As a UK-based business that provides services to various different countries, VAT is not a simple subject.
In 1993, when the EU single-market was created, the EU VAT system was implemented.
EU VAT Triangulation occurs when there are three companies involved in a single supply of goods of services, and they are all based in three different EU countries.
For instance, an English company with a British VAT registration sells goods to a French customer, but the British company first has to buy goods from a German supplier prior to shipment directly to the French Customer. In theory, this would require the British company to register itself in Germany for German VAT, in order to record the purchase and onwards dispatch (sale) to the French Customer. The British company could also register for French VAT to do the same).
In order to avoid companies having to register like this the Triangulation Simplification Exemption was introduced within the EU VAT law.
What is the Triangulation Simplification Exemption?
In order to avoid the obligation for a non-resident EU VAT registration for the British seller in the above scenario, the following conditions are requires:
· All three parties must be resident in three separate EU member states
· The German supplier issues a sales invoice to the British company with its VAT number with no VAT charge, as this is a regular intra-community dispatch of goods.
· The French customer now becomes responsible for recording the arrival of goods into France, as in intra-community supply (thus shifting the reporting from the British company).
· The British company includes the acquisition and despatch with a “2” market in its filing.
How to handle the Intrastate and EC Sales List
The British company will need to report the sales to the French customer in its EC Sale List/ DEB. This is generally done as a single line transaction by customer for all triangulation sales in that month/quarter. It is important not to mix regular sales with triangulated sales.
For Intrastate, the German supplier shows the despatch, and the French customer shows the arrival of the goods. In most countries, there is no need for the British company to declare any movement of goods as they did not pass through the UK.
Please note that the Triangulation Simplification Exemption is likely to change in its applicability to the UK after the UK’s exit from the EU.