On 19th April 2018 the European Court of Justice (ECJ) has decided that EU triangulation rules also apply, if the middle party in a chain of three involved VATable suppliers is situated in that country, in which the transportation of the goods starts (C-580/16 – “Hans Bühler KG”).
The case was about a German company (“Hans Bühler KG”), who (as the middle party of a chain transaction) purchased goods from a German supplier and who sold these to a Czech customer. Goods were transported directly from Germany to Czech Republic. Hans Bühler KG was situated in Germany, but made use of its Austrian VAT number (this was issued due to a permanent establishment in Austria) and so, Hans Bühler KG applied the EU triangulation rules to avoid a further VAT registration in the Czech Republic.
But Austrian authorities refused to apply the simplification of EU triangulation rules and charged the company with Austrian VAT due to the misuse of the Austrian EU VAT number.
EU triangulation rules shall reach a simplification, by which the middle party in an EU-cross border supply chain with three different EU-member states involved, does not need to register in the country of destination. Instead, the final recipient of the goods is liable for VAT on the acquisition of the goods in the country of destination. As a result, the middle party does not have to submit VAT returns in the destination country, but merely in that country, whose VAT number was used. This helps to limit costs on compliance work, which can be substantial due to the different rules the various member states foresee.
However, some EU-countries do not accept this simplification, if the middle party is situated in that country, where the transportation starts even if this middle party makes use of a different EU VAT number. So here, the opinion of the Austrian authorities was that Hans Kühler KG should have had to register in Czech Republic, because Hans Kühler KGwas situated in Germany, where the transportation into the Czech Republik began.
ECJ now has decided that this understanding is wrong: The middle party can make use of the simplification even if it’s situated, where the transportation of the goods starts. So such companies now can make use of the simplification and avoid a number of additional VAT registrations just by using one additional EU VAT number, which differs from that country, in which the transportation of the goods start.
So again ECJ has a practical view on the EU VAT rules instead of following the formal view of EU tax authorities.
Suppliers with multi-national supply chains now should check whether or not they can stop VAT registrations in destination countries by arguing based on this decision of the ECJ. This would lead to less VAT compliance and would save money because of a reduced number of VAT declarations to submit. Necessary for this is only one VAT registration in addition to the registration in that country, in which they’re situated.
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