EU VAT – The Triangulation Simplification

August 1, 2023

What is Triangulation:

By using the simplification method of triangulation, it eases the transaction of sending goods between three companies based in three member states. The transaction consists of two layers; the invoice flow, and flow of goods. The invoice flow shows Company A invoicing Company B, and Company B invoicing Company C. The flow of goods would be delivered by Company A directly to Company C, therefore creating a triangle.

Without using the simplification method, Company B would have to register for VAT in the country Company C is located, to be able to use the intra-community acquisition, then make an onward local supply to Company C.

In order to use the simplification method, these conditions must be met:

  • Each of the three companies must be located in different member states, and registered for VAT in that member state.
  • The goods must travel directly from A to C
  • VAT Numbers must be quoted on the invoices, along with the phrase “Article 141 simplification” included on the invoice from Company B to Company C. 

How it works:

In order to use the simplification method, these conditions must be met:

  • Each of the three companies must be located in different member states, and registered for VAT in that member state.
  • The goods must travel directly from A to C
  • VAT Numbers must be quoted on the invoices, along with the phrase “Article 141 simplification” included on the invoice from Company B to Company C.

How to report:

When making a sale that fits into the triangulation simplification, the below steps would be followed:

  • There would be a zero-rated supply from Company A to Company B, following the intra-community supply B2B rules, sending from one EU VAT number to another. This would be recorded by Company A and B as intra community supply and acquisition on the VAT returns, to net out to zero VAT to be reported.
  • Company B can then make a VAT free supply to Company C, using the triangulation simplification, and ensuring the needed phrase is included on the invoice. This will be reported by both Company B and C as triangular supply and acquisition, leaving no VAT liability to be paid.
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Rosie Green
Rosie Green