CJEU: simplified triangulation allowed for intermediary with VAT number in EU Member State of dispatch
On 19 April 2018, the Court of Justice of the European Union delivered its judgment in the Firma Hans Bühler KG case (C-580/16) on the application of the simplified triangulation rules in a cross-border supply chain.
23 April 2018
The Court of Justice of the European Union (hereafter: “CJEU”) ruled that taxable persons can apply the simplified triangulation rules if they are (also) VAT registered in the EU Member State from which the goods are dispatched.
The interpretation given by the CJEU, based on the context and the objectives pursued by the simplified triangulation rules, overturns restrictions in a number of EU Member States applied to taxable persons with multiple VAT registrations.
In a regular cross-border supply chain EU VAT rules may indicate that an intermediary supplier has to register for VAT purposes in the EU Member State of arrival of the goods in order to account for an intra-Community acquisition. This is followed by a local supply of goods – in principle subject to local VAT - by the intermediary supplier to its final customer in the EU Member State of arrival.
The purpose of the simplified triangulation scheme is to avoid the VAT registration of an intermediary contractor in a cross-border supply chain. Moreover, subject to compliance with certain conditions the intermediary supplier does not have to declare an intra-Community acquisition of the goods in the EU Member State of arrival and the final customer will be responsible for reporting domestic VAT.
Firma Hans Buhler (hereafter "FHB"), established and VAT registered in Germany, purchased goods from suppliers in Germany and resold them to businesses in the Czech Republic. The German suppliers transported the goods directly to the Czech customers. FHB provided its Austrian VAT registration number to it suppliers and applied simplified triangulation using its Austrian VAT number. This allowed for two successive invoices without VAT, reducing cash flow impact for FHB and its customer.
The Austrian tax authorities challenged the applied simplification for triangulation, as FHB did not punctually and accurately report the transactions in the European Sales Listing to be filed in Austria. Besides, FHB had not proved that the transactions had been subject to VAT upon final acquisition of the goods in the Czech Republic. FHB could not use its Austrian VAT number for supplies of goods dispatched from Germany, as it was also in the possession of a German VAT number.
The CJEU ruled that FHB was entitled to apply the simplified triangulation using its Austrian VAT number, regardless of the fact that FHB was also registered for VAT in Germany, the EU Member State of departure. According to the CJEU only the VAT identification number under which he made the intra-Community acquisition must be taken into account in assessing whether the conditions for simplified triangulation are met. This interpretation is also in line with the objective of the simplified triangulation scheme which is to avoid a situation whereby the intermediary contractor, in a series of transactions has to satisfy identification and declaration obligations in the Member State of destination of the goods.
In practice, some EU Member States, including the Netherlands, do not allow the application of the simplified triangulation rules through a VAT number held in their country, if the taxable person that acts as the intermediary party is also VAT registered in the EU Member State of departure.
The CJEU interpretation reinforces an approach whereby taxable persons with multiple VAT registrations can set up their invoicing flows for cross border goods transactions by making optimal use of their VAT numbers. This allows for the reduction of cash flow impact of VAT in cross border trade, as well as improved VAT reporting management.