Your company (“B”), the middle man, is normally required to be VAT registered in the country C (where the transport of the goods ends) to report an intra-community acquisition of goods followed by a domestic sale. Your company basically must self-assess local VAT and must invoice its client (“C”) with local VAT. However, a local reverse charge mechanism could be applicable (payment of VAT shifted to the client) depending on local regulation (see our Note regarding Reverse Charge Mechanism).

The EU Directive provides however for a Simplified Scheme avoiding to middle man (“B”) the obligation to register in the last Member State (C). The main issue that businesses face is that the Simplified Scheme is not interpreted consistently throughout EU by National Tax Authorities. Some Member States do not accept the use of the simplification measures where B is also VAT registered in Member State A or Member State C. By contrast, 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 key ssues:

• Ascertain the physical flow of goods and the invoices in order to determine the correct VAT treatment of the chain transactions and possible VAT obligations of each supplier involved in the Member State where goods come from and/or which they are intended for;

• Check if the Simplified Scheme for triangulation transactions is applicable in the country of arrival of the goods and which conditions should be fulfilled in this respect;

• in case the triangulation Simplified Scheme is not applicable, proceed with the local VAT registration;

• Check whether the reverse charge is applicable for the subsequent domestic sale to the client.