This blog was last updated on February 2, 2024
When the European Commission abolished the internal fiscal borders of the European Union in 1992, they were quite aware of one particularly difficult matter – drop shipments. These are “triangular” transactions where the buyer is different from the recipient, also known as, when the bill-to party is different from the ship-to party. Now, after almost 25 years of intra-EU VAT rules, these “ABC” triangular transactions still create significant and recurring liability nightmares. In many organisations’ VAT practice an issue in relation to this matter occurs almost every week. Are you a multinational organisation that struggles with triangular drop shipments and correctly handling the VAT implications? VAT managers must be involved in the daily business operations and supply chain to ensure that these transactions are handled properly and the right VAT reports are filed accurately. Download our complimentary white paper, “The Trouble with Triangulation”, that explores and explains a number of practical triangulation scenarios, including:
- Domestic ABC transactions where all parties are doing business in the same country, but one party is not a resident and a domestic reverse charge is needed.
- Simplified triangulation situations where all three parties are located in different EU member states and zero-rate can be applied.
- Drop-shipments where one party is not a business, but an individual and all three parties are in different countries, so you must know who is responsible for registering for VAT in which location.
- A non-EU company is the middleman, such as the United States, and where they have to use VAT registrations.
Errors can result in audits, penalties, damage to business reputation and discord amongst vendors, customers and partners that can all affect your bottom line. Stay on top of all types of transactions to avoid these costly liabilities by learning from Sovos today. We are here to help you stay compliant with all your VAT reporting and analysis needs.
