Triangulation occurs when there are three companies involved in a single supply of goods, and they are all in three different EU countries.
For example, a French company with a French VAT registration sells some goods to a German customer, but the French company first has to buy the goods from a Spanish supplier before shipping them to the German customer. This would require the French company to VAT register itself in Spain for Spanish VAT to record the purchase and onward dispatch (sale) to the German customer. (The French company could also register for Germany VAT to do the same).
To avoid creating a need for many companies to register like this, the Triangulation Simplification exemption was created within the EU VAT law, which is implemented across all member states so that the French company does not have to register for VAT in Spain.
Know the triangulation simplification rules
To avoid the obligation for a non-resident EU VAT registration for the French seller in the above scenario, the following conditions are required:
- All three parties must have VAT numbers from different states - the third number cannot be in the ship from or ship to country
- The Spanish supplier issues a sales invoice to the French company with its VAT number on, with no VAT charge as this is a regular intra-community dispatch of goods.
- The German customer now becomes responsible for recording the arrival of goods into Germany as an intra-community supply (thus shifting the reporting from the French company)
- The French company includes the acquisition and dispatch with a “T” market in its filing. Other countries have similar notifications, for example, in the UK “2” is used in the filing.