Navigating EU VAT: Chain transactions and triangulation in SAP

VAT in the Digital Age

Understanding the future of VAT, e-invoicing, and digital reporting

On Demand Webinar: VAT in the Digital Age

VIDA & SAP: The Critical Preparations Your Company Should Be Making Today

VAT is entering a new digital era.

The European Commission’s VAT in the Digital Age (ViDA) initiative is reshaping how VAT is reported, how businesses exchange invoices and how tax authorities access transaction data across the EU.

For businesses, ViDA is more than a VAT change. It will have significant implications for invoicing processes, ERP and finance systems, data management, compliance, and the way businesses operate cross-border EU trade.

Explore what ViDA could mean for your organisation, including the impact on VAT and finance processes, invoicing and reporting, and impacts on your ERP / SAP systems. We also look at the practical considerations involved in preparing for these changes and the approaches, and what technologies and solutions that can help you address them.

Whether you are looking to understand the legislation, assess its impact on your organisation or determine how best to prepare, our ViDA hub provides the information and practical insights to help you navigate the challenges ahead.

What is VAT in the Digital Age?

The EU’s VAT in the Digital Age (ViDA) package is a major modernisation of the EU VAT system. Adopted on 11 March 2025, it will progressively change how businesses report VAT, how VAT is collected in the platform economy, and how businesses manage VAT registrations across the EU. The reforms will be phased in between 2025 and 2030.

There are 3 pillars of ViDA:

1. Digital Reporting & e-Invoicing
ViDA will move VAT reporting towards digital, near real-time reporting based on e-invoicing. From 1 July 2030, mandatory e-invoicing and new EU Digital Reporting Requirements will apply to cross-border B2B transactions, giving tax authorities faster access to transaction information and helping tackle VAT fraud.
2. VAT & the Platform Economy
New rules will change how VAT is handled by certain digital platforms. In particular, platforms facilitating short-term accommodation rental and passenger transport by road will, in certain circumstances, become responsible for collecting and paying VAT where the underlying supplier does not charge VAT.
3. Single VAT Registration
ViDA will simplify and broaden the application of the domestic reverse charge mechanism, allowing Member States to apply it more widely in certain circumstances, and reducing the need for non-established businesses to register for VAT locally. ViDA will also expand the use of the One Stop Shop (OSS), allowing businesses to meet more of their EU VAT obligations in their own country, rather than registering for VAT separately in multiple Member States. The changes also include improvements to existing OSS/IOSS processes and a new mechanism for transfers of own goods. Overall, this pillar is designed to reduce the need for multiple VAT registrations and make cross-border EU VAT compliance simpler.

ViDA implementation timeline

March 11, 2025

Adoption of ViDA package

EU Council adopts ViDA package
• Domestic e-invoicing is now permitted
• Small changes to distance selling rules

January 01 2027

Preparatory OSS & I-OSS changes

Minor clarifications of OSS / I-OSS schemes

July 01 2028

Single VAT registration

• Mandatory domestic reverse for non-established / non-identified suppliers
• Introduction of transfer of own goods OSS
• Extension of OSS schemes to cover further e-commerce / consumer sale activity

What is triangulation?

Many multi-national companies operating across the EU make use of the “triangulation simplification”. This removes the burden to VAT register in different Member States into which goods are delivered.

Under normal EU VAT rules, without the triangulation simplification, Party B (the intermediate supplier) would ordinarily be required to register for VAT in Member State C to account for an intra-Community acquisition. It would then make an onward local supply of goods to its customer, Party C, in Member State C.

Watch the Video: Chain Transactions and Triangulation

We discuss one of the most challenging and complex issues facing businesses when trading across the EU

What is EU VAT Triangulation?

Where you have three parties located in three different EU member states, and those goods are being shipped directly from party a in the chain to party c in the chain.

How to automate Triangulation

Standard SAP doesn't have the flexibility to understand all scenarios for complex chain transactions. Meridian tax technology automates the process.

VAT Determination for Cross border transactions

Cross-border chain transactions are among the most complex challenges in indirect tax compliance.

Why Native SAP Struggles with Chain Transactions
Transport Assignment Ambiguity
Customization Nightmares

How Meridian VAT Determination Solves the issues
Dynamic Evaluation
Built Directly Inside SAP
Centralized Control

VAT Determination for Cross border transactions2_800x500 (1)

Basic rules surrounding the triangulation simplification

The following conditions must be met for the triangulation simplification to apply :

There are three different parties (i.e. separate taxable persons) VAT registered in three different EU Member States
Goods are transported directly from Member State A to Member State C
The invoicing flow involves Party A selling the goods to Party B (the intermediate supplier)

The intermediate supplier in turn invoices its customer, Party C (in Member State C)
Party B must obtain from Party C a valid VAT ID from the Member State of destination, and quote this VAT ID on its invoice; and
Party B must quote “Article 141 simplification” on its invoice to Party C

Find out More

A More Complex Triangulation Scenario

A question that is often asked is whether or not the triangulation simplification is still available in the following circumstances:

where Party “B” is VAT registered in the destination Member State, or
where Party “B” is VAT registered in the Member State of dispatch, or
where Party “C” (the end-customer) picks up the goods from Party ‘A’, or arranges his own transport to the destination country

As is often the case with EU VAT rules, the answers to the above questions are not straightforward; yet the legal and practical impact can be significant. The Meridian Arco and VAT Add-on solutions enable the triangulation scenario to be automatically determined within the SAP system.

For a detailed insight into complex EU triangulation scenarios, download our Guide : Navigating the complexities of EU VAT triangulation

Download the Guide

ERP considerations

It is best practice to ensure that the system automatically determines the VAT treatment of sales transactions that potentially fall within the triangulation simplification. After all, it is very unlikely that sales order staff will have the requisite depth of knowledge to understand the nuances of the EU VAT rules in this area. It is far better, to have the system automatically detect when triangulation can no longer apply and where it is necessary to report a domestic transaction (either in the Member State of dispatch or destination).