Triangular transactions – proper annotations on the invoice

Triangular transactions involving three entities registered in three different EU member states are a crucial element of the internal market. They facilitate the simplification of goods circulation and enhance economic efficiency. However, according to the ruling of the Court of Justice of the European Union (CJEU) on December 8, 2022, in the case of Luxury Trust Automobil GmbH (C-247/21), such simplification cannot be applied in the absence of proper annotations on the invoice. Moreover this error cannot be fixed even by correcting the invoice.

The case of Luxury Trust Automobil GmbH concerned the interpretation of regulations regarding triangular transactions in the context of Value Added Tax (VAT). In a typical triangular transaction, the first taxpayer (the seller) sells goods to the second taxpayer (the intermediary), who then delivers them to the third taxpayer (the buyer) in another member state. It is essential that the transaction is properly documented to benefit from tax simplifications that eliminate the need to charge VAT on both transactions.

In Poland it is necessary that the second taxpayer issues an invoice to the last VAT payer in the order containing, in addition to the data listed in art. 106e, the following information:

1) the note “VAT: Faktura WE uproszczona na mocy art. 135-138 ustawy o ptu” lub “VAT: Faktura WE uproszczona na mocy artykułu 141 dyrektywy 2006/112/WE” (“VAT: EC invoice simplified pursuant to art. 135-138 of the VAT Act” or “VAT: EC invoice simplified pursuant to art. 141 of Directive 2006/112/EC”);

2) a statement that the tax on the supply made will be settled by the last VAT payer in the order;

3) the number referred to in art. 97 sec. 10, which is used by him for the first and last VAT payer in the order;

4) the identification number used for the purposes of the value added tax of the last taxpayer in the order.

Conclusions from the Ruling

The CJEU ruled that for triangular transactions, it is mandatory for the invoice issued by the seller to include appropriate annotations confirming that the goods were delivered directly to the third taxpayer. The absence of such annotations means that the transaction cannot be considered triangular.

This requirement aims to ensure transparency and accountability in the trade of goods. In practice, this means that businesses must pay particular attention to the accuracy of documentation related to triangular transactions, which can lead to additional costs and administrative burdens. Improper documentation of triangular transactions can result in financial penalties and a liability to pay VAT, adversely affecting the company’s cash flow.

The ruling of the Court of Justice of the European Union in the case of Luxury Trust Automobil GmbH (C-247/21) clearly demonstrates that simplifications in triangular transactions are contingent upon proper documentation of these transactions. Entrepreneurs must be aware of the requirements for annotations on invoices to fully benefit from the opportunities offered by the internal market of the European Union. This is especially important as according to the ruling the omission of the appropriate clause on an invoice cannot be corrected at a later date by adding information indicating that the invoice concerns an intra-Community triangular transaction and that the tax liability is transferred to the recipient of the supply (a third party in the chain).

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