Triangulation

By Tolley
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The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Triangulation
  • Typical triangulation transaction
  • Requirements
  • Additional UK requirements for a non-UK intermediary selling to UK customers
  • Intermediaries who do not meet the triangulation requirements
  • Accounting requirements

Triangulation is an EU simplification measure that was introduced in order to reduce the requirement for businesses that enter into triangulation transactions to register for VAT in overseas jurisdictions.

HMRC Notice 725 ; VATPOSG3830; De Voil Indirect Tax Service V3.380, V7.261 (subscription sensitive); VATSM5210; VATSM5250

Under the normal VAT rules, the intermediary party involved in a triangulation transaction would need to register for VAT in either the original supplier’s member state or the final customer’s member state in order to account for VAT on the transaction.

Triangulation is the term used to describe a chain of intra-EU supplies of goods involving three EU VAT registered businesses, VAT registered in different EU member states, where the goods go directly from the original supplier to the end customer.

Typical triangulation transaction

The following diagram demonstrates how a typical triangulation transaction is undertaken:

VATSM5215

Explanation

‘B’ (UK intermediary supplier) receives an order from ‘C’ (French final customer).

‘B’ places an order with ‘A’ (German original supplier) to fulfil the order. ‘A’ sends the goods direct to ‘C’ in France. Therefore the goods go direct from Germany to France.

The original supplier ‘A’ invoices ‘B’ for the goods and ‘B’ in turn invoices ‘C’ for the goods supplied.

The following rules apply to triangulation transactions taking place within the UK. The rules are broadly the same in all EU member states although certain EU member states can apply the rules more stringently.

Requirements
  • all parties must be VAT registered in different EU member states. Non-EU vendors can be involved in triangulation transactions providing they are VAT registered in the relevant EU member state. If a non-EU vendor is the intermediary supplier

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