It is questionable whether the simplification also applies to scenarios involving more than three entrepreneurs. In section 25b.1 para. 2 of the VAT application degree, the German tax authorities assume that in a chain transaction involving four parties, an intra-Community triangular transaction only applies to the ‘last triangle’. This means that the simplification rule does not apply to entrepreneurs that are not in the middle of the ‘last triangle’. Other Member States of the European Union take a different view and also apply the simplification of intra-Community triangular transactions to middle entrepreneurs in four-party scenarios. If the application of an intra-Community triangular transaction is refused, the penalty tax that arises as a result of the middle entrepreneur inevitably using the wrong VAT identification number must also be taken into account (declaration of the intra-Community acquisition of goods without input VAT deduction in the country which VAT identification number has been used).
Against the background of this inconsistent handling, the ruling of the General Court of the European Union (EGC) of 3 December 2025 (Case T-646/24) is significant. The case concerned a four-party chain transaction in which the supply chain was formed between a German (UDE), a Slovenian (USI) and two Danish entrepreneurs (UDK1, UDK2) and in which the goods were supplied directly from UDE in Germany to UDK2 in Denmark. The EGC had to clarify whether UDK1 actually had to physically receive the goods in order to apply the simplification of the intra-Community triangular transaction. The court ruled that the simplification of the intra-Community triangular transaction can also be applied to four parties, provided that the conditions for the intra-Community triangular transaction are met. UDK1 does not have to physically receive the goods but merely has legal power of disposal over them. The latter was the case, as UDK1 resold the goods to UDK2. In addition, the EGC held that the simplification cannot be applied if USI knew or should have known that it was participating in VAT evasion.
The German tax authorities' view on four-party intra-Community triangular transactions therefore conflicts with the EGC ruling. It remains to be seen how the German tax authorities will respond to the ruling. An amendment to the VAT application degree is indicated.
Entrepreneurs who carry out similar four-party chain transactions are advised to review their supply chains in order to take advantage of simplification options or, if necessary, to defend themselves against existing claims relating to ‘penalty tax’.