Triangular Trade

[Former Member]

hi all,

can any body suggest me regarding Triangular Trade.

What is the use of Triangular Trade.

Thanks,

Aarthi.

[JozsefSzikszai]

hi Aarthi,

this is some special EU business type, there are three compnaies (A, B, C).

Goods : A ==> C

Invoice : A ==> B ==> C

Money : C ==> B ==> A

So the goods go directly from A to C, while for invoice and money there is one more player in the middle. It has to be reported in EC sales list.

More info in SAPHelp.

ec

[Former Member]

See OSS note 938150:

Summary

Symptom

§ 25b of the German Turnover Tax Act explains the requirements concerning the mapping of a triangular deal within the EU. You want to map them in an R/3 system. This affects the R/3 applications SD, MM, and FI.

Other terms

German Turnover Tax Act § 25b, triangular deal, XEGDR, STCEG, SD, Sales and Distribution, MM, Materials Management, FI, Financial Accounting

Reason and Prerequisites

§ 25b of the German Turnover Tax Act requires complex settings across the applications SC, MM, and FI.

Solution

Display the logistic process of the triangular deal using a sample process (IT = country Italy; DE = country Germany; AT = country Austria).

In a chain transaction, the goods movement does not take place between two contracting partners, but between several companies.

If a company uses a supplier to send the ordered goods directly to a customer, this is called a chain transaction.

The triangular deal within the EU, or the EU triangular deal, is a special chain transaction.

I. Process description

Chain transaction

AT -

-

---

DE -

-

---

DE -

-

---

DE -

-

---

DE

EU triangular deal:

Customer IT - - - - - - - - - - - -> Company DE

<- <-

<- <-

<- <-

<- <-

<- Supplier AT <-

EU triangular deal in a chain display:

1.Delivery 2. Delivery

AT -

-

---

DE -

-

---

IT

--- Physical goods movement (AT to IT) -->

An Italian company with an Italian VAT registration number orders goods from a company in Germany. The German company, which has a German VAT registration number, orders the goods from an Austrian supplier, who has an Austrian VAT registration number. The Austrian supplier delivers the goods directly to the Italian company.

Document flow display in R/3-SD from the point of view of the German company:

Standard order IT orders goods from DE

. Order DE orders goods from AT

. Invoice DE bills IT

.. Accounting document

II. Term definitions in turnover tax law

To be able to carry out a turnover tax-relevant evaluation of this business process, some terms must be defined first.

From a tax pint of view, two deliveries are carried out in the EU triangular deal.

The delivery from supplier AT to the selling company in DE and the delivery from DE to the customer in IT.

From a turnover tax point of view, the goods movement must be assigned to only ONE delivery for this delivery chain. This is called an "active delivery". This assignment of the goods movement is important as for cross-border goods movements only active deliveries are taken into account for a tax exemption for exports or deliveries within the EU.

The second delivery type is called "inactive delivery". For this type of delivery, the company cannot claim tax exemption.

The goods are physically delivered from the supplier in AT to the customer in IT.

For the correct assignment of the "active delivery" you have to know who initiates the goods movement. This initiation of the goods movement can, for example, be proved using the terms of delivery (Incoterms).

1. Differentiation between an active and an inactive delivery

Active delivery:

An active delivery takes place between the company that is responsible for the transport or that commissions the shipping company and the company in the triangular deal that is not directly involved in this delivery process.

Using the example above, this means: The supplier from AT delivers the goods to the customer in IT. Therefore, the "active delivery" takes place between AT and DE.

Only active deliveries are tax-exempt (export or delivery within the EU) if the goods cross a border.

Inactive delivery:

All deliveries in the triangular deal that are not active deliveries are called "inactive deliveries". For this type of delivery, the company cannot claim tax exemption.

Special case: If the company from Germany delivers the goods, you have to decide whether this company acts as a recipient or a supplier. In general, the company "in the middle" is seen in the role of the recipient. However, if this company has a VAT registration number from the country where the goods delivery originates (in this case, AT) and the Incoterms state that it assumes the transport risk, it is seen as the supplier.

Consequence: If DE acts as the recipient, the delivery between supplier AT and DE is seen as an "active delivery". However, if DE acts as the supplier, the delivery between supplier DE and IT is the "active delivery". From a tax point of view, this has no consequences.

