EU VAT Triangulation Simplification |
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Where goods are being traded across state borders within the European Union, a form of VAT simplification, known as triangulation, may apply. The facility allows EU businesses to make intra-community trades in different countries, without the need to VAT register in each EU state.
Where does EU triangulation apply?For triangulation to apply, it generally requires at least three different parties in the trade, operating in different countries. A simple example can illustrate the process best: If a company (‘A’) wishes to supply its customer (‘B’) in a foreign EU state with goods sourced from a third foreign country, from a supplier (‘C’), then company A would ordinarily be required to VAT register in company C’s country to report the trade. However, if company A has a VAT registration in its home country, it can avoid this burden, at it will not be charged VAT by company C, the supplier..
VAT Compliance requirements for triangulationTo utilise this simplification, company A must clearly indicate on the invoice and EC Sales List that triangulation is applicable. Company C must in turn account for the VAT on its VAT return as an acquisition, rather than as a domestic supply. The trade is also reported through Intrastat as a movement between C and B – thus excluding A from the reporting.
Non-EU tradesIf non-EU companies act as the intermediary, like company A, then they will require a VAT registration for their company somewhere within the EU. Without an EU VAT number, company B would be obliged to charge full local VAT to the non-EU company.
TMF can help you understand your compliance obligations on triangulationIf you would like FREE guidance on VAT triangulation, please contact us at: +44 (0)870 067 8881
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