Sales tax is difficult to determine, especially for cross-border payments. Then it seems questionable which countries can all tax. However, it becomes completely problematic when three entrepreneurs are involved, all based in different countries. Then even the regular determination of taxation rights seems questionable. In addition, however, there could also be an intra-Community triangular transaction, which must also be examined. The intra-Community triangular transaction within the meaning of § 25b UStG is actually a tax simplification standard. We explain why and what conditions the intra-Community triangular business has. The article examines these triangular constellations with regard to the actual law and then explains the modifications made by § 25b UStG.

The triangular business of § 25b UStG regulates cross-border taxation with sales tax. It assesses the relationships between three entrepreneurs based in different countries. These entrepreneurs would have to conclude sales tax transactions on the same subject matter. The object would have to pass directly from the first customer to the last. All three entrepreneurs would have to be registered for VAT in Member States of the European Union and the object would have to be transferred to another Member State. As a further condition of the triangular transaction, the object of the delivery would have to be transported by the first supplier or customer.

Without the regulations on triangular business, the business would be regarded as quite normal series business within the meaning of § 3 VIa UStG. The consequence of a series transaction is that only one delivery is to be regarded as moved. Since here the object passes directly from the first supplier to the last customer, according to § 3 VIa UStG the delivery of the first supplier is moved. Consequently, § 3 VI UStG applies to the delivery of the first supplier to the first customer as a location rule of the moving delivery. Accordingly, the delivery is carried out where the delivery begins, i.e. in the country of the first supplier.

In a triangular transaction, this country is a member state of the European Union. The first customer is also established in the Member State. This delivery is therefore in accordance with § 6a UStG an intra-Community delivery and therefore according to § 4 no. 1 lit. b VAT free. Thus, the first supplier owes no tax. Nevertheless, the first customer makes a taxable intra-Community acquisition pursuant to § 1a UStG, since the object passes from one Member State to another Member State of the European Union. This is possible because this delivery is a moving delivery according to § 3 VI 1 UStG.

The place of this delivery is in accordance with § 3d UStG in the country where the item is at the end of the transport. The item is located at the end of all events in the country where the last customer accepts the item. Consequently, the VAT is also applicable there. Therefore, the location rules of the UStG also apply as rules for the distribution of taxation rights. However, according to § 13a I No. 2 UStG, the taxpayer is the first customer.

According to § 3 VI According to § 3 VII 2 No. 2 UStG, the delivery of the first customer to the last is to be located as immovable delivery in the country of the last customer and therefore also taxable there.

The result is that the first customer would have to be registered for sales tax in a foreign state. Therefore, he would have to indicate the intra-Community acquisition and the taxable supply to the last customer in the tax declaration. For the intra-Community acquisition, however, he can draw the VAT deduction directly again according to § 15 I 1 No. 3 UStG. Consequently, the second supplier first pays the tax but receives exactly as much back. Therefore, de facto no tax is paid on this delivery. He will pass on the taxable delivery to the last customer, so that he will actually bear the tax. Nevertheless, the first customer must register for sales tax in a foreign state. This result is unsatisfactory and is modified by the triangular business.

The intra-Community triangular business leads to a considerable simplification of the taxation procedure and is therefore regularly dubbed a simplification standard. The reason for this is its legal consequence. In an intra-Community triangular business, three entrepreneurs operate. Section 25b II of the UStG provides that the tax on delivery to the last customer is also due by the last customer. Therefore, § 25b II UStG establishes a real tax claim.

Prerequisite for this is that the supply has been preceded by an intra-Community acquisition and the first customer is not resident in the country where the taxes are owed by him. The first customer must use, for the first and the second delivery, the same VAT identification number issued to him by a Member State other than that in which the actual delivery begins or ends. The first customer must also issue the last customer an invoice within the meaning of Section 14a VII UStG, in which the tax is not shown separately. Therefore, the invoice must mention the intra-Community triangular operation and the VAT mechanism of the last customer. As a last condition, the last customer would have to use the VAT identification number of the Member State where the transport or dispatch ends.

§ 25b V UStG establishes the deduction for the last customer. In order for him to deduct the input tax, however, the requirements of § 15 UStG must be met. Therefore, the acquired object must be used for at least 10 % of the business and must not be subject to any further exclusion under § 15 Ia UStG. It seems questionable whether § 25b V UStG has a declaratory or constitutive effect. In our opinion, the entitlement to deduct input tax according to § 15 I 1 No. 1 UStG requires a difference between the taxpayer and the person entitled to deduct input tax. The wording is open in this respect. Nevertheless, the explicit provision of the VAT deduction for intra-Community acquisition in Section 15 I 1 No 3 of the UStG supports this. Consequently, § 25b V UStG should be considered as constitutive, since it coincides with the person liable for the tax and the person entitled to the deduction.

Therefore, § 25b UStG reverses the tax liability mechanism. Consequently, the first customer no longer has to pay tax for his actually taxable delivery to the last customer. In addition, the intra-Community acquisition of the first customer is taxed under Section 25b III of the UStG. Therefore, there is no longer any tax to be paid for this either. Thus, the first customer no longer has to register for sales tax in a foreign country. Rather, Section 25b of the UStG leads to a taxation corresponding to the actual burden.