2. Definition of the delivery location

The delivery location must be determined so you can decide whether the German or the foreign tax law applies.

In this case, the delivery location of the "active delivery" is the place where the physical goods movement starts.

In the case of an "inactive delivery", you have to determine whether the "inactive delivery" takes place before or after the "active delivery". If the "inactive delivery" takes place after the "active delivery", the delivery location is the place where the physical goods movement ends. If the "inactive delivery" takes place before the "active delivery", the delivery location is the place where the physical goods movement begins.

3. Prerequisites for the EU triangular deal:

Three companies make a sales transaction concerning the same goods and these goods are delivered from the first supplier to the last recipient.

For turnover tax-purposes, all three companies are registered in different EU member states (apparent from the VAT registration numbers).

The goods are delivered from one EU member state to another EU member state.

The "active delivery" can be assigned to the first company in the chain or to the company in the middle in its role as recipient.

III. Mapping the EU triangular deal in the ERP system

The company in DE uses the ERP system.

The Italian company (IT) orders goods from the German company (DE). The German company, in turn, orders these goods from an Austrian company (AT). DE creates the sales order for the customer IT. Using a purchase requisition, the order is created in the system of supplier AT. After receiving the invoice from supplier AT, DE creates an order-related customer billing document for IT. Depending on the terms of delivery, DE must register for tax in AT.

1.Delivery 2. Delivery

AT -

-

---

DE -

-

---

IT

a) AT delivers the goods to IT.

This means that the "active delivery" takes place between AT and DE. The delivery location of the first delivery is AT and the delivery location of the second delivery is IT.

For the invoicing of DE to IT this means the following:

DE should register in IT because the delivery location is in Italy. However, here, a first-year convention can be used. DE sends an invoice without tax (zero percent tax) to IT (with a note about the tax payable by IT and an additional invoicing specification concerning the first-year convention). The invoice receives the indicator for the EU triangular deal (VBRK-XEGDR) and is therefore specified in the German company's EC sales list. For this purpose, a separate tax code is required that has the characteristic (T007A-EGRKZ) '1' (Delivery of goods within the EC).

b) IT collects the goods in AT.

This means that the "active delivery" takes place between DE and IT. The delivery location of the first delivery is AT and the delivery location of the second delivery is also AT.

For the invoicing of DE to IT this means the following:

DE hast to register in Austria and use this VAT registration number for this transaction, as the delivery location is in Austria. Delivery within the EU that is taxable in Austria but tax-exempt. A zero percent tax is determined. The first-year convention does not apply, as the goods are transported by the last recipient.

c) DE acts as recipient.

Therefore, the "active delivery" takes place between AT and DE. The delivery location of the first delivery is AT and the delivery location of the second delivery is IT.

For the invoicing of DE to IT this means the following:

DE should register in Italy, but a first-year convention applies. DE sends an invoice without tax (zero percent tax) to IT: Note about the tax payable by the Italian company and additional invoicing specification concerning the first-year convention. The invoice receives the indicator for the EU triangular deal (VBRK-XEGDR) and is therefore specified in the German company's EC sales list.

d) DE acts as supplier.

Therefore, the "active delivery" takes place between DE and IT. The delivery location of the first delivery is AT and the delivery location of the second delivery is also AT.

For the invoicing of DE to IT this means the following:

DE hast to register in Austria and use this VAT registration number for this transaction, as the delivery location is in Austria. Delivery within the EU that is taxable in Austria but tax-exempt. A zero percent tax is determined. The first-year convention does not apply, as the goods are transported by the last recipient.

IV. Conclusion

Depending on who transports the goods within the EU triangular deal, tax-related first-year conventions apply.

If the first-year convention applies, the tax registration in the other relevant EU member state is no longer required. However, in this case, the indicator for the EU triangular deal has to be set in the customer billing document so it can later be evaluated in the EC sales list.

This means that if the supplier delivers the goods to the ultimate consignee or if the selling company transports the goods itself and acts as the recipient (and uses the VAT registration number of its own country), the first-year convention applies.

Note that this is a consultation note. Inquiries concerning the function described above are not covered by Support. They are treated as consulting and are therefore subject to a fee. Also note that this note gives general guidance but cannot replace a consultation by your tax consultant!