EU: what do you need to know about triangulation – recent developments

The CJEU Judgement on “Luxury Trust Automobil GmbH” (C-247/21) analysis the importance of following strictly invoice requirements in a triangulation supply and more specifically of the “reverse charge” statement on the second invoice in a triangulation.

Based on the case the final customer (party C) in a triangular transaction, will not be designated as the person liable to pay VAT where the invoice issued by the intermediary (party B) does not contain the words “Reverse charge”. On this basis, the triangulation simplification may not be applied. Furthermore, invoices that do not include this statement may not be corrected retrospectively by for example adding a statement that the tax liability is transferred to the person to whom the supply is made to.

In practice, in the absence of a reference to the reverse charge mechanism on the invoice, party B in a supply chain will be required to register for VAT purposes in the EU Member State of destination. In that EU Member State, party B will be obliged to report an intra-Community acquisition and a (potential) subsequent local supply to the final customer (party C). In addition, party B will be deemed to perform a reportable acquisition in the EU Member State of which it communicated the VAT number when purchasing the goods from party A. The input VAT on this reportable acquisition can only be reclaimed if party B correctly reports an intra-Community acquisition in the EU Member State of arrival of the goods.

Action item: In light of this development, please assess whether there is a VAT risk for the triangulation transactions carried out by your company and changing the invoice layout if not fully compliant.

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