Company A in France sells goods to Company B in Germany, which resells them to Company C in Austria. The goods are transported directly from France to Austria by a carrier engaged by Company A, and Company B has no fixed establishment in Austria. All three companies are VAT-registered in their respective member states. Under Article 141 of the EU VAT Directive (the triangulation simplification), what is the correct VAT treatment for Company B, the intermediary?
- Company B must register for VAT in Austria because it takes legal title to the goods there before reselling them to Company C
- The simplification only applies if Company C, rather than Company A or Company B, arranges the transport of the goods from France to Austria
- Company A must charge German VAT on its sale to Company B, since the first supply in a triangulation chain is always taxed in the intermediary's member state
- Company B does not need to register for VAT in Austria; it reports its onward sale to Company C as a triangulation-simplification supply on which Company C accounts for the VAT under the reverse charge, while Company B's own acquisition of the goods from Company A is treated as exempt in Austria under the simplification
Why D? And why not the others?
Correct answer: D. Company B does not need to register for VAT in Austria; it reports its onward sale to Company C as a triangulation-simplification supply on which Company C accounts for the VAT under the reverse charge, while Company B's own acquisition of the goods from Company A is treated as exempt in Austria under the simplification
Article 141's triangulation simplification exists precisely so that an intermediary in a qualifying three-party, three-member-state chain does not have to register in the customer's member state: Company A's sale to Company B is a zero-rated intra-Community supply under Article 138, Company B's deemed acquisition of the goods in Austria is exempted from Austrian VAT under the simplification, and Company B's onward sale to Company C is reported with Company C accounting for Austrian VAT itself under the reverse charge. The option requiring Company B to register in Austria because it holds legal title there is exactly the outcome the simplification is designed to avoid, since without it an intermediary taking title mid-chain would otherwise need a local registration. The option conditioning the relief on Company C arranging transport gets the transport requirement backwards: the goods must move directly from the first supplier to the final customer, arranged by either the first supplier or the intermediary (or someone acting on their behalf), not by the final customer, for the simplification to apply. The option asserting that the first supply is always taxed in the intermediary's member state is wrong because that first leg is a zero-rated intra-Community supply of goods under Article 138, not a domestically taxed sale in Germany.
Source: EU VAT Directive (2006/112/EC), Article 141 (triangulation simplification)