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Cross-border successive supplies of goods present risks for VAT determination & reporting
Chain transactions present complex VAT challenges for businesses. They are successive sales of goods between 3 or more parties where a single intra-Community shipment occurs from the first supplier directly to the last customer. Per the common rules introduced in the EU Quick Fixes, the intra-Community transport of the goods should only be ascribed to one of the invoices in the chain, with only that invoice benefiting from the VAT exemption for an intra-Community supply.
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VAT Advisor also covers Triangulation transactions.
Complexity also arises following the intermediary’s intra-Community acquisition in the country where the transport ends, as VAT will be due on the acquisition of those goods which requires the intermediary to have a local VAT registration. Furthermore, the subsequent domestic sale to the final customer may or may not be subject to local VAT, depending on whether that Member State has implemented the reverse charge for non-established suppliers.
Finally, where certain conditions are met in a chain consisting of three parties, triangulation simplification can be used to apply an exemption on the intra-Community acquisition, and a reverse charge on the local sale, which avoids the need for the intermediary to obtain a VAT registration.
Example cross-border chain supply of goods
Take the example below, taken from our VAT Advisor tool. An Austrian company (the “customer”) has placed an order with its German supplier (the “intermediary”) for goods to be delivered to an address in Austria. The intermediary, in turn, needs to source the goods from their supplier in Germany (the “supplier”) and requests that the goods are transported directly to the Austrian customer.
The VAT obligations for this use case are as follows:
- As the intermediary has used an EU VAT number, other than a German VAT number, the transport shall be ascribed to the first invoice and the supplier shall report the intra-Community supply.
- The intermediary makes an intra-Community acquisition in Austria and reports the VAT due on that acquisition, as well as the deductible input VAT, assuming the intermediary has the right to deduct VAT.
- The intermediary makes a local supply to the customer in Austria and charges the appropriate rate of VAT. Some countries apply a reverse charge on supplies by non-established businesses.
- The customer reports its local purchase and recovers the input VAT paid, assuming it has the right to deduction.
Solving the challenges with VATCalc
VATCalc covers all of the above requirements, whether on-screen (VAT Advisor and VAT Auditor), via an API call to our tax engine (VAT Calculator), or by posting the invoice to the correct VAT return box (VAT Filer):
- Full VAT calculation for both invoices and all parties
- Cites legislation articles relied upon for the conclusions, both EU VAT Directive and local legislation
- Produces invoices covering both legs of the transaction – and these may be simply flipped to purchase invoices so all parties may see their obligations in full
- Once you are happy and ‘commit’ the transaction, VATCalc can include the transactions in all the relevant VAT return within the same software. But this is just an option: you can use Advisor or Calculator separately.