Why need a valid VAT identification number of the customer?

21st of June 2019

The European Council has now agreed on four 'quick fixes' to ensure simplified international trade. At the same time, the quick fixes are intended as anti-fraud measures. The measures will take effect on 1 January 2020. They have consequences for entrepreneurs who trade goods internationally.

It concerns the following four measures:

1.         Simplification around call off stocks

2.         Simplification of chain transactions

3.         VAT identification number mandatory for application of the zero VAT rate

4.         Simplified evidence for the zero VAT rate

For entrepreneurs who cross the border with their goods, the impact is considerable. For example, you have to think about adjustments to the ERP systems. All kinds of other processes also need to be updated, starting with the administration. The VAT compliance procedures and the invoicing process need to be reassessed. And what about the existing contracts and the order process with customers and suppliers? After this, we will discuss one of the four quick fixes in more detail, also because most entrepreