The chain transaction is considered a group of
transactions, when not only the supplier and the customer participate, but also
one or few intermediaries (i.e. the intermediary/intermediaries purchase the
goods from the supplier and resell them to the final customer) participate and
all transactions are related by a single delivery, i.e. the goods are
transported directly from the supplier to the final customer.
21 February 2018 the European Union Court of
Justice (EUCJ) ruled in case C-628/16 Kreuzmayr GmbH, which approved provisions
that the customer does not have the right to deduct input VAT according to
the incorrectly issued VAT invoices.
This decision demonstrates, that the companies
purchasing goods should also evaluate the circumstances of the transaction and
ascertain that the transaction is formalized in a correct way. If the business
partner incorrectly applies local VAT, the company does not have right to
deduct such input VAT.
Additionally, we would like to note that the
assessment of the reliability of business partners becomes more relevant to
each company and may help to reduce the risk in international trade.
The circumstances of
The case analysed the situation with chain
supplier A (German company) sold goods to a company B registered as a VAT payer
in Austria (intermediary);
intermediary B sold goods to the final customer C (VAT payer in Austria), intermediary
B has not informed about this transaction the supplier A and has not fulfilled
its obligation to deliver the goods from Germany to Austria itself;
customer C has delivered goods from Germany to Austria.
The following VAT invoices were issued
according to these transactions:
supplier A has issued the VAT invoices to the intermediary B with 0% VAT rate
(intra-Community supply to another EU country);
intermediary B has issued the VAT invoices to the final customer C applying
local Austrian VAT (local supply in Austria);
intermediary B has not paid VAT to the Austrian Tax Authority according to the
VAT invoices issued;
final customer C has paid to the intermediary B according the VAT invoices
issued and deducted input VAT according to the VAT invoices issued in Austria.
The EUCJ has determined that the transaction
was not treated correctly, i.e.:
supply of goods from the supplier A to the intermediary B should have been
considered as a local supply of goods in Germany (i.e. the supplier A should
have applied the local German VAT rate for the transaction);
supply of goods from the intermediary B to the final customer C should have
been considered as an intra-Community supply of goods from Germany to Austria
(i.e. the intermediary B should have applied 0% VAT rate for the transaction).
After evaluating the circumstances of the case,
the EUCJ stated that the intermediary B and final customer C knew that the
rights to dispose of goods was transferred in Germany
, i.e. the final
customer C could dispose goods as their owner before their delivery in the EU.
Due to the incorrect treatment of the
transaction, both the supplier A (had to calculate and pay calculated VAT
from the transaction) and the final customer C (had lost right to deduct VAT
according to the VAT invoices issued incorrectly)
suffered losses. The
intermediary B became insolvent and the final customer C could not receive a
refund of overpaid amounts (i.e. incorrectly calculated VAT) from the
The details of the case can be found:http://curia.europa.eu/juris/document/document.jsf;jsessionid=9ea7d2dc30ddda430396e09d46b7ba0e85eb67762b72.e34KaxiLc3qMb40Rch0SaxyNbhr0?text=&docid=199507&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=505740