Roadtrip through ECJ Cases – Focus on Place of Supply of Intra-Community Acquisitions – ”Triangulation” (Art. 42)

Last update: October 13, 2025

Importance of this article

Article 42 of the EU VAT Directive 2006/112/EC is crucial because it facilitates the simplified VAT treatment known as “triangulation” within the EU. This provision allows businesses involved in a three-party cross-border transaction (involving three VAT-registered entities in three different EU Member States) to reduce the VAT registration burden by avoiding the need for the intermediary (the middle party) to register for VAT in the Member State of the final customer.

In a typical triangulation scenario:

Goods are shipped directly from the first supplier (party A) to the final customer (party C).
An intermediary (party B) in a different Member State invoicing the supply but does not have to register for VAT in the final customer’s Member State.
Party B treats the acquisition as an intra-Community acquisition in its own Member State and sells to Party C using a simplified VAT regime.
Party C accounts for VAT under the reverse charge mechanism, meaning the VAT liability shifts to the final customer.

Article 42 is important as it disapplies the usual VAT liability rules (Article 41 in the Directive) for the intermediary, provided that the final customer accounts for the acquisition VAT correctly. This significantly reduces administrative burden and compliance costs relating to multiple VAT registrations across Member States. The simplification ensures only one intra-Community transport and the intermediate supply declared only once for VAT purposes, making cross-border trading more efficient in the EU.

This mechanism is widely used to streamline VAT processes in tri-party transactions and ensure legal clarity on VAT liabilities, which is essential for maintaining a smooth single market in the EU.

Article in the EU VAT Directive 2006/112/EC

Article 42
The first paragraph of Article 41 shall not apply and VAT shall be deemed to have been applied tothe intra-Community acquisition of goods in accordance with Article 40 where the followingconditions are met:
(a) the person acquiring the goods establishes that he has made the intra-Community acquisition for the purposes of a subsequent supply, within the territory of the Member State identified in accordance with Article 40, for which the person to whom the supply is made has been designated in accordance with Article 197 as liable for payment of VAT;
(b) the person acquiring the goods has satisfied the obligations laid down in Article 265relating to submission of the recapitulative statement.

ECJ Cases Decided