Triangular intra-Community trade

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The intra-Community triangular business (in Austria only triangular business, ) is a simplification regulation of European VAT law. It is applicable to intra-Community series transactions and reduces the administrative burden on those involved as medium-sized entrepreneurs. Indirectly, the aim is to promote trade in the European internal market.

Legal intra-Community triangular business must be distinguished from illegal carousel business.

Significance
European VAT law is essentially based on the VAT System Directive (VATSystRL). However, it only sets out the framework within which the legislators of the individual Member States have to shape their national VAT legislation. Similarly, the rules on intra-Community triangular trade, in particular those laid down in Articles 141 and 197 of the VAT System, leave so much scope for implementation that the national rules of the Member States differ markedly in some respects.

In German law, intra-Community triangular business is implemented in the VAT Act (UStG), in Austrian law in the internal market regulation (BMR).

Conditions

The simplification is applicable when a series transaction is executed with a movement of goods between two Member States of the European Union. In principle, the simplification regime applies only if the series business is carried out by exactly three operators and the first delivery in the series business – from the first operator to the second operator – is carried out as the moved delivery and thus as the intra-Community delivery.

For the medium-sized entrepreneur, this leads to an intra-Community acquisition in the country of destination and subsequent taxable domestic delivery. According to the normal principles of European VAT law, the medium-sized entrepreneur would have to submit VAT returns in the country of acquisition, because in principle both the intra-Community acquisition carried out by him and the subsequent domestic delivery in the country of destination lead to the obligation to submit tax returns in all the relevant – i.e. up to 28 – EU Member States, which can entail an almost unbearable administrative burden.

The simplification is that, on the one hand, the intra-Community acquisition is deemed to be taxed at the end of the movement of goods within the framework of the first supply in the other Member State and, on the other hand, the tax liability for the subsequent domestic supply is transferred to the customer. In this way, the medium-sized entrepreneur avoids tax registration in the target country and is only subject to reporting obligations in the country whose VAT identification number he uses, where he is therefore already registered for tax purposes and has to submit VAT returns anyway.

Conditions for a triangular transaction according to German