As tax authorities worldwide embrace digitization, one theme is clear: real-time tax ID validation is becoming central to VAT/GST compliance. Governments are moving from retrospective audits to instant checks at the transaction level, and businesses must adapt.

In this post (Part 1 of our series on validating tax IDs), we explore the key global trends making validation essential today.

1. Continuous Transaction Controls 

A growing number of countries are adopting Continuous Transaction Controls (CTC), models where every transaction is reported to or cleared by tax authorities in real time. E-invoicing clearance (like Italy’s SdI, Turkey’s e-Fatura, and many systems in Latin America) is a form of CTC. 

In such systems, the tax authority’s platform validates certain fields when an invoice is issued. One of the core validations is ensuring the seller’s and buyer’s tax numbers are valid and active. If not, the invoice doesn’t get approved. 

The OECD has highlighted electronic invoicing as a key tool in the “Tax Administration 3.0” vision for digital transformation of tax authorities. The aim is to get real-time visibility of transactions to close compliance gaps. According to the European Commission, the rollout of e-invoicing and digital reporting in various EU countries has contributed significantly to reducing the VAT Gap (the shortfall of expected VAT revenues). 

The logic is simple: when every invoice goes through government servers, fraudulent or invalid transactions (like those with fake VAT numbers) can be caught or prevented immediately.

2. Real-time tax ID validation mandates and software

Some tax authorities now provide or mandate online validation services to confirm the status of a tax ID at the time of transaction. 

A recent example is Egypt’s new requirement (effective Nov 2024) that businesses selling digital services into Egypt must validate the buyer’s Tax Registration Number (TRN) and a new Unique Identification Number (UIN) in real time. This dual check must be done via the tax authority’s system and is essential to justify zero-rating under the reverse charge. The system provides instant confirmation via API. 

Similarly, in the EU, while not (yet) real-time mandated by law, the VIES system allows immediate online validation of VAT numbers across member states, and businesses are encouraged to use it for each cross-border sale. 

Some countries have taken it further: they require a VAT number to be validated at the time of invoicing to apply the exemption. We see a direction where tax ID validity might be pinged live for each transaction in many jurisdictions. For example, in Denmark, businesses are expected to validate a customer’s VAT number for every EU sale. The Danish Tax Agency instructs suppliers to use the VIES tool via skat.dk and to keep screenshots of each validation for five years. This is a clear example of real-time, transaction-level enforcement. 

Companies like Fonoa have built instant validation solutions anticipating this, offering one API to validate tax IDs in 100+ countries instantly.

3. Spreading e-invoicing mandates

Countries on almost every continent are implementing or expanding e-invoicing mandates. For example, Turkey and Mexico were pioneers, and now the EU is moving toward a 2030 mandate for intra-EU digital reporting. 

In all these systems, an invoice typically must include the valid tax identification of the parties or it will be rejected. Other country-specific examples include:

• Italy’s system from 2019 onward effectively made having a valid VAT number a prerequisite to invoice domestically: the SdI platform knows if a VAT number (Italian or foreign) is not on its registry and can fail the invoice. 
• India introduced B2B e-invoicing in 2020, requiring a GSTIN (GST Identification Number) validation to get an Invoice Reference Number. 

The global trend is that if your indirect tax data (like tax IDs) isn’t accurate, you won’t even be able to transact, the government systems will block you. This is a huge shift from the old retrospective audit model to a preventative model.

4. Transaction cross-checking and data sharing

Even outside formal e-invoicing, there’s a trend of requiring more data sharing to tax authorities (often known as SAF-T, Standard Audit File for Tax, or similar schemes). Tax ID validation plays a role in these as well. 

For instance, the EU’s DAC7 rules (2023) force digital platforms to report sellers’ information (including tax IDs) to tax authorities. Platforms are expected to collect and validate that information, it’s not enough to just pass on what sellers claim. 

Globally, countries like Turkey, Australia, and Canada have introduced similar platform reporting of seller incomes. This means if you run a marketplace, you must be confident that the tax IDs you report for your users are valid, or you could face compliance actions for inaccurate reporting. 

We also see governments cross-checking data between businesses: e.g., Spain’s SII matches customers’ and suppliers’ VAT numbers on reported invoices to ensure both sides declare consistently. The push towards “transaction matching” (using buyer and seller tax IDs as the link) is only possible if those IDs are valid and current.

5. Clear emphasis on validation frequency

Some authorities explicitly mention how recent a validation should be. 

For example, the EU’s official guidance suggests businesses should “keep track of your validation in case of tax control”, implying you should validate around the time of the transaction. Certain countries’ audit procedures assume that a supplier took reasonable care by checking the VAT ID at the time of sale. 

If an audit finds a VAT number invalid and you have no record of ever checking it, you might be found negligent. For example, in Finland, sellers must include customer VAT IDs in recapitulative statements. If an invalid number is reported, the Finnish Tax Administration can deny zero-rating and impose penalties, even registering foreign sellers for VAT locally to recover tax. This shows how “validation frequency” is effectively built into quarterly reporting. 

Thus, the best practice of validating each new transaction or at least periodically is being cemented into regulations and audits. On the technology side, companies like Recurly have built in automated re-validation if an invoice is more than X months from the last check, acknowledging that time sensitivity. 

6. Penalties and enforcement becoming immediate

In the past, using an invalid tax ID might be caught in an audit years later. Now, with real-time systems, the “audit” happens immediately: the invoice is rejected or the transaction is flagged. This shifts the burden to businesses to have their data right upfront. 

Penalties can also be automated; for example, if Italy’s SdI finds you issued an invoice with an invalid exemption reference (a kind of indirect validation), it rejects it and you effectively have an unreported transaction (subject to late reporting fines if not fixed in 5 days). In Egypt’s upcoming system, if you fail to validate the IDs, presumably the zero-rating could be denied or fines imposed for non-compliance with the mandate. 

The era of “real-time compliance” means there’s little margin for error. Validating tax numbers is no longer just a good practice, it’s becoming a built-in step of the transaction flow by law.

Summary:  Tax is moving to real-time validation

The global tax environment is clearly moving toward digital, real-time enforcement, where validating counterparty tax IDs is mandatory and instantaneous. Companies operating internationally must keep pace with these trends or risk being unable to do business in certain markets. 

The writing is on the wall: from Latin America to Europe, from Asia to Africa, verifying who is on each side of a taxable transaction is a cornerstone of modern tax control. Revalidation of indirect tax numbers is thus not only about avoiding audits; it’s about ensuring your transactions can happen at all in increasingly connected tax systems.

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