EU Offers VAT Registration Search Service

by Ulrika Lomas, Tax-News.com, Brussels

24 June 2002

As every company knows which trades with cross-border partners in the European Union, making use of VAT rules for cross-border exemptions and reclaims can be a highly bureaucratic process, to the extent that it is often more trouble than it is worth to pursue legtimate reclaims.

Now the EU Commission has taken a step towards equity for traders by launching a free service which will allow businesses across Europe to check the validity of customers' VAT identification numbers on the Internet. The site, launched on Friday, is expected to save time and administrative costs both for businesses and for tax administrations.

Current VAT rules mean that supplies of goods made by a trader in one Member State to a trader in another Member State are exempt from VAT in the country of origin on the basis that they will be taxed in the country of destination. However, a trader making intra-EU supplies has to be sure that his customer is subject to VAT in another Member State before despatching the goods free of VAT as otherwise he may have to pay the VAT himself.

The new, Commission-sponsored service gives businesses access to parts of the electronic information exchange system used between tax authorities, known as the "VAT Information Exchange System" or "VIES ".This is a big improvement on the current system, where a supplier wanting to confirm the validity of the VAT identification number provided by his customer has had to contact his own tax administration which would check the VIES and confirm that the number quoted was valid.

All intra-EU supplies between traders subject to VAT are exempt from VAT in the country of sale, the tax being declared at destination by the receiving trader. Normally the customer provides his VAT identification number to the supplier when he orders the goods. However, it is the responsibility of the supplier to confirm that his customer is indeed VAT registered in another Member State before he sends the goods free of VAT. Otherwise the supplier may be obliged to pay the VAT himself.

The new service is available at www.europa.eu.int/comm/taxation_customs/vies/en/vieshome.htm.

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