A triangular transaction is a VAT simplification for the supply of the same goods between three businesses that are VAT-registered in three different EU member states, where the goods travel directly from the first business to the last. Thanks to it, the middle business (the first customer) does not have to register for VAT in the final customer’s country — the last customer accounts for the tax. Under Slovak law the rule is set out in Section 45 of the VAT Act (No. 222/2004 Coll.) and derives from the harmonised Article 141 of the EU VAT Directive.
What a triangular transaction is and when you use it
Picture a common scenario: a Slovak company buys goods from a supplier in Germany and immediately resells them to a customer in Austria. The goods are not shipped to Slovakia — they go straight from the German warehouse to the Austrian customer. Without a special rule, the Slovak company would have to deal with the acquisition of goods in Austria and register for VAT there.
This is exactly why the triangular transaction exists. It is a simplification under which the middle business avoids registering in the final customer’s country. The acquisition of goods is exempt for it, and the obligation to account for VAT passes to the last customer, who can also deduct it. You will recognise the same transfer-of-liability logic from other situations we covered in our article on how to invoice abroad from a Slovak VAT perspective.
What conditions a triangular transaction must meet
The simplification is not automatic — it applies only when all the statutory conditions are met at the same time. If even one is missing, the whole structure collapses and the middle business must register in the foreign state.
- Three persons registered for VAT in three different member states take part in the transaction.
- The subject is the supply of the same goods, dispatched or transported directly from the first supplier to the last customer.
- The middle business is not identified for VAT in the final customer’s state and uses the same VAT number towards both the supplier and the customer.
- Transport is arranged by the first supplier or the first customer, not by the last customer.
Who arranges transport and why it matters
Transport is the most common stumbling block. The simplified regime assumes that the goods are physically organised by the first company in the chain or by the middle business. If the final customer arranges transport, the allocation of the movement of goods to the individual supplies changes and the triangular regime does not apply.
We therefore recommend recording clearly in your orders and shipping documents who ordered and paid for transport. Determining the place of supply for cross-border movements of goods is a sensitive matter — we explained it in more detail in our text on issuing invoices correctly in Slovakia and the Czech Republic.
How a triangular transaction is invoiced
The middle business issues an invoice to the last customer without tax. The document must carry the wording "reverse charge" (in Slovak: „prenesenie daňovej povinnosti”), which signals to the customer that they will account for and pay the VAT in their own country. Without this wording the invoice does not meet the requirements and the tax authority may challenge the simplification.
At the same time, the first supplier invoices the middle business as in an ordinary intra-Community supply of goods exempt from tax. The clear allocation of roles in the chain is what makes the whole simplification work.
How the first customer reports a triangular transaction
The middle business reports the transaction in the EC Sales List (recapitulative statement), where for the supply to the last customer it enters the customer’s VAT number, the value of the goods and code "1" marking the triangular transaction. In the VAT return it reports both the acquisition of the goods and their subsequent supply, and thanks to the exemption no tax liability arises from the transaction.
An important detail: the first customer does not report the triangular transaction in the VAT ledger statement (kontrolný výkaz). Incorrect inclusion there, or a missing record in the EC Sales List, are among the typical mistakes the tax authority warns about.
What happens if you fail to meet the conditions
If any of the conditions is not met, the simplification ceases and the transaction is assessed under the general rules. For the middle business this means in practice the obligation to register for VAT in the final customer’s state and to tax the acquisition of goods there — exactly what the rule was meant to avoid.
Example: a Slovak company buys goods in Poland and sells them to Hungary, but the Hungarian customer arranges transport. This breaks the transport condition, the triangular regime does not apply and the Slovak company must deal with registration in Hungary. That is why it pays to assess every such chain in advance, not only when filing the return.
Are you planning to sell goods in a chain across several EU states and want to be sure you use the simplification without the risk of registering abroad? We are happy to assess the transaction before you close it.
FAQ
Does the middle business have to register for VAT in the final customer’s country?
No, that is the main advantage of a triangular transaction. When all the conditions are met, the acquisition of goods is exempt for the middle business and the last customer accounts for the VAT in their own country. The middle business thus avoids the administration of registering in a foreign state. If the conditions are not met, however, it cannot avoid registration.
What must the invoice state in a triangular transaction?
The middle business issues an invoice without tax and must state the wording "reverse charge" and that the transaction is a triangular supply. This tells the last customer that they will account for and pay the VAT themselves. Without the correct wording the invoice does not meet the requirements and the tax authority may challenge the simplification.
What if the last customer arranges transport?
In that case the transport condition is broken and the triangular regime does not apply. Transport must be arranged by the supplier or the middle business, otherwise the allocation of the movement of goods changes. The middle business then usually has to register for VAT in the final customer’s state. It is therefore wise to settle the transport arrangement in advance.