EU VAT triangulation – Party B registered in destination country

Introduction

Many multi-national companies operating across the EU make use of the “triangulation simplification”. This removes the burden to VAT register in different Member States into which goods are delivered. A question that is often asked is whether or not the triangulation simplification is still available in the following circumstances:

i. where Party ‘B’ is VAT registered in the destination Member State, or

ii. where Party ‘B” is VAT registered in the Member State of dispatch, or

iii. where Party “C” (the end-customer) picks up the goods from Party ‘A’,  or arranges his own transport to the destination country.

As is often the case with EU VAT rules, the answers to the above questions are not straight forward; yet the legal and practical impact can be significant.

i)              Party B VAT registered in the destination country

The triangulation simplification is specifically in place to allow the intermediate supplier (Party B) to avoid having to register across multiple EU countries when involved in triangulation supplies. The question that therefore arises is whether it is still possible to employ the triangulation simplification where Party B
is already registered in the destination Member State. This may be the case due to other taxable activities in the destination country, in which Party B is involved. As is often the case with EU VAT, the position is not always clear and different EU Member States apply different rules in such circumstances.

Where Party B is already registered (as a non-established business) in Member
State C there are two different approaches that can be taken:

• Triangulation is still applied (see figure 2). Party B reports a triangulation supply in Member State B, with Party C accounting for an intra-community acquisition
• Triangulation cannot be applied(see figure 3). In such cases, Party B would report an intra-EU acquisition in to the destination country. It would then follow up with a domestic sale to Party C (either with local VAT charged or under the extended reverse charge mechanism)

In practice, it appears that roughly half of EU Member States take the first approach and the other half take the second approach. As a result, it is necessary for businesses to research the individual country rules when determining whether triangulation can be applied in these circumstances.

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