Meaning of Chain Transaction 2

The function of the intra-community triangular business

The simplification rule for the intra-Community triangular transaction with regard to sales tax is as follows.

For the first buyer (French wholesaler) of a chain transaction, the triangular transaction is an intra-Community acquisition in the destination country (Spain) and leads to a taxable domestic delivery.

It follows that the first buyer (French wholesaler) would have to submit a VAT return in another country (Spain).

Due to the simplification rule, the acquisition is considered to be taxed in the EU member state (Spain) and the tax liability is transferred to the second buyer (Spanish furniture store).

This saves the French wholesaler from having to register in the country of destination Spain.

The accounting

The supplier must note the following when submitting the invoice:

  1. There must be a reference to the tax exemption for the first customer on the invoice
  2. the reference to a triangular transaction must be noted
  3. the USt-IdNr (sales tax identification number) for the first and second customer must be given

It must be clearly recognizable that the sales tax liability is passed on to the second customer.

Movements of goods to a third country

According to Section 3.14, Paragraph 12 of the UStAE, an entrepreneur based in another EU member state or in a third country who is involved in a chain transaction must always register in Germany.

If the movement of goods begins domestically and ends in a third country

The tax exemption according to § 4 No. 1a in conjunction with § 6 UStG can only be used for the moving delivery.

An example:
A Mongolian entrepreneur M orders a printing press from the Chinese entrepreneur CH.

CH orders the printing machine from entrepreneur D in Aachen, who forwards the order to manufacturer E in Heidelberg. CH picks up the printing press in Heidelberg and transports it with its own truck directly to M.

The BFH (Bundesfinanzhof) (XI R 30/13, BFH / NV 2015, 769, LEXinform 0934303) says about this case study: If CH picks up the goods from E and can prove that he acts
as a buyer of D and not as a supplier himself and CH only receives ownership in China and he himself does not transfer ownership before the delivery item has left the country, then the 1st delivery E to D is the transport delivery.

The place of delivery is Heidelberg, as this is where the delivery begins. This delivery is taxable and subject to tax. An export delivery within the meaning of Section 4 No. 1 Letter b in conjunction with Section 6 Paragraph 1 No. 2 UStG is not given, as customer D is not a foreign buyer within the meaning of Section 6 Paragraph 3 UStG.

When the movement of goods begins in the third country and ends domestically

In this case, a relocation of the place of delivery (Section 3 (8) UStG) for the transport or dispatch delivery may be considered.

This is the case if the entrepreneur whose delivery is to be assigned to the transport or dispatch in a chain transaction, is also debtor of the EUSt.

An example:
The German greengrocer from Munich orders avocados from the Spanish wholesaler Munos. He orders the avocados from the Limas farmer in Peru. Limas transports the avocados directly to Munich on behalf of the Spanish wholesaler.

The German greengrocer has the parts put into free circulation and pays the German EUSt (delivery condition “duty unpaid and untaxed”).

Two deliveries are made in this chain transaction (Limas to Munos and Munos to the greengrocer).

The transport is to be assigned to the first delivery of Lima to Munos, since Limas, as the first entrepreneur in the series, transports the avocados itself. The place of delivery is Peru according to Section 3 Paragraph 6 Clause 5 in conjunction with Clause 1 UStG.

The delivery of Limas is subject to the German VAT on import into Germany. A relocation of the place of delivery in accordance with Section 3 (8) of the UStG is out of the question, as Limas, as the supplier of the transport delivery, is not also the debtor of the VAT.

The second delivery (Munos to the greengrocer) is the dormant delivery. According to § 3 Paragraph 7 Clause 2 No. 2 UStG, it is deemed to have been carried out in Germany, since it ends there and follows the transport.

Munos carries out a tax-free delivery according to § 4 No. 4b UStG, since its delivery in the supply chain precedes the import by the end customer.

An import for the company of the German greengrocer is given because he clears the imported item in Germany for free circulation under customs and tax law and then uses it to carry out sales.

The German greengrocer, the resulting import VAT according to § 15 para. 1 sentence 1 no. 2 UStG as a tax deduct, as he at the time of release for duty-free circulation the power of disposal holds (Sect. 15.8, para. 5 sentence 2 UStAE ).

Chain Transaction 2