What is VIES?
What is VIES?
VIES (VAT Information Exchange System) is an online tool designed to facilitate the exchange of information related to value-added tax (VAT) within the European Union (EU) between EU Member States. It enables businesses to verify the VAT registration numbers of other businesses registered in the EU.
Why should businesses use VIES?
When selling products or services to business customers in the EU, it is essential for taxpayers to validate the VAT number of their customers to ensure they are VAT registered. We already discussed why is it essential to validate the tax number of your customers before a transaction takes place?
This is because selling goods and services across country borders to business customers in the EU generally does not require you to charge VAT, which is different from selling to consumers. Doing this wrong means you either charge tax when you shouldn’t and add unnecessary costs to your product or that you don’t charge tax when you should which means you are not collecting the tax you should but still need to remit to the Tax Authorities. Both are obvious situations that any business wants to avoid.
That’s why it is important to verify if your customers are business customers or consumers. The VIES system simplifies this process by providing businesses with a single point of access to EU VAT registration information for all EU Member States. This reduces the administrative burden on businesses and helps to promote intra-Community supplies within the EU.
The VIES system also helps to reduce administrative burdens for businesses engaged in intra-Community trade. Prior to the introduction of the VIES system, businesses had to contact each individual EU Member State to verify the VAT registration status of other businesses. This was a time-consuming and costly process and made it difficult for businesses to engage in cross-border transactions.
How to use VIES?
The VIES system is a free service, managed by the European Commission, and is accessible online. To validate whether your customer is registered for VAT and cross-border trade in the European Union, you just need to:
- Select the Member State, i.e., the country of your business customer
- Enter the VAT number of your business customer (for example, 123456789)
👉Learn more in Fonoa’s Essential Guide to Tax Number Validation.
Which information can be found in the VIES registry?
VIES can only be used to verify VAT IDs of businesses that are VAT registered in one of the 27 EU Member States, plus in Northern Ireland after Brexit. If you need to verify a VAT ID of a business outside the EU, you will need to use other tools.
Once the request for validation has been sent, you will get a result. That result will confirm if the VAT number you entered is valid or invalid. And in most instances, unlike in the case of Germany or Spain, it will also automatically provide you with additional information, like the name and address of the business that the VAT number is assigned. This is important as it can help ensure that your customer has not simply used a valid VAT number belonging to another taxable person.
Downsides to using VIES
VIES has some limitations that are important to be aware of when checking your customer’s EU VAT numbers.
First of all, only VAT numbers ‘activated’ by local tax authorities in EU countries will appear in the database. And while some EU countries activate all issued VAT numbers in their country for VIES purposes, many EU countries do not (some tax administrations only allow you to confirm the validity of VAT numbers approved for intra-EU transactions). This results in an incomplete overview of registered VAT identification numbers and means the information about your customer’s tax status can potentially be misleading.
Second of all, VIES is designed to check individual VAT numbers online, which does not work great if your business has a large volume of customers across the EU. Checking numbers manually can be a lengthy process.
On top of that, VIES relies on information provided by each EU Member State's Tax Authorities, and, as indicated by the disclaimer on their website, this information may not always be updated in real-time. Therefore, there is a possibility that the VAT ID information provided by VIES may not be up-to-date or accurate.
Finally, we already discussed when VIES is having issues, like ‘downtime’, and what you can do about it.
Instantly validate Tax ID numbers
That is why we built Fonoa Lookup. With Fonoa Lookup you can validate tax identification numbers directly with governments throughout the EU and in many countries outside the EU for a more complete overview and more accurate validation. Plus, it offers you the ability to automatically check a large volume of tax numbers without any manual work.
Know whether to charge sales tax, VAT or GST by validating the tax IDs of your suppliers and business customers.
Get in touch, and we can help you validate your customers' VAT numbers before the transaction.