Impact of transport on VAT exemption in intra-Community chain transactions

In chain transactions involving only one transport, it is crucial to determine within which relationship the transport takes place. The exemption for intra-Community supply can only be applied to one contractual relationship — specifically, the one in which the transport occurs. If you are involved in cross-border chain transactions within Europe and want to ensure that you correctly apply the exemption for intra-Community supplies, it is important to read on.

What is a chain transaction?

A chain transaction consists of successive supplies of goods where the goods are transported or dispatched directly from the first supplier to the final customer, between whom there is no direct contractual relationship.

Party A sells goods to Party B, who in turn resells the goods to Party C, whereby the goods are transported directly from Party A to Party C, between whom there is no direct contractual link. Parties A, B, and C are located in different EU Member States, meaning the goods cross national borders. Although there are two supplies (from A to B and from B to C), the transport can be allocated to only one of these supplies.

Only the supply with transport qualifies for the VAT exemption for intra-Community supplies. The other supply or supplies in the chain fall under the standard VAT regime.

Who is responsible for the transport?

Who arranges the transport has significant implications for determining the place of supply.

• If Party A arranges the transport, it is clear that the transport belongs to the A–B relationship. This supply is deemed to take place where the transport begins but is exempt from VAT in Member State A. The supply from B to C is then a taxable supply without transport, taking place where the goods are made available to the buyer — in this case, in Member State C. The B–C supply is therefore subject to local VAT in Member State C.
• If Party C arranges the transport, it is clear that the transport belongs to the B–C relationship. This supply is also deemed to take place where the transport begins and is exempt from VAT in Member State A (the country of departure). The supply from A to B is then a taxable supply without transport, taking place in Member State A, where the goods are made available. This supply is subject to local VAT in Member State A.
• If Party B (the intermediary) arranges the transport, things become more complex. Is the transport to be allocated to the A–B relationship or the B–C relationship?

Guiding principle for transport by intermediary B

Since January 1, 2020, the general rule is that transport is attributed to the supply to the party that arranges or commissions the transport. In other words, if transport is carried out by or at the expense of intermediary B, the transport is in principle linked to the supply to B — i.e., to the A–B relationship.

Exception: If B provides their VAT number from the Member State from which the goods are dispatched (i.e., Member State A) to their supplier, then the transport is attributed to the supply by intermediary B — i.e., to the B–C relationship.

A matter of facts

In VAT matters generally — and especially in cross-border transactions — the facts are crucial. Who supplies whom? With or without transport? From where to where? Etc.

Only once all these questions are answered can the correct VAT treatment be determined.

In this context, our VAT specialists offer a VAT scan for cross-border trade, where all relevant points are carefully examined. This ensures that your business meets all relevant (evidentiary) requirements and obligations to apply a VAT exemption.

Would you like more information about VAT in international trade or request a VAT scan of your international goods flows?

Our VAT specialists are happy to assist you.