In 2020, as part of the Quick Fixes (implemented to help simplify certain aspects of EU VAT) Article 36a of the EU VAT Directive) was introduced so as to facilitate applying the correct VAT treatment in chain transactions In its‘ long-awaited publication, the German Ministry of Finance (BMF) has now, 3 years later, brought German VAT legislation in line with EU legislation.

A chain transaction takes place when several parties are involved in the delivery of the same goods, and these are delivered by the first party directly to the last party in the supply chain (one transport). When more than one Member State is involved in the chain, the identification of the “moved” or “non-moved” supply can become complicated, given that only one step in the chain can only be considered as moved (and be treated as an intra-Community supply). 

Where the first party or the last party in a supply chain organises transport, there is no issue with the allocation of transport and the moved supply will be applicable to the first party /last party as appropriate.  

The difficulty has been where the intermediary has organised the transport. This is now removed through the BMF confirming the right of the intermediary to choose how the supply should be treated from a VAT perspective.

Scenario 1 – intermediary arranges transport from the Member State of dispatch – default scenario. Example:

Scenario 2 – intermediary arranges transport from the Member State of dispatch but communicates clearly it’s VAT ID in the Member State of Dispatch to its supplier in advance of the supply. Example:

This clarified approach is to be applied to all open cases, and whilst long overdue, is a welcome step in clarifying the correct application of VAT treatment in B2B chain transactions involving Germany. Companies involved in chain transactions in Germany are advised to review transactions and ensure correct VAT determination.

If you have any questions on the impact of the above changes on your business, please contact us here