 3 is also unproblematic: I issue an invoice with 19% VAT.

My question is: How do I document point 2?
- I cannot issue an invoice for the product review service, as I have no direct contact with the foreign sellers and the invoice would not matter to them from experience. They would not pay the VAT in China (Reverse Charge). This could then become a problem for me. I cannot receive a proper credit document either.
- I cannot issue a self-bill either, as this is only a temporary solution. I would have to issue self-bills regularly. Also, the VAT disclosure on self-invoices does not work.
- Is the PayPal payment receipt (bank statement) sufficient as proof? But then the question arises of how to handle the VAT, which I actually have to pay due to my compensation for the product review service, but which is not clearly indicated on the bank statement.

Steuerberater Knut Christiansen

Hello and thank you for using frag-einen.com!

I would like to give you the following assessment regarding your question.

Since you cannot conclusively prove who the credit is from (foreign company/private individual, etc.), the tax office will subject this money receipt in Germany to value-added tax.

Strictly speaking, it is a credit from the Chinese company, but without documentation. Therefore, you should record the money receipt via Paypal as taxable income and pay the corresponding value-added tax. The fact that you do not have a receipt showing value-added tax is irrelevant. What is important is that you subject it to value-added tax. Generally, the Paypal statement suffices as proof. Ultimately, from points 1 and 2, there is no revenue or loss in terms of value-added tax, so you will not be at a disadvantage.

I hope this answers your question, but feel free to ask any follow-up questions at no cost.

I would like to remind you that this forum cannot replace a detailed and personalized tax consultation, but is mainly intended to provide an initial tax assessment. By adding or omitting relevant information, the legal assessment of your issue could be different.

Best regards!

Knut Christiansen
Tax advisor