Can wrong invoice references when making use of simplified triangulation lead to VAT liabilities?

VAT Consult
The European Court of Justice (Case C 247/21; Luxury Trust Automobil GmbH) was requested to deal with this question in an Austrian case.
On 14 July 2022, Advocate General Kokott concluded that the wording “reverse charge” on the invoice is a key requirement to benefit from the simplified triangulation.


The mechanism of simplified triangulation constitutes an exception to the basic rule in the EU VAT legislation that if goods are subject to a supply accompanied with a cross border (intra-EU) transport, the seller needs to report an exempt supply in the Member State of departure and the acquirer needs to report a taxable acquisition in the Member State of arrival. 

Triangulation covers situations where three parties (A, B and C) are involved in a chain of transactions with goods directly being dispatched from one Member State (MS 1) to another Member State (MS 3). 

In principle, it only concerns supply chains whereby the cross-border transport has been arranged between party A and B (excluding pick up transactions by C). 
The VAT relief allows B to avoid a VAT liability triggered by a taxable acquisition in the Member State of arrival (MS 3) followed by a subsequent local supply to party C in the Member State of arrival (MS 3). 

Instead, the simplification allows party B to declare the acquisition under another Member State's VAT system (MS 2) and to shift the liability for the acquisition in MS 3 towards party C. 

In this respect, the EU VAT legislation (combined articles 141 and 197 of the VAT Directive 2006/112/EC) imposes several conditions to the use of triangulation: 
  • Party B is not established in MS 3, but is VAT registered in another EU Member State (MS 2); 
  • Party B acquires the goods from MS 1 for subsequent delivery in MS 3; 
  • The goods are directly transported from another EU Member State than the one where party B is VAT registered towards party C in MS 3;  
  • Party C is VAT registered in MS 3; 
  • A, B and C are different legal entities (no branches or VAT registrations of the same legal entity);
  • Party C has been designated as liable for payment of the VAT due on the supply of party B.

In practice, we observed that country specific provisions implementing the EU provisions on the simplified triangulation regime may differ slightly and/or administrative practice in EU Member States may approach the conditions in a different way. 

Questions referred

This case concerned a pre-Brexit flow involving a supply of vehicles between parties established in UK (A), Austria (B) and the Czech Republic (C), with the vehicles being shipped directly from the UK to the Czech Republic.
Party C was identified as a so-called missing trader and did not collect any VAT on his supplies in the Czech Republic.

B did not include the appropriate reference on his invoice, i.e. the statement “reverse charge”, to transfer the VAT liability to his customer in the Czech Republic.
Because of the missing “reverse charge” reference, the Austrian tax authorities challenged the application of the simplified triangulation.

The referring Court asked whether: “article 42(a) of [the VAT Directive] in conjunction with Article 197(1)(c) of that Directive … to be interpreted as meaning that the person to whom the supply is made is to be designated as liable for payment of VAT if the invoice, which does not show the amount of value added tax, states: “Exempt intra-Community triangular transaction?”

Translated in simple terms: does the fact that the invoice includes the wording “exempt” instead of “reverse charge” prevent the application of the simplified triangulation?

The referring Court also asked whether an invoice correction can be made with retrospective effect (question 2) and according to which invoicing country rules the invoice is to be corrected (question 3).


Question 1: need for an invoice to expressly refer to “reverse charge” ?

The Advocate-General concludes that the mere indication of the statement “Exempt intra-Community triangular transaction” is not sufficient when taking advantage of the VAT relief for simplified triangulation.

Through the content of the invoice, suppliers can decide whether or not to make use of the simplification measure for triangular transactions. This means that, without an invoice referring to “reverse charge”, the normal VAT treatment of chain transactions applies.

Under the normal (non-simplified) scheme, B needs to account for (irrecoverable) VAT on the intra-Community acquisition in Austria (VAT identification number used for the purchase; safety net cf. article 41 of the VAT Directive). This is unless B can demonstrate that VAT was settled on his acquisition in the Czech Republic (Member State of destination; Article 40 of the VAT Directive).

Question 2: possibility to correct an invoice with retroactive effect?

The Advocate-General concludes that an invoice containing the wording ‘Reverse charge’ can be issued subsequently, but only with ex nunc (going forward) effect, whereby it is necessary that that invoice is received by the recipient of the supply.
According to the Advocate-General, the conditions for the use of a simplification scheme cannot be fulfilled retroactively. Therefore, a correction is not possible on an “ex tunc” (retroactively) basis.

This means that as long as the corresponding invoice exists, the conditions of the simplification scheme for an intra-Community triangular transaction are deemed not to be met.

In the case at hand, B appeared no longer to be in the possibility to deliver the invoice to his customer (who was identified as missing trader).

Question 3: which country is competent for setting the rules on corrections?

According to the Advocate-General, this question is only relevant if an invoice could still be issued/corrected with retroactive effect. As this is not the case, this question does not need to be answered.


This opinion is somewhat surprising and goes against the trend in recent EU jurisprudence where “substance” was often considered to take precedence over “form”.

In theory: VAT should be neutral, but this case illustrates that VAT neutrality is not always guaranteed. Therefore, in order to avoid VAT costs, it is important for taxpayers to make sure that they handle VAT formalities correctly.

Proper attention should also be paid to VAT invoice references. This is especially true when taking advantage of simplification VAT schemes.

We look forward to the final judgment, which can be expected in three to maximum six months. While awaiting the final decision, this case is another example underlining the importance of VAT rules when being involved in cross-border chain transactions.