intra-Community triangular operationsIntra-Community triangular operations (ITO) are performed among three companies located in three different countries. Thus, Company B (intermediary, Country 2) purchases goods from Company A (supplier, Country 1), to be in turn resold to Company C (final customer, Country 3), so that the product will be transported directly from the country of the supplier to that of the final customer, without entering the country of Company B.

Tax system: Intra-Community triangular operations

According to Article 141 of Council Directive 2006/112/EC, of 28 November 2006, on the common system of value added tax (Official Journal of the European Union L 347, of 11 December 2006), a special tax system is established for intra-Community triangular operations.

The purpose of this special treatment is to simplify formal obligations and, therefore, the costs to be incurred by those performing these types of operations, as well as guaranteeing a proper control thereof.

Therefore, from the tax point of view:

  • Businessperson A would make a tax-free intra-Community delivery of goods according to the general regulations applicable to intra-Community operations.
  • Businessperson B would make an intra-Community acquisition that is exempted due to the application of the special tax system established for triangular operations.
  • Businessperson B makes a domestic delivery to Businessperson C in Country 3; such delivery is subject to tax as the rest of domestic deliveries. In this case, an investment is made by the liable party, and the taxpayer is Businessperson C, not Businessperson B, even though –as already mentioned– B makes a domestic delivery.

Requirements: Intra-Community triangular operations

In order to apply such procedure, a series of conditions should be met:

  • The businessperson acting as intermediary (B) should not be based or identified, for VAT purposes, in the country of destination of goods (Country 3); it must be based or identified in another member state.
  • The intra-Community acquisition of goods (the acquisition made by B in Country 3) must result from the subsequent delivery of those goods in that same member state by the liable party acting as intermediary. Therefore, the intra-Community acquisition is carried out for the purpose of such subsequent domestic delivery.
  • The goods thus acquired must be carried directly from one member state to another, and the intermediary must not be identified in any of them.
  • The recipient of the subsequent delivery (final customer) must be another liable party or a legal entity other than the liable party, identified for VAT purposes in the state of destination of goods.
  • The final recipient of the goods must be designated by the legislation of Member State 3 as payer of the tax levied on the delivery made by the liable party not based in the member state in which the tax is due.

Formal obligations in Spain: Intra-Community triangular operations

In order to guarantee a proper tax control in Spain in relation to triangular operations, the following formal obligations apply to Businessperson B (the one located in Spain):

  • Form 349 for the intra-Community acquisition resulting from the delivery made by Businessperson A from Country 1.
  • Form 303 for the intra-Community acquisition resulting from the delivery made by Businessperson A from Country 1, provided that the operation is subject to VAT.
  • Form 303 for the domestic delivery made to Country 3 of the final customer.

Peter Spiller

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