VAT: changes in the simplified ABC-scheme

21 November 2023

In light of the ruling by the Court of Justice in the case of Luxury Trust Automobil GmbH, the Secretary of State for Finance has introduced modified rules regarding the simplified ABC scheme. These changes have been in effect since September 2, 2023, and impact entrepreneurs involved in ABC transactions.

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Anne Kin VAT specialist
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A brief overview of the Simplified ABC Scheme

In ABC transactions, the sale of goods occurs from party A to B and subsequently from party B to party C, with A, B, and C each registered for VAT in different EU countries. The goods are transported directly from Member State A to Member State C. For VAT purposes, there are two deliveries (A-B and B-C). Without the simplified scheme, only the first delivery (A-B) could take place at a 0% rate, and the second delivery (B-C) would be subject to the local rate in country C. B would have to charge the local VAT of Member State C to C and then register for VAT purposes in Member State C, submitting VAT returns there.

However, there exists an exception in the form of the simplified ABC-scheme. Under this scheme, B is exempt from the obligation to register in Member State C, and the responsibility for local VAT is reverse charged to party C. Consequently, party C is tasked with remitting the local VAT. One key requirement is that each party possesses its own VAT number in their respective Member State.

The amended rules

In the Luxury Trust Automobil judgment, the Court of Justice ruled that, for the application of the simplified ABC scheme, it must be explicitly stated on the invoice from B to C that the VAT has been shifted to C. In line with this, the Secretary of State amended the Decision on Invoicing Obligations. The change stipulates that if the simplified ABC scheme is applied, the term 'intracommunity (ABC) supply' may no longer appear on the invoice from B to C. Instead, the term 'VAT reversed' must be clearly stated on the invoice from B to C.

If B fails to include this on its invoice, B cannot apply the simplified ABC scheme and must register for VAT purposes in Member State C.

Optimizing ABC transactions

Are you involved in ABC transactions? We recommend that you explore whether you qualify for the simplified ABC scheme. If you do, it's crucial to ensure that your invoice complies with the new requirements for the application of the simplified ABC scheme.

ABAB is eager to assist you in determining whether you can apply the simplified ABC scheme. This can help you avoid foreign administrative obligations and minimize the risk of double VAT taxation.

Want to learn more?

At ABAB, we are committed to making a difference by sharing knowledge, providing advice, and ensuring insight. If you would like more information on this topic, our international tax advisors are ready to assist you. Feel free to contact, Anne Kin, international VAT specialist , at phone number +31135915125 or send Anne an e-mail.

Would you like more information? Our specialist will gladly assist you!

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