In business practice, we often encounter chain transactions. A chain transaction is successive supplies of the same goods between several parties, which are subject to a single transport directly from the first supplier to the final customer. In chain transactions, at least three subjects are involved, but often there are more of them.
For cross-border chain transactions, VAT registration of some transaction parties in the EU Member State of taxation could be necessary.
For the correct VAT treatment, it is necessary to determine which of the supplies should be considered as movable (i.e. connected with transportation). For supplies within the EU, this supply can be considered as a VAT exempt intra-community supply of goods. All other supplies should be considered as unmovable domestic supplies subject to local VAT, either in the Member State of dispatch or the Member State of the destination of the goods.
The determination of a movable supply is relatively straightforward where the first supplier or the last customer arrange the transportation of goods – in such cases transportation should be allocated to the first, or to the last supply in the chain.
VAT treatment of chain transactions was absent from Slovak legislation and the law of many other EU Member States prior to 2020. This made it difficult to determine which supply should be considered as movable where transportation was arranged by a middleman. When assessing which supply in a chain is movable, it was necessary to follow the relevant CJ EU case law.
The new legislation, which is part of the European package of VAT measures known as Quick Fixes, aims to remove this uncertainty. The determination of movable and unmovable supply has been significantly simplified compared to the past:
Where three parties participate in a chain transaction, the triangulation simplification may be used under certain circumstances.
Applying our experience with chain transactions, we can perform an analysis of the VAT regime of your commercial transactions.
We will identify potential risks of your cross-border chain transactions and advise you on how to eliminate these risks.
We will suggest how to set up a business transaction from the VAT perspective, taking into consideration your firm’s individual needs.
We will assist you with drawing up documentation that meets the requirements of tax authorities.
Partner, Tax & Legal Leader, PwC Slovakia
CEE TLS Lead Relationship Partner, PwC Slovakia
Tel: +421 903 261 010
Senior Manager, PwC Slovakia
Tel: +421 903 268 048