The judgment of the General Court in case T-646/24 addresses a classic issue of VAT on intra-Community transactions, namely the application of the triangular transactions regime in supply chains that are more complex than the standard “ABC” scheme. In particular, the case concerns a chain involving four parties.
In the case at hand, a company identified for VAT purposes in Slovenia acquires certain goods from suppliers established in Germany, using its Slovenian VAT identification number. It then resells those goods to three Danish companies, all of them identified for VAT purposes in Denmark.
The transport is organized and paid for by the Slovenian company and is carried out directly from Germany to Denmark, without any physical passage through Slovenia.
The company declares these acquisitions and supplies in Slovenia, files its recapitulative statement and issues invoices to its Danish customers with the reference to the reverse charge mechanism, applying the simplification for triangular transactions under Slovenian law. Up to this point, everything appears to indicate that we are dealing with a classic triangular transaction scheme.
The information obtained by the tax authorities reveals, however, that the chain of supplies was in fact composed of four operators registered in three different Member States, a German supplier, the Slovenian company, a Danish company acting as its customer, and a fourth operator who was the final recipient of the goods. The goods in question were the object of a single transport operation, from the first operator in the chain to the last one.
The Slovenian tax administration took the view that the simplification for triangular transactions could not apply, because the goods were not placed at the disposal of the third operator in the chain, but of the fourth. In other words, this would not be a triangular transaction, but rather what could be described as a “quadrangular transaction”.
For that reason, three questions were referred to the Court for a preliminary ruling in order to resolve the controversy that had arisen.
The concept of “to the person for whom he is to carry out the subsequent supply”
Four taxable persons identified for VAT purposes in three different Member States participate in the dispute. However, there is still a single dispatch of goods, from the first operator in the chain to the last.
The legal difficulty lies in the expression “to the person for whom he is to carry out the subsequent supply” in Article 141(c) of the VAT Directive.
On the basis of settled case law, the Court recalls that a supply of goods is not to be identified with the formal transfer of ownership under national law, but with the transfer of the power to dispose of tangible property as owner. The Court adds an essential qualification, namely that this transfer of the power of disposal does not require the purchaser to have physical possession of the goods, nor that the goods be physically transported or delivered to him.
On that basis, the Court concludes that Article 141(c) and (d) does not require the recipient of the subsequent supply to have physical possession of the goods, nor, which is more important in this case, that the transport should end at that recipient’s premises.
Therefore, the fact that the single transport operation ends at the premises of the customer of the third operator (in other words, at a fourth operator) does not in itself prevent the condition laid down in Article 141(c) from being met.
This conclusion is clearly reflected in the answer to the first question referred, where the Court states that direct transport to the customer of the third operator does not exclude the application of the simplification regime, provided that the other objective conditions are fulfilled. In this way, the Court effectively endorses the use of the simplification mechanism in chains where four parties intervene in the supply of goods.
The Court also states that the fact that the operator invoking the simplification knows that the goods are not transported physically to the third operator, but to that operator’s customer, does not affect the fulfilment of the above conditions.
The Court further adds that no one may benefit from the advantages of the VAT system (deductions, exemptions, refunds or simplification regimes) where those advantages are used in the context of fraud. Therefore, in a case such as the present one, neither the reduction of the taxable amount of the intra-Community acquisition nor the simplification for triangular transactions can be relied upon if it is established that the operator knew, or had reason to know, that he was participating in a fraudulent chain. An exceptional benefit which exists only for “clean” transactions is therefore denied. It is for the authorities of the Member States to verify this.
The judgment of the General Court makes the interpretation of the triangular simplification more flexible, adapting it to complex supply chains and logistics flows in which transport is directed to the final customer, who is not necessarily the third operator in the chain but may be a subsequent operator in a later position in that chain. The key element remains the power to dispose of the goods, not their physical reception by the third operator. The case is therefore resolved on the basis of a concept that is not new, but already clearly defined in the case law of the Court of Justice.
The technique of triangular transactions can coexist with more complex chains and sophisticated logistics, provided that it does not become a shelter for organized VAT fraud structures.