VAT ID Check – meaning, procedure and advantages

Checking the VAT ID – meaning, procedure and advantages

The VAT identification number (VAT ID) is a central element in international trade and serves to uniquely identify companies that provide goods or services subject to VAT. It plays a particularly important role in the cross-border movement of goods and services within the European Union. But how do you check the validity of a VAT number and why is this check so important? This article explains what the VAT number is all about, why it needs to be checked and how to do it correctly.

What is a VAT number?

The VAT identification number (VAT ID no.) is a tax identification number that is issued by the tax authorities of a country to companies subject to VAT. It serves to uniquely identify these companies in the context of international trade in goods and services and is required in particular for intra-Community deliveries and services within the EU.

The VAT ID number is essential for companies that operate across borders within the EU. It enables these companies to supply goods and services to the end customer without charging VAT (value added tax) if they are so-called ‘tax-free intra-Community supplies’. In this way, double taxation within the EU is avoided.

Why does the VAT ID number need to be checked?

There are several reasons why it is crucial to check the VAT number:

  1. Avoidance of tax evasion and abuse: the VAT number makes it possible to check whether a company is actually entitled to deduct input tax and whether it is authorised to make tax-free intra-Community supplies. Without verification, abuse or tax evasion could occur, for example if companies use false VAT ID numbers to illegally exempt themselves from VAT.
  2. Ensuring correct tax declarations: Companies trading with other companies within the EU must ensure that their business partners have a valid VAT number. Otherwise, they could make mistakes in their own tax return and risk unwanted tax claims or penalties.
  3. Avoiding liability risks: When working with foreign partners, there is a risk that they will not fulfil their VAT obligations correctly. If, in the event of an incorrect tax return, the tax office establishes that an unlawful VAT exemption has taken place, companies can sometimes be held liable for the VAT that was wrongly not paid. Checking the VAT ID number can minimise this risk.
  4. Correct invoicing: For companies operating within the EU, the correct issuing of invoices is of central importance. A valid VAT ID number must appear on invoices if an intra-Community supply of goods or services is involved. An incorrect or invalid VAT registration number can result in the company losing its VAT exemption.

How do you check a VAT registration number?

Checking a VAT registration number is usually quick and straightforward. In the European Union, there is a central online database operated by the European Commission: **VIES (VAT Information Exchange System)**. Companies can use this system to check the validity of a VAT ID no. for all EU member states easily and free of charge.

Steps to check the VAT registration number:

  1. Access to the VIES database: To check a VAT number, visit the official website of the VIES system: [VIES website](http://ec.europa.eu/taxation_customs/vies/).
  2. Entering the VAT number: There is an input field on the website where the VAT number of the company in question must be entered. It is important to enter the country and number correctly, as the database searches specifically for the combination of country and VAT number.
  3. Check result: After the entry, the system will check the validity of the VAT number. The result shows whether the number is valid and whether it can be assigned to a registered company. If the number is invalid, this will also be displayed and further action should be considered, such as contacting the relevant tax office.

Advantages of the VAT registration number check

The regular verification of VAT ID numbers offers companies numerous advantages:

  • Legal certainty: companies can ensure that they are working with business partners who fulfil their tax obligations and do not pose a risk of tax evasion.
  • Avoidance of fines: Incorrect invoices due to invalid VAT ID numbers can result in fines or additional payments. Regular checks minimise this risk.
  • More efficient business processes: Quick VAT registration number verification ensures smoother international trade processes and ensures that legal requirements are met.

Conclusion

VAT registration number verification is an essential part of tax compliance for companies operating internationally, especially in the context of intra-Community trade within the EU. By using the VIES system, companies can quickly and easily check whether their business partners have a valid VAT ID number and thus avoid tax risks. Regular and thorough checks help to prevent tax evasion, avoid fines and ensure that VAT is handled correctly. In an increasingly interconnected and international economy, the correct handling of VAT registration numbers is essential for the success and legal certainty of a company.