# Policy change: no simplified triangulation without the reverse charge wording

Published: 2023-09-14

Until recently the Dutch Tax Administration accepted the wording "intra-Community supply". Since 2 September the invoice must literally state that VAT is reverse charged, or the simplification falls away.

In a cross-border ABC supply, business A supplies goods to business B, B supplies the same goods on to business C, and the goods are transported directly from A to C.

It is settled case law of the Court of Justice that where goods are transported from one member state to another, that intra-Community transport must be ascribed to one of the supplies. Where it is ascribed to the supply from A to B and all the conditions are met, A's supply is zero-rated in the member state of departure. B then makes an intra-Community acquisition in the member state of arrival, and also a taxable supply to C in the member state where the goods are located after transport.

## Simplified triangulation

Where B is neither established nor registered in C's member state, those rules are cumbersome. The VAT Directive therefore provides for simplified triangulation, which avoids B having to register and file returns in C's member state. B is then treated as not making a taxable acquisition in the member state of arrival, and the VAT on the supply to C is reverse charged to C.

Conditions attach to the simplification. One is that B states on the invoice that the VAT is reverse charged to C.

## The Court of Justice

What if B has not done so? At the end of last year the Court of Justice held that the simplification then does not apply. For B that means two things.

First, under the normal rules B makes an intra-Community acquisition in the member state of arrival and in principle owes local VAT on the supply to C. B must therefore register and file returns there.

Second, B also makes an acquisition in the member state of the VAT number under which it bought the goods from A, a so-called number acquisition. B can recover the VAT on that acquisition if it proves that it declared an acquisition in the member state of arrival.

## Policy amended

In the Netherlands the tax authorities did not require B to state "VAT reverse charged" literally: under policy, "intra-Community supply" was also enough. That lenient reading was amended with effect from 2 September. From that date B must state "VAT reverse charged" on its invoice to C in order to use the simplification. Without it, the simplification does not apply. The tightening has since been reflected on the tax authorities' website.

B must continue to report the supply to C in the recapitulative statement and in box 3b of the VAT return. Nothing changes on that point.

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