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It is not every day that an American firm finds itself in the middle of an EU VAT controversy that significantly develops the law. However, the September 27, 2012 decision of the European Court of Justice (ECJ) does just that. The case is Vogtländische Straβen-,Tief- und Rohrleitungsbau GmbH Rodewisch (VSTR) v. Finanzamt Plauen.

In November 1998 Atlantic International Trading Company (AIT), an American company established in New York, NY, purchased two stone-crushers from VSTR, a firm established in Germany. AIT quickly re-sold the stone-crushers to an end user established in Finland. The VSTR/AIT contract was “ex works,” that is AIT was responsible for transporting the goods from Germany, and AIT did this by hiring a heavy equipment transport company to move the goods by road and sea directly to Finland (not first to the USA, and then to Finland).

The VAT treatment of ABC transactions can be complex. The VAT Directive contains no specific rules for triangular transactions, but it does have a mechanism (Article 141) that provides simplified treatment for one specific type of ABC transaction. This treatment is so favorable for B, that it is common for traders to design their trades to fit the simplification mandate.

Triangulation case law has been developing. The most notable developments are the recent cases of EMAG Handel Eder OHG v. Finanzlandesdirektion für Kärnten (Berufungssenat II), followed by Euro Tyre Holding v. Staatssecretaris van Financiën, and Both of these cases impact the VSTR decision. Collectively, these three cases define our present understanding of triangulation.

This paper presents the law in this area, with particular attention to third country middleman who, like AIT, may find themselves facilitating ABC transactions with EU participants, but who are denied the benefits of simplification because of their place of establishment. The paper concludes that because of penalties provisions in each of the Member States it is advisable for third-country middlemen to register in one Member State and adopt simplified triangulation reporting.

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