One of the more complex areas of VAT, and ensuring that VAT is correctly charged, is that of triangulation and chain transactions<\/p>\n
Chain transactions occur where the same goods are sold successively between several businesses but are subject to a single physical movement from the first supplier to the final customer. For VAT purposes, it is necessary to determine which supply in the chain is linked to that movement, as this determines which transaction may qualify as an intra-Community supply. Triangulation is a specific type of chain transaction involving three businesses acting in three different Member States, where the goods are sold by the first supplier to an intermediary and then by the intermediary to the final customer, but are transported directly from the first supplier to the final customer by either the first or second party in the chain. The triangular transaction simplification can reduce the VAT registration obligations of the intermediary, provided the relevant conditions are satisfied.<\/p>\n
The General Court of the European Union recently delivered an important VAT judgment in case T\u2011614\/25, AS \u2018Trading 4\u2019 v Valsts ie\u0146\u0113mumu dienests (Latvian National Tax Authority).<\/p>\n
The case concerns the attribution of a single intra-Community transport within a chain of successive supplies and, in particular, whether the first supplier can rely on the VAT exemption in Article 138(1) of the VAT Directive where the goods physically leave its Member State and the final customer accounts for VAT in the destination Member State.<\/p>\n
The judgment confirms an important principle: proof that goods have physically crossed a Member State border is not, by itself, sufficient to determine which transaction in a chain qualifies as the exempt intra-Community supply.<\/p>\n
Nor is the position altered merely because the final customer is liable for VAT under the triangular transaction simplification. The decisive question remains which supply the single intra-Community movement must be attributed to.<\/p>\n
Situation actuelle<\/strong><\/p>\n Trading 4 is a Latvian VAT-registered company engaged in supplies of petroleum products. Between January 2016 and January 2017, it sold products subject to excise duty to several businesses established in Estonia and the United Kingdom. Those intermediaries were not VAT registered in Latvia but were registered in their respective jurisdictions.<\/p>\n On the same dates on which the intermediaries acquired the goods from Trading 4, they resold them to customers located in other EU Member States. The goods did not physically move first to the intermediaries. Instead, there was one direct movement from Trading 4 in Latvia to the intermediaries’ customers in the other Member States. Trading 4 treated its supplies to the intermediaries as intra-Community supplies subject to the Latvian 0% VAT rate.<\/p>\n However, following an audit, the Latvian tax authority concluded that the 0% treatment was incorrect. Its position was that the intermediaries had transferred the right to the goods to their customers before the goods left Trading 4’s warehouse, and that Trading 4 was aware of this fact. On that basis, the authority regarded Trading 4’s sales as domestic Latvian supplies subject to VAT.<\/p>\n That assessment was subsequently upheld by the Latvian Regional Administrative Court and the matter eventually reached Latvia’s Supreme Court, which referred questions concerning Articles 138(1), 141 and 197(1) of the VAT Directive for a preliminary ruling.<\/p>\n What was the General Court asked to decide?<\/strong><\/p>\n The central issue was whether three features of the transactions were sufficient to establish Trading 4’s entitlement to the intra-Community supply exemption:<\/p>\n Trading 4 also relied on VAT neutrality, arguing that VAT had already been paid by the final customers in the destination Member States.<\/p>\n The Court’s decision<\/strong><\/p>\n The General Court rejected the proposition that those circumstances were sufficient, in themselves, to justify exemption of Trading 4’s supply. Under Article 138(1), the intra-Community supply exemption requires, among other things, a transfer to the customer of the right to dispose of the goods as owner and the dispatch or transport of the goods to another Member State.<\/p>\n Where two supplies involve one intra-Community transport, the transport can be attributed to only one supply, which alone qualifies for intra-Community supply treatment. Determining which supply receives the transport, therefore requires an overall assessment, of the particular circumstances.<\/p>\n Of crucial importance is the point at which the right to dispose of the goods as owner passed to the final customer. If the second transfer took place before the intra-Community transport occurred, the transport cannot be attributed to the first supply. The judgment therefore reinforces the need to distinguish between the commercial chain of sales and the single physical movement of the goods.<\/p>\n Economic control rather than formal ownership matters<\/strong><\/p>\n The judgment provides useful guidance on the meaning of the \u201cright to dispose of the goods as owner.\u201d This concept is not limited to the formal transfer of legal ownership under national law, nor does it require the customer to have taken physical possession of the goods. Instead, the focus is on whether the party concerned has acquired the ability to deal with the goods as if it were their owner, including the ability to make decisions affecting their commercial or legal position, such as deciding to resell them. In determining when this right has transferred and, consequently, to which supply the intra-Community transport should be attributed, it is necessary to consider the commercial reality of the arrangements as a whole. Relevant factors may include who initiated and arranged the transport, who directly or indirectly bore the associated costs, who gave instructions concerning the movement of the goods, who exercised actual or functional control over that movement, and whether the transport was undertaken as part of a resale or other commercial activity carried out on a party’s own account. The judgment therefore underlines that the formal wording of contracts or the technical transfer of legal title will not necessarily determine the VAT treatment where the economic and operational circumstances indicate that the right to dispose of the goods had passed at a different point in the transaction chain.<\/p>\n Excise documentation does not determine the VAT result<\/strong><\/p>\n The petroleum products were transported under an excise duty suspension arrangement. Trading 4 argued that this supported its analysis of when the right to dispose of the goods had transferred. The General Court rejected that approach. The transport of goods under an excise duty suspension arrangement does not determine which supply receives the intra-Community transport for VAT purposes. VAT and excise duty have separate charging mechanisms, and the excise arrangements do not alter the conditions governing the transfer of the right to dispose of the goods as owner.