CJEU on triangular transactions – who accounts for VAT in this chain?

The case decided by the CJEU concerned an Austrian company (Luxury Trust Automobil, LTA) based in Austria, which is active in the brokerage and sale of luxury vehicles both in the EU and in third countries. In 2014. LTA purchased vehicles from a supplier based in the UK (then still in the EU), which it then resold to M company based in the Czech Republic. The vehicles were transported directly from the UK to the Czech Republic, with LTA organising their transport.
Each of the three companies used the VAT number of its country of establishment. LTA’s invoices contained the reference ‘exempt intra-Community triangular transaction’. In the summary information, LTA indicated the Czech VAT number of company M and stated that these were intra-Community triangular transactions.
In a tax audit, the Austrian authorities found that the triangular transaction system was not applicable. The disputed invoices did not contain any indication that the last purchaser was liable for VAT. The transaction should therefore be considered in the light of the general rules. On the basis of these provisions, since LTA used an Austrian VAT number, it made an intra-Community acquisition in Austria. The acquisition should thus be deemed to have been made in Austria until LTA demonstrates that it was taxed in the Czech Republic. Since, on the basis of additional findings, this condition was not met, the company in question was not entitled to deduct the input VAT on this acquisition.
The CJEU confirmed in the judgment that, in the context of such transactions, the final purchaser is not effectively designated as the person liable to pay value added tax (VAT) if the invoice issued by the intermediate purchaser does not contain the mention ‘reverse charge’. Furthermore, the omission on the invoice of the mention ‘reverse charge’ required by a provision of the VAT Directive cannot be corrected at a later date by adding a reference indicating that the invoice relates to an intra-Community three-way transaction and that the tax liability is passed on to the recipient of the supply.
This is an important ruling that highlights the importance of correctly documenting triangular transactions and indicating on the invoice which of the three parties to the transaction is liable for VAT. Given the recent position of the CJEU, which stated that a written contract can be considered an invoice, here the tribunal appeared to be very restrictive. It did not even allow for the possibility of correcting the invoice, so that the taxpayer could correct the mistake. Therefore, it is worth paying attention to whether all the prerequisites for applying the simplification for triangular transactions are met, so as not to suffer negative consequences – comments Łukasz Woźniak, manager at Thedy & Partners.