Update: VAT invoice requirements simplified triangulation scheme
19 January 2023 - On 8 December 2022, the ECJ ruled on the VAT invoice requirements regarding the application of the simplified triangulation scheme (C-247/21). According to the ECJ, the simplified triangulation scheme can only be applied if the invoice issued by party B to party C contains the words ‘Reverse charge’. Furthermore, an omission of the reference to the reverse charge mechanism cannot be corrected (retrospectively) by adding a statement that the tax liability has been shifted to the person to whom the supply is made.
Simplified triangulation scheme
A triangular transaction is a transaction whereby goods are supplied by party A to party B and subsequently by party B to party C, while those goods are transported directly from party A in one EU member state to party C in another EU member state. In principle, party B should be established in a different EU member state as well in order to apply the simplified triangulation scheme. If the optional simplified triangulation scheme is applied, party B should not declare an intra-Community acquisition the EU member state of arrival of the goods and the VAT liability on the domestic supply (in the member state of arrival) carried out by party B is shifted to party C. As a consequence, party B does not have to register for VAT purposes in the EU member state of arrival of the goods.
The simplified triangulation scheme can be applied under certain conditions. If these conditions are met, the VAT liability on the domestic supply carried out by party B in the EU member state of arrival of the goods is shifted to party C. In order to apply the reverse charge mechanism, party B should issue a correct invoice to party C. According to the VAT Directive, one of the invoice requirements is that the invoice contains the statement ‘Reverse charge'.
The ECJ now ruled that the simplified triangulation scheme cannot be applied if the statement ‘Reverse charge’ is not included on the invoice issued by party B to party C. An omission of such a reference cannot be corrected (retrospectively) by adding a statement that the VAT liability has been shifted to the person to whom the supply is made.
Impact
Please be aware of the invoice requirements if the simplified triangulation scheme is applied. According to a Decree of the Dutch Secretary of Finance (no. BLKB2014-704M), the invoice requirements for the simplified triangulation scheme are met if the invoice states ‘Intra-Community supply’. However, according to the ECJ (and possibly other EU member states) the simplified triangulation scheme can only be applied if the invoice issued by party B to party C contains the statement ‘Reverse charge’.
The issuance of an incorrect invoice may have an impact on your business. Therefore, parties involved in simplified triangulation should assess whether all (invoice) requirements have been met. We are of course happy to help you with this assessment.
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