In case T-646/25, the Court of Justice of the European Union (CJEU) confirmed what many tax interpretations have suggested: it is possible to combine a four-party chain transaction with the simplification normally reserved for “triangular” transactions. Similarly, Polish tax authorities in 2023 accepted such approach in the tax ruling (no. 0114-KDIP1-2.4012.336.2023.1.RM).

The MS case

The case involved a Slovenian company, MS, which purchased soybean and rapeseed meal as well as rapeseed oil from German suppliers. MS arranged the transport and resold these goods to companies registered in Denmark. Both the invoicing and reporting showed that MS applied the simplified VAT procedure for these transactions.

However, the Slovenian tax authority – after receiving information from Danish authorities – discovered that the Danish companies listed as buyers were “missing traders”: they never declared the transactions, paid no VAT, and had no warehouses or offices in Denmark. In reality, the goods were delivered to Danish warehouses and collected by the customers of those three Danish intermediaries.

The Slovenian authority argued that MS could not use the triangular simplification because the transport covered more than two supplies and the goods were ultimately made available to a fourth party, not the third. It assessed VAT due from MS at over €1.8 million, also accusing MS of participating in VAT fraud.

Why this matters – and why it’s risky

The good news? The CJEU has now addressed this practical example of an “extended” chain transaction – a model that’s increasingly common. The bad news? VAT rules are not always clear on the tax consequences of such structures, creating uncertainty and significant financial risk.

The triangular simplification avoids the need to register for VAT in the destination country, dramatically reducing administrative burdens. It also means no local VAT to charge and reclaim – improving cash flow for intermediaries.

If the simplification is denied, as in the Luxury Trust case, the financial impact can be severe – especially for businesses that rely on this model daily.

Expect disputes over its application in complex chains or where the final customer arranges transport to continue for years. But thanks to today’s judgement, one point is now clear – and it favors taxpayers.

CJEU’s key findings

Faced with definitional challenges, the Court reasoned as follows:

  • it confirmed that the formal requirements for the simplified procedure were met;
  • it considered the purpose of the simplification, which is not undermined by the presence of additional buyers in the chain – provided they are VAT-registered in the same country as the third party;
  • it clarified that the VAT Directive’s requirement for the second supply to be made “to the third party” does not mean a direct physical delivery. Chain transactions by nature involve multiple transfers of ownership. There is no obstacle to the third party reselling the goods to further buyers who acquire the right to dispose of them in the destination country. As the Court put it: Article 141(c) and (d) of the VAT Directive does not require the recipient of the subsequent supply to physically possess the goods or for the goods to be physically transported to or collected by that person.

Finally, the CJEU stressed that the mere presence of four parties in a simplified chain transaction does not in itself indicate fraud or abuse of the VAT system. However, if MS knowingly participated in a scheme designed to facilitate fraud, penalties for lack of due diligence and involvement in VAT fraud would of course apply (you can find more details on the Polish perspective on VAT due care on our blog).

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