Triangulation and reducing EU VAT registrations

When the European Union single market was created in 1993, and the current EU VAT system implemented, one particular trading scenario was identified as needing simplification to avoid forcing companies to register multiple times for cross border trade.

Example of EU VAT Triangulation

It occurs when there are three companies involved in a single supply of goods, and they are all in three different EU countries.  For example, a French company with a French VAT registration sells some goods to a German customer, but the French company first has to buy the goods from a Spanish supplier prior to shipment directly to the Germany customer.  This would require the French company to VAT register itself in Spain for Spanish VAT  to record the purchase and onward dispatch (sale) to the Germany customer.  (The French company could also register for Germany VAT to do the same).

To avoid creating a need for many companies to register like this, Triangulation Simplification exemption was created within the EU VAT law, which is implemented across all member states so that the French company does not have to register for VAT in Spain.



What are the rules for Triangulation Simplification

To avoid the obligation for a non-resident EU VAT registration for the French seller in the above scenario, the following conditions are required:

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  • All three parties must have VAT numbers from different states - the third number cannot be in the ship from or ship to country
  • The Spanish supplier issues a sales invoice to the French company with its VAT number on, with no VAT charge as this is a regular intra-community dispatch of goods.
  • The German customer now becomes responsible for recording the arrival of goods into German as an intra-community supply (thus shifting the reporting from the French company)
  • The French company includes the acquisition and despatch with a “T” market in its filing.  Other countries have similar notifications, for example, in the UK “2” is used in the filing.

How to handle the Intrastate and EC Sales Lists

The French company will need to report the sale to the German customer in its French EC Sale List / DEB. This is generally done as a single line transaction by customer for all triangulation sales in that month/quarter.  It is important not to mix regular sales from triangulated sales.

For Intrastat, the Spanish supplier shows the despatch, and the German customer shows the arrival of the goods.  In most countries, there is no need for the French company to declare any movement of goods as they did not pass through France.