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VAT: new Commission on-line validation service saves time and costs for businesses

European Commission - IP/02/864   14/06/2002

Other available languages: FR DE

IP/02/864

Brussels, 14th June 2002

VAT: new Commission on-line validation service saves time and costs for businesses

From today, it will be easier for businesses across Europe to check the validity of their customers' VAT identification numbers on the Internet. The Commission has launched an online service which gives businesses access to certain parts of the system of electronic information exchange used between tax authorities, known as the "VAT Information Exchange System" or "VIES". The new service will save time and administrative costs both for businesses and tax administrations. Under current VAT rules, 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 must 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. Until now, a supplier wishing to confirm the validity of the VAT identification number provided by his customer had to contact his own tax administration which would check the VIES and confirm that the number quoted was valid. This is part of the Commission's work to make doing business in the EU's internal market as simple as possible, by removing practical obstacles which are a headache for businesses.

Launching the service, Frits Bolkestein, the Commissioner responsible for taxation said "This is another significant step to make it easier to do business in the EU's Internal Market. It is a further development of the strategy which I announced in 2000 to improve the operation of the VAT System."

The on-line service, which any member of the public can now access free of charge, allows checking of the databases of VAT registration numbers which each Member State maintains as part of the VIES. The database of VAT identification numbers is only one aspect of the VIES. Members of the public logging on to the site will not be able to see any of the other VIES information which is used by Member States' taxation authorities for VAT control purposes and which should, in the interests of taxpayer confidentiality, remain reserved for the use of taxation authorities only.

Under the current VAT system, all intra-EU supplies between traders subject to VAT) are exempted 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. But 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.

Up to now, a supplier wishing to confirm the validity of the VAT identification number provided by its customer generally had to contact its own tax administration which would check the VIES and confirm that the number quoted was valid. By cutting out the intermediary, this new service speeds up this verification procedure, thus saving time and money for both businesses and tax administrations. The overall aim is to facilitate legitimate commercial transactions within the Internal Market while improving controls against fraud.

Background

The VIES electronic system which was created in 1992 to prevent VAT fraud following the abolition of border controls allows the Member States' tax administrations to exchange information about tax-exempt intra-EU supplies of goods. The database enables Member States to compare the goods supplied with the goods received and thus to ensure that supplies of goods sent to their resident VAT-registered traders are in fact taxed and that goods do not escape taxation by being sent tax-free to non-existing traders.

In June 2000 the Commission proposed a new strategy to ensure that the existing VAT system operates more efficiently within the internal market (see IP/00/615) while keeping a move to an origin based system as the long term EU goal. This new online service is an element of that strategy which focuses on simplification, modernisation and ensuring a more uniform application of the current VAT arrangements as well as on closer administrative co-operation between administrations.

The online service can be accessed at the following address:

http://europa.eu.int/vies


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