VATLive > Blog > Europe > Chain transactions - EU VAT Quick Fixes

Chain transactions - EU VAT Quick Fixes

  • Dec 26, 2019 | Richard Asquith

The second of the four EU VAT Quick Fix for 2020 concerns cross-border chain transactions involving more than two parties. The changes seek to help identify when the zero-rated VAT cross-border step occurs when goods are being moved. 

Current position – doubt on where zero-rating applies on cross-border chain transactions 

When goods are sold across EU borders, between VAT registered businesses, they are exempt, or zero-rated for VAT. EU rules determine this is only applicable at the point where the goods physically move across a border. 

When three parties - a supplier, intermediary and customer - are involved in a cross- border transaction, it can be challenging to determine on which transaction between the three parties to apply the zero-rating. 

In many cases, the supplier may issue a zero-rated invoice even if not responsible for the transport. The intermediary must then reinterpret the correct treatment before they can correctly invoice the customer. 

Countries offer varying rules on these such chain transactions, and where the zero- rating should happen. In addition, a series of complex European Court of Justice rulings must be understood and matched to businesses’ current models to ensure proper compliance with EU case law. 

What’s changing on 1 January 2020 

The EU is simplifying the way the VAT position is determined when the three businesses - supplier, intermediary and customer - in a chain transaction are located in three different EU states, but the goods are moving between the supplier and customer’s countries only. 

The new rules clarify two scenarios for defining where to zero-rate the movement of goods in the chain: 

  • If the intermediary presents a non-resident VAT number in the supplier’s country where the goods are dispatched from, then the sale is treated as a domestic transaction in the supplier’s country. The supplier charges local VAT to the intermediary. The intermediary then transports the goods to the customer’s country and performs a zero- rated cross-border supply to the customer. 
  • If the intermediary instead provides a VAT number from another EU state, then the supplier zero-rates the sale as a cross- border supply to the intermediary. The intermediary must then take responsibility for the transport of the goods from the supplier’s country to the customer’s country. Following this, the intermediary then undertakes a domestic supply with the customer, under the customer’s national VAT rules. 

What’s not changing: Triangulation transactions 

Businesses using the current triangulation simplification (Article 141/197 of the EU VAT Directive) can still use this simplification. This means the customer is still responsible for reporting the VAT in the country of arrival.


VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He can be contacted at: richard.asquith@avalara.com. He is part of the European leadership team which won International Tax Review's 2019 Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.
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