EU General Court on application of simplification measure to triangular transaction in four-party supply chain
The judgment of the General Court of the EU in the MS Ključarovci case (T-646/24) provides a more precise interpretation of the conditions for applying the simplification for triangular transactions under Article 141 of the VAT Directive. The subject of the dispute was whether the existence of four entities in the supply chain automatically precludes the application of this scheme if the supply of goods is carried out within a single cross-border transport between two member states.
The case concerned a Slovenian company acting as an intermediary in the supply of seed oil press cakes from a German supplier to a Danish company. The latter then supplied the goods to its customer within the Kingdom of Denmark, with the supply taking place in a single transport directly from Germany to Denmark.
The Slovenian tax authorities concluded that due to the existence of another person in the chain, more than two successive supplies had been made and therefore the simplification measure could not be applied. It therefore imposed additional VAT on MS Ključarovci. The dispute was then brought before the General Court on the basis of preliminary questions from the Slovenian court.
In its judgment, the General Court emphasised the purpose of Article 141 of the VAT Directive, which is to simplify administrative obligations and prevent multiple VAT registrations in different member states. The key question was whether the condition in Article 141(c) could be met even if the goods were not delivered directly to the person for whom the subsequent supply was made, but to their customer.
According to the General Court, two successive sales of the same goods that is transported directly from the first supplier to the final customer constitute a single transport of goods. The Court concluded that the directive does not require the person to whom the subsequent delivery is made to physically hold or take physical possession of the goods. The goods may also be delivered in a single transport to that person’s customer to whom the goods are subsequently sold.
The decisive factor is that the transport takes place from one member state to another member state and that the final customer is a taxable person identified for VAT purposes in the state of transport destination. The existence of a fourth entity in the supply chain does not in itself preclude the application of the simplification.
In conclusion, the General Court recalled that the simplification for triangular transactions cannot be applied in cases of abuse of law or involvement in tax fraud. However, the mere fact that the intermediary is aware of the direct delivery of goods to the final customer is not sufficient to exclude this scheme. The national authorities may refuse its application only if it is proven that the person concerned knew or should have known that they were participating in transactions involving VAT fraud.