Invoice Triangulation Method for Determining Country of Supply
You have the option to derive the country of supply for Intrastat Reporting from the legal reporting unit association (instead of the legal entity) when using the invoice triangulation method.
Deriving the country of supply from the legal reporting unit is beneficial for organizations that operate within the European Union (EU) and have a complex enterprise structure. Specifically those that have business units and inventory organizations in multiple EU countries that belong to a single legal entity.
Let's look at the important aspects of using the invoice triangulation method for determining the country of supply:
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Triangular trade
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Example
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Conditions
Triangular Trade
Intrastat Reporting supports the concept of a triangular trade transaction. This is any transaction between three trading partners in three countries, where at least two of the parties are part of the economic zone.
This table lists the two possible triangulation methods.
|
Triangulation Method |
Definition |
|---|---|
|
Invoice |
Movement record is based on the invoice and not the physical movement of goods. |
|
Shipment |
Movement record is created only on the physical movement of goods |
You can use the legal reporting unit to determine the country of supply when using the invoice triangulation method.
Example
Let's say you have a selling entity where the legal entity, business unit, and inventory organization are all located in Austria. Additionally, you have a supply warehouse located in Germany where the business unit and inventory organization are located, but the legal entity is in the Netherlands.
This table outlines the location for each entity.
|
Entity |
Location |
|---|---|
|
Selling Entity (legal entity, business unit, and inventory organization) location |
Austria |
|
Supply Warehouse (business unit and inventory organization) location |
Germany |
|
Legal Entity location |
Netherlands |
|
Country of Supply location |
Germany |
Now, a customer in Austria places an order with your Austria entity, but you need to source the goods from your warehouse in Germany. You ship the goods from the Germany warehouse directly to the customer in Austria. An intercompany transaction resolves the financial obligation between the country of supply and selling business unit entities. Using the invoice triangulation method, you can ensure that when your warehouse in Germany rolls up to a legal entity in the Netherlands, Intrastat lists the country of supply as Germany, instead of deriving it from the legal entity (Netherlands).
This is possible by creating and associating a legal reporting unit in Germany with the business unit where the goods are shipped from, also in Germany.
Conditions
When using the legal reporting unit for determining the country of supply with the Invoice triangulation method, these conditions apply:
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Intrastat looks to the legal reporting unit (instead of the legal entity) to derive the country of supply.
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You must create legal reporting units for each business unit under the legal entity and associate the legal reporting units to the business units.
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Intrastat uses the invoices created for the transaction to derive the country of supply based on the legal reporting unit and business unit association.
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If a legal reporting unit isn't associated with a business unit, or a business unit is associated with multiple legal reporting units, Intrastat derives the country of supply from the address of the legal entity.