Update: ‘Failed’ triangular transactions – Opinion of Advocate General Kokott on the preliminary ruling request by the VwGH regarding invoice details and invoice correction in a triangular transaction

As mentioned in our (German) newsletter of 21 May 2021, the Austrian Supreme Administrative Court (VwGH) submitted the following questions to the Court of Justice of the European Union (CJEU) regarding invoicing by the acquirer to the recipient in a triangular transaction:

    • Is tax liability transferred to the recipient even if no reference is made in the invoice to the transfer of tax liability?
    • If the first question is answered in the negative, can such a mention to tax liability on the invoice be amended so as to apply retroactively?
    • Is it necessary for the invoice recipient to receive the amended invoice in order for an amendment to be effective?
    • Does the effect of the amendment apply retroactively to the original date of invoicing?
    • Which requirements apply to the issue of the invoice – those of the state of residence of the acquirer, or those of the Member State in which the recipient operates its business?

Opinion of the Advocate General of 14 July 2022

Based on the previous so-called ‘substance over form’ case law of the CJEU, which has previously addressed input VAT deduction and VAT exemption of intra-Community supplies of goods, it appeared conceivable that purely formal irregularities would not prevent the application of the simplification rule to triangular transactions or retrospective amendments.

Comments regarding invoices referring to the transfer of tax liability as a prerequisite for the application of the simplification rule for triangular transactions

Advocate General Kokott stressed that the absence of a reference to the transfer of tax liability to the recipient in the context of an intra-Community triangular transaction has less to do with the classification as material or merely formal requirements than the intended purpose of the rules.

According to the opinion, the purpose of the special rules for intra-Community triangular transactions is to simplify matters for the involved parties, in particular:

    • no obligation to register for VAT purposes in the Member State of arrival, and
    • no further taxation of an intra-Community acquisition by the acquirer in the Member State that issued the VAT ID number as a result of the use of this VAT ID number by the acquirer.

The prerequisite for both simplifications, however, is that the tax liability is transferred to the recipient, which would be the case if the acquirer exercises its right of option and refers to the transfer of tax liability in the invoice. According to the opinion, the purpose of the invoice is also to inform the addressee of the invoice that it owes VAT. Without such information being provided, there is an increased risk that no party will pay VAT.

In the view of the Advocate General, therefore, a reference to the transfer of tax liability is strictly required, and not disproportionate for application of the simplification rule.

Comments regarding retrospective issue of invoices in an intra-Community triangular transaction

In the view of the Advocate General, the correction of the original invoice does not constitute an actual invoice correction, but rather an (initial) issue of an invoice with the required hallmarks, meaning that the ‘corrected’ invoice has no retroactive effect. It is only effective ‘ex nunc’ and must be received by the recipient if its informational purpose is to be fulfilled.

Comments regarding the content of the correction and the relevant national invoicing requirements

For the Advocate General, the question as to which national rules apply does not even arise, as no triangular transaction exists in the absence of a proper invoice and this question would only be relevant if an invoice could be issued retroactively, which is not the case.

Overall, the Advocate General has adopted a relatively strict view, which is presumably justified on the basis that the simplification rule is a right of option of the acquirer.

It remains to be seen whether the CJEU will endorse this view.

FB twitter Linkedin
Tags

Categories