ABC transaction
For VAT purposes

Simplified ABC transaction for VAT purposes

The so-called ‘ABC-transaction’ is important to consider when you declare your international transactions in your VAT or ICP return. 

 

This ABC-transaction always concerns at least three companies from one or more countries. Company A sells its goods to company B, company B sells the same goods to company C. The question is who has to pay VAT and where is the VAT due?

 

In the above-mentioned transaction, the goods go straight from company A to company C. Normally, when the transport occurs within the framework of the supply between company A and company B, company B has to register itself for VAT purposes in the country where company C is. Meaning that he has to submit a VAT return in that country. 

 

When the supply meets the conditions, the simplified ABC transaction is applicable, there is no necessity for registration and the filing of a VAT return.

Conditions for the simplified ABC transaction

Registration is not necessary, meaning that company B can submit its VAT return in the Netherlands when it complies with the following conditions:

 

  • The company situated in the Netherlands must be the middleman;

  • The company is already registered for tax purposes in the Netherlands;

  • The company does not want to register in the country of company C;

  • The company must be able to provide evidence of having bought the goods from company A with the aim of successively selling them to company C;

  • All three companies must have VAT numbers in different EU-countries; You make an arrangement with A in respect of the transport of the goods.

  • The goods have to go directly from A to C in the country of C.

  • The intra-community supply to company C must be declared in the VAT return. 

The biggest advantage is that company B does not have to register itself for VAT purposes in each country it conducts business with. The simplified ABC transaction is not applicable when company B is already registered for VAT purposes in the country of company C.

How does it work?

Company B will receive an invoice from company A with 0% VAT, this purchase should not be included in the VAT return of company B. The transaction from company B to company C is designated as an intra-community transaction (please see our article regarding this subject). Company B must send an invoice without VAT. These kinds of invoices have to meet extra conditions (please see our article about invoice requirements). The most important extra requirements are:

 

  • The invoice should state the VAT identification number of company C;

  • The invoice should state: 

    • Reverse-charge; or

    • Intra-community supply.

When this is done, company C is informed that the simplified ABC transaction for VAT purposes is applicable.

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