Your company (B) based in Germany purchases goods from a Czech supplier (A) and resells the goods to a Belgian client (C). The goods are transported directly from the Czech Republic to Belgium by the Czech supplier himself [no stop in Germany].
This is a so-called “supply chain transaction” for VAT purposes, a chain of sales involving at least 3 companies (A, B, C) with only one physical movement of goods. See our VAT News n° 520 for more info on this topic.
VAT registration in the country of arrival of the goods is normally required…
Your company is normally required to be VAT registered in Belgium [where the transport of the goods ends] to report an intra-community acquisition of goods followed by a domestic sale. Your company must invoice its client with Belgian VAT unless a local reverse charge mechanism is applicable [payment of VAT switched to the client].
…unless the triangulation simplification scheme is applicable
EU Directive provides however a simplification scheme avoiding intermediary company (B) having to register in Member State (C). The main issue that industry faces is that there is very little uniformity in the application of the simplification. Some Member States do not accept the use of the simplification when B is also VAT registered in Member State A or Member State C. Some Member States accept to apply the simplification rules even if 4 or more parties are involved in the chain transaction, etc.
Companies involving in chain transactions must pay attention to the following issues:
- Verify the exact flow of goods and invoices in order to determine the correct VAT treatment of the chain transaction and possible VAT obligations of the company in another Member State;
- Check how the triangulation simplification scheme measures are applicable in the country of arrival of the goods and which conditions should be fulfilled in this respect.
- In case the triangulation simplification scheme is not applicable, proceed to the local VAT registration;
- Check whether or reverse charge is applicable for the subsequent domestic sale to the client.