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Logistic Efficiency: The Role of Triangular Operations

In the dynamic world of commerce, logistics agility is essential for companies to stay ahead of the curve. The efficient movement of products from one place to another, without setbacks, ensures that they arrive on time and without unnecessary costs. This is where triangular operations come into play, an ingenious commercial resource to simplify and optimize the resolution of complex problems.

What are Triangular Operations?

Triangular operations are international commercial transactions that involve three parties: a producer or manufacturer, an intermediary (such as a supplier or distributor), and a final buyer (which can be a company or an individual). In these operations, the product is shipped directly from the place of origin to the final destination, without passing through the country of the intermediary.

These operations are mainly classified into two types:

Intra-Community: Here, all participants are in member countries of the European Union.

Extra-Community: They involve one or two countries that are not members of the EU.

Within this type, there are pure extra-Community operations, where only the intermediary is from the EU, and mixed extra-Community operations, where the manufacturer or the final buyer, in addition to the intermediary, are from the EU.

Benefits of Triangular Operations

Logistics optimization

By shipping products directly from the supplier to the final customer, unnecessary routes are avoided, resulting in a more efficient supply chain. This not only reduces delivery times but can also reduce the operation’s carbon footprint.

Cost reduction

The triangular operation can significantly reduce costs by eliminating the need to store products in the seller’s facilities. This translates into savings on storage, insurance, and inventory management.

Simplification of customs procedures

By not having to import and then re-export the goods, customs processes are simplified. This can result in less paperwork and a reduction in waiting times at borders.

Greater flexibility

This modality allows companies to be more agile and better respond to market demands. For example, if there is an increase in demand for a product in a specific country, the company can direct shipments directly from the supplier to that market quickly.

Reduced risk of damage or loss

Each time the goods are handled, there is a risk of damage or loss. Triangular operations reduce the number of times the products are handled, thus decreasing the risk.

Regulatory compliance

By simplifying the supply chain, compliance with customs and tax regulations is also simplified. This is especially important in international trade, where regulations can be complex and vary significantly from one country to another.

How VAT is declared in triangular operations

In the EU context, intra-Community triangular operations are exempt from VAT. This means that the intermediary receives and issues invoices without VAT, and the final customer is responsible for self-assessing VAT in their country.

On the other hand, in extra-Community triangular operations, if the goods are manufactured within the EU and exported outside, the operation is exempt from VAT. However, if it is an import, the final customer is responsible for paying VAT at customs, in addition to any applicable tariffs.

To declare VAT in these operations, it is crucial to identify the role of each actor and the flow of goods. For example, in a typical intra-EU triangular operation, the supplier (EM1) sells to the intermediary (EM2), who in turn sells to the final customer (EM3). The goods are transported directly from EM1 to EM3, and although there are two sales transactions, there is only one physical movement of goods.

The intermediary (EM2) in an intra-Community triangular operation does not declare VAT on the acquisition of goods and, when selling to the final customer (EM3), does not pass on VAT either. It is the final customer (EM3) who must declare an Intra-Community Acquisition of Goods and self-assess VAT in their declaration.

How to identify transactions that simulate being triangular

There are some operations that may appear triangular at first glance, but in reality they are not due to certain specific characteristics of the transaction.

Some examples of operations that may appear triangular, but are not, include:

Operations with simple intermediaries

In some cases, there may be a supply chain with an intermediary between the supplier and the final customer, but this intermediary simply acts as a distributor or reseller and does not change the nature of the transaction. In these cases, the operation would not be considered triangular.

Operations with logistics intermediaries

Sometimes an intermediary may be used solely to facilitate the transport or logistics of a transaction, but does not have an active role in the buying and selling of goods. In such cases, the operation remains between the supplier and the final customer, and the intermediary only provides logistics services.

Storage or warehousing operations:

Temporary storage of goods in a country other than the supplier’s or final buyer’s might seem like a triangular operation. However, if this storage is merely an intermediate step in the distribution process and doesn’t affect the transaction’s ownership or nature, it’s not considered a triangular operation.

Consignment Operations

In industries like art or luxury goods, consignataries act as agents, selling goods on behalf of the owners. While the consignatory facilitates the sale, the final transaction remains between the owner and the buyer, hence not a triangular operation.

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