<\/p>\n Similarly, the electronic administrative document used for movements of excise goods can provide valuable evidence that goods actually left the Member State of dispatch, but it does not establish when the right to dispose of those goods passed from one party to another. This distinction is likely to be particularly important for businesses trading fuel, alcohol and other excisable products.<\/p>\n Triangulation cannot determine which supply gets the transport<\/strong><\/p>\n Perhaps the most significant aspect of the judgment concerns the interaction between Article 138 and the triangular transaction simplification in Articles 141 and 197.<\/p>\n Under the simplification, an intermediary can, subject to the statutory conditions, avoid having to register for VAT in the Member State in which the goods arrive, with the final customer assuming liability for the relevant VAT under the reverse charge. However, the Court stressed that the simplification effectively presupposes an intra-Community acquisition by the intermediary. Such an acquisition, in turn, depends upon the first transaction being capable of classification as the exempt intra-Community supply. Consequently, reliance on Article 141 cannot be used circularly to prove that the first supply qualifies under Article 138(1).\u00a0 The fact that the intermediary and final customer operated the triangular simplification did not determine which supply received the transport. Nor was the fact that the final customer was liable for VAT sufficient. Article 138(1) does not make exemption of the supplier’s transaction dependent simply on the final customer ultimately accounting for VAT elsewhere in the chain.<\/p>\n Additional questions asked<\/strong><\/p>\n The Latvian Supreme Court had also asked whether the first supply could qualify for exemption where the first supplier knew, before dispatch, that the intermediary had already resold the goods to a customer in another Member State.<\/p>\n The General Court did not answer that question because the referring court had made it conditional upon an affirmative answer to its first question. Since the Court answered the first question negatively, it considered the second question unnecessary.<\/p>\n A third question concerned the application of Article 141 where the customer in the third Member State subsequently resold the same goods during the same single transport operation. The Court declared this question inadmissible because the main proceedings concerned Trading 4’s entitlement to the Article 138(1) exemption rather than the VAT treatment of the intermediaries under Article 141.<\/p>\n An important qualification: the transactions pre-dated Article 36a<\/strong><\/p>\n Trading 4 concerned transactions from 2016\u20132017, before Article 36a of the VAT Directive introduced specific rules for attributing transport in chain transactions.<\/p>\n It therefore should not be read as replacing the current Article 36a rules. Its broader point is that the transport can only be linked to one supply, and the actual facts and commercial arrangements remain key to determining which one.<\/p>\n Conclusion and practical guidance for businesses<\/strong><\/p>\n Trading 4 is a reminder that the physical destination of goods does not, by itself, determine the VAT treatment of each transaction in a chain. Where several sales involve a single intra-Community movement, businesses must determine which supply is linked to that movement.<\/p>\n This requires looking at the actual commercial arrangements, including the timing of the sales, when the right to dispose of the goods passed, responsibility for arranging transport, contractual terms and Incoterms, freight documentation, invoicing and VAT numbers. Evidence that the goods reached the final Member State, that excise procedures were followed, or that VAT was ultimately accounted for downstream, may support the analysis, but does not replace it.<\/p>\n The practical message for businesses is therefore to analyse the contractual and physical supply chains together and document the allocation of transport. The triangular simplification can simplify VAT compliance, but it cannot correct an incorrect attribution of the underlying intra-Community movement.<\/p>\n ","protected":false},"excerpt":{"rendered":" One of the more complex areas of VAT, and ensuring that VAT is correctly charged, is that of triangulation and chain transactions Chain transactions occur where the […]<\/p>\n","protected":false},"author":239137953,"featured_media":14663,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"content-type":"","_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_wpcom_ai_launchpad_first_post":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"{title}\n\n{excerpt}\n\n{url}","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"_wpas_customize_per_network":false,"jetpack_post_was_ever_published":false},"categories":[1387],"tags":[1410],"class_list":["post-14661","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-eu-vat-update","tag-latvia-vat-update"],"jetpack_publicize_connections":[],"jetpack_likes_enabled":true,"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/pfNysa-3Ot","jetpack_featured_media_url":"https:\/\/meridianglobalservices.com\/wp-content\/uploads\/2026\/09\/tripet_1140x360.jpg","_links":{"self":[{"href":"https:\/\/meridianglobalservices.com\/fr\/wp-json\/wp\/v2\/posts\/14661","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/meridianglobalservices.com\/fr\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/meridianglobalservices.com\/fr\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/meridianglobalservices.com\/fr\/wp-json\/wp\/v2\/users\/239137953"}],"replies":[{"embeddable":true,"href":"https:\/\/meridianglobalservices.com\/fr\/wp-json\/wp\/v2\/comments?post=14661"}],"version-history":[{"count":3,"href":"https:\/\/meridianglobalservices.com\/fr\/wp-json\/wp\/v2\/posts\/14661\/revisions"}],"predecessor-version":[{"id":14665,"href":"https:\/\/meridianglobalservices.com\/fr\/wp-json\/wp\/v2\/posts\/14661\/revisions\/14665"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/meridianglobalservices.com\/fr\/wp-json\/wp\/v2\/media\/14663"}],"wp:attachment":[{"href":"https:\/\/meridianglobalservices.com\/fr\/wp-json\/wp\/v2\/media?parent=14661"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/meridianglobalservices.com\/fr\/wp-json\/wp\/v2\/categories?post=14661"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/meridianglobalservices.com\/fr\/wp-json\/wp\/v2\/tags?post=14661"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n