As a business owner in Europe, VAT compliance is likely on your mind. It can be a complex and time-consuming process, but VIES is here to simplify things. VIES, or VAT Information Exchange System, is a system created by the European Union to facilitate the exchange of information on Value Added Tax (VAT) between member states.

VIES (VAT Information Exchange System) is a search engine owned by the European Commission. It is important to note that it is not a database. The data is retrieved from national VAT databases when a search is made from the VIES tool.

How VIES Works ?​

VIES works by allowing businesses to validate VAT numbers of other EU businesses. This is important because, when trading across borders, businesses are required to charge the correct amount of VAT based on the customer’s location. By using VIES to validate VAT numbers, businesses can ensure that they are charging the correct amount of VAT.

VIES works by retrieving data from national VAT databases when a search is made from the VIES tool. To validate a VAT number, businesses can use the VAT VIES validation tool on the European Commission’s website or make use of the publicly available APIs.VIES is available in 23 languages of the European Union.

Disadvantages of VAT Validation through VIES​

While VIES is a useful tool for VAT validation, there are some disadvantages to be aware of. One of the biggest is that the system is not always up-to-date. VAT numbers may not be immediately registered or updated in the system, which can lead to false negatives when validating a VAT number.

Additionally, some member states may require additional registration or authorization for VAT purposes. This can make it difficult for businesses to validate VAT numbers, especially if they are new to cross-border trading.

It is important to note VAT VIES doesn't include all valid VAT number in the EU. Some countries make available only those vat numbers which are registered for cross border trade for search in VAT VIES. One such example is Spain. Over the perriod of time VAT VIES has been multiple downtime especially during VAT filing periods and year-end closing. Downtimes also vary from country to country. You can check the real time status of various country databases on EU union site.

Also the VAT VIES APIs are publicly available for integration, there are limits applicable on maximum number of concurrent requests one can make to these APIs.

Things to Note on VAT Validation​

When using VIES for VAT validation, it’s important to note that the system is not foolproof. False negatives can occur, and businesses should always double-check VAT numbers before making any assumptions about a customer’s VAT status.

Additionally, businesses should keep in mind that VAT validation is just one part of VAT compliance. They should also ensure that they are charging the correct amount of VAT and submitting accurate VAT returns on time. If they cannot find the information on VIES they should request more information from the national authorities. You can find the list of national tax authorities here.

As a small team or a solopreneur you must have faced immense worry during audits about additional expenses in terms of penalties or taxes not paid. Most of the worry comes from incorrectly identifying business customers ( B2B ) from consumers ( B2C). You might have identified a consumer as a business customer and hence not charged taxes on the invoice but this will make you liable for paying taxes on behalf of the consumer instead because there is very little chance that you can get consumers to pay extra later. On top of this, there will also be additional fines and interest you have to pay for applying the wrong taxes on the invoice.

While working for a large fintech company building products, we noticed more and more companies wanting to shift from manually validating VAT numbers of their customers to automating this process via APIs. What exactly is driving this trend?

Why we exist?​

Every business use many data sets to verify and stay compliant with the regulations in the regions where they sell. They rely on multiple products in the process of generating an invoice . This includes many steps starting from business identity verification to location verification and tax compliance. The complexity increases multiple folds if they sell in multiple countries.