Importance of correct invoice statement in simplified triangulation confirmed by Court of Justice

Principle of simplified triangulation

For the simplified triangulation scheme to apply, there must be a VAT-taxable supplier established in EU Member State 1 who sells goods to a VAT-taxable intermediary established in EU Member State 2, who in turn resells these goods to a VAT-taxable final customer established in EU Member State 3. This requires the goods to be transported directly from the supplier in EU Member State 1 to the final customer in EU Member State 3. In doing so, the transport of the goods must be organised by or on behalf of the supplier or the intermediary.  

Below is a schematic representation:

In this situation, the supplier will perform an intra-Community supply of goods in EU Member State 1. The intermediary will then be required to perform an intra-Community acquisition of goods in EU Member State 3 (i.e., EU Member State of arrival of the goods), followed by a local supply of these goods to the final customer. These transactions result in the intermediary being required to register for VAT purposes in EU Member State 3 and comply with local VAT obligations there (e.g., payment of VAT, filing of periodic VAT returns and any listings).  

To avoid this administrative burden for the intermediary, it can opt to apply the so-called simplified triangulation scheme. Under this scheme, the intermediary's intra-Community acquisition of goods is not taxable in EU Member State 3. The VAT due on the intermediary's local supply to the final customer is shifted to the latter.  

 

Ruling of the Court of Justice of the European Union

In the ruling C-247/21, Luxury trust Automobil GmbH regarding the application of the simplified triangulation scheme, the following preliminary questions were referred to the CJEU: 

• Can the scheme be applied if the invoice issued by the intermediary to the final customer mentions 'Exempt intra-Community triangulation’? 

• If the above question is answered in the negative, can such invoice reference be corrected retrospectively? 

In response to the first question, the CJEU ruled that the invoice issued by the intermediary trader must contain the indication "Reverse charge of VAT". Consequently, the reference "Exempt intra-Community triangulation" is not sufficient for the application of the simplification scheme.  

On the second question, the court ruled that the incorrect invoice cannot be corrected retrospectively.  

 

Conclusion

In contrast to previous cases that followed the 'substance over form' principle, the Court in this case ruled that the material condition of a correct invoice statement is indeed an essential condition for the application of the simplified triangulation scheme.

If this condition is not met, retroactive rectification is no longer possible and the intermediary risks still incurring VAT obligations in EU Member State 3 and/or facing penalties in its member state (2).

By Belgian standards, when acting as an intermediary in such a transaction, it is appropriate to include the following reference on the invoice: 'Application of simplified triangulation – Reverse Charge of VAT - Articles 141 & 197 Directive 2006/112/EC'.