- Definition and Structure: Chain transactions, also referred to as drop shipments, involve a seller in one country selling goods to a buyer in another member state while sourcing the products from a third party who ships directly to the buyer, complicating the VAT treatment.
- VAT Complexity: These transactions create complexities because they involve multiple parties and may include different VAT obligations, requiring careful consideration of where the goods are supplied and how VAT is applied at each stage.
- Reasons for Use: Sellers may opt for chain transactions to achieve cost savings or due to lack of inventory, but the VAT implications necessitate a thorough understanding of both local and cross-border tax regulations to ensure compliance.
Source Meridian
