Düsseldorf, 04 April 2011 – Chain transactions are playing an increasing role in international trade. However, they are becoming more and more problematic for companies since the VAT treatment is complex and there is no uniform implementation within the EU. Using examples drawn from practice, experts from ten EU countries and Switzerland will discuss this and other important VAT topics in Düsseldorf on 5 April 2011 at the "International VAT Meeting 2011".

Although chain transactions appear to be simple in their practical handling, their actual VAT treatment is extremely complicated and often results in processing errors. The risks are inherent. Chain transactions are procedures in which more than two companies conduct sales transactions for the same items and, when forwarded or shipped, these items move directly from the first company to the final purchaser. Problems arise particularly in cross-border transactions, i.e. when other countries apart from Germany are involved. A German company can quickly generate a sale abroad, including all the VAT consequences. "The problem is made worse by the fact that, even in EU states, there is no uniform treatment of chain transactions which results in unsatisfactory inconsistencies", says Joachim Strehle, partner at WTS.

The top priority is to determine the place of supply for each individual transaction along the chain. In the context of chain supplies, it is crucial to determine to which supply the forwarding or shipment is related. However, agreements between the parties on the conditions of carriage (Incoterms) or the systematic use of VAT identification numbers can offer some leeway. Companies should make use of these options. The next question is the application of tax exemptions. Such supply only which relates to the forwarding or shipment can benefit from any tax exemption, either as an export supply or as an intra-Community supply. For all other forms of supplies a tax liability must be assumed.

Another tricky topic that is discussed at the "International VAT Meeting 2011" organised by WTS is the distinction between supply of goods with installation and supply of services. In this case, too, there are considerable differences between the countries. The question arises as to whether the fulfilment of a contract for work and services is to be treated as a supply of goods with installation or a supply of services. The distinction is sometimes important in order to determine the place of supply, the application of tax exemptions and tax liability.

In conclusion, the WTS conference provides companies with an opportunity to discuss local problems and difficulties relating to cross-border sales transactions with specialists from the core countries of the EU and Switzerland. In addition to specific cases derived from practice, the focus is also on issues involving simplification rules for consignment stocks, developments in electronic invoicing and use of the reverse-charge mechanism.

Pictures and Press Materials

 Joachim Strehle, CPA/Tax Advisor, is a partner at WTS and Head of the Service Line VAT

Press Release (PDF)