A triangular transaction occurs if taxable person A sells goods to taxable person B and B to taxable person C, whereby the goods are transported directly from A to C. If A or B arranges the transport and B provides a VAT identification number of a Member State other than the Member State of departure of the goods, B should normally register in the Member State of arrival and – depending on the reverse charge rules of the Member State of arrival – charge VAT or not. However, under certain conditions the simplified triangulation scheme can be applied.
The simplified triangulation scheme has been devised to prevent registration of B in the country of arrival. The simplification entails that the acquisition of B in the country of arrival is exempt and that the payment of the VAT on his supply is transferred to C. Articles 141 and 197 of the EU VAT Directive[2] – in which the simplified scheme is laid down – appear to have been misinterpreted in the Dutch VAT Act[3] and on the website of the Dutch Tax Administration[4].
1 Article 37c, letter b of the Dutch VAT Act stipulates that if the Netherlands is the country of arrival of the goods, the goods must be delivered by B to a taxable person who resides or is established in the Netherlands (party C). However, Article 141 of the EU VAT Directive stipulates that C must be registered for VAT purposes in the Member State of arrival. It is not a “may” provision. Article 37c, letter b of the Dutch VAT Act must therefore be amended. Inquiries in various EU Member States show that the Netherlands is the only country that requires party C to be established in the country of arrival.
2 Letter c of the same provision[5], states that B may not have a VAT identification number in the Member State of departure of the goods. This is not correct either. It should make no difference whether or not B is registered in the country of departure. After all, the intra-Community supply must be made by A in order for the simplification to apply. B must provide A with a VAT identification number from another Member State than the Member State of departure. Whether or not party B is also registered for VAT in the country of departure can therefore not be relevant. See also the judgment of the European Court of Justice Hans Bühler[6]. In this case, B was even established in the country of departure. Letter c of the provision therefore has no meaning since it clearly conflicts with Article 141 of the VAT Directive. There are a few other Member States[7] that also misinterpreted Article 141 of the VAT Directive.
3 It is possible, however, to require that B may not be registered in the country of arrival of the goods. Indeed, if B is registered in the country of arrival, he can declare an intra-Community acquisition and charge the VAT of the Member State of arrival. If the Member State of arrival implemented the reverse charge of article 194 VAT Directive for the supply of goods and the conditions are met, B must not charge VAT. The website of the Dutch Tax Administration states that B may not have a VAT identification number in the Netherlands if the Netherlands is the country of arrival. I can’t find this anywhere in the Dutch regulations.
4 B must state “reverse charge”[8] on his invoice to C. The Luxury Trust Automobil Case of the European Court of Justice[9] shows that the reference to the application of the reverse charge mechanism is a condition for the application of the simplified triangulation scheme. If the invoice does not refer to the reverse charge mechanism, the simplification should not be applied. Moreover, the invoice may not be corrected later by referring to the reverse charge mechanism. A Dutch Ministerial Decree[10] states that the invoice from B to C may state “intra-Community supply”. The website of the Dutch Tax Administration states: “If you are party B, you will receive an invoice with 0% VAT. You do not include this purchase in your VAT return. You classify the 2nd transaction (from you to C) as an intra-Community supply. You send an invoice without VAT.” You may wonder if B can apply the simplification if B indeed followed the instructions of the Dutch Tax Administration.
5 In yet another Ministerial Decree[11], the view of the Explanatory Notes to the Quick Fixes[12] is explicitly not followed on all points. This Decree reaffirms that C must be established in the country of arrival. According to the decree, if an ABCD occurs (four parties involved whereby the goods are transported from A to D) and C specifies the VAT identification number of the country of arrival of the goods, the simplification cannot be applied. But if C wants the goods to be delivered to D who is located in the country of arrival of the goods, should A or B check whether the location where the goods are delivered belongs to C? That seems to go too far. I therefore agree with the Explanatory Notes, that allow the application of the simplification in this situation. In my opinion, failure to follow the Explanatory Notes is an incorrect interpretation of the VAT Directive by the Ministry of Finance.
I propose to implement the provisions of the VAT Directive in the Dutch VAT Act literally. Furthermore, the website of the Dutch Tax Administration should also be amended as soon as possible.
[1] mr Marja van den Oetelaar, Director of The VAT Consultancy Firm: www.thevatconsultancyfirm.com and Managing Director of VAT Forum
[2] European VAT Directive 2006/112/EC
[3] Wet op de omzetbelasting 1968
[4] www.belastingdienst.nl
[5] Article 37c Wet op de omzetbelasting 1968
[6] European Court of Justice 19 April 2018, C-580/16
[7] For instance Cyprus, Bulgaria and Hungary
[8] Article 226 EU VAT Directive
[9] European Court of Justice 8 December 2022, C-247/21
[10] Decree “Omzetbelasting, administratieve-, facturerings- en andere verplichtingen” dated 23 June 2021
[11] Decree of 13 April 2021, nr. 2021-3736, Stcrt 2021, 19872
[12] Explanatory Notes on the EU VAT changes in respect of call-off stock arrangements, chain transactions and the exemption for intra-Community supplies of goods (“2020 Quick Fixes”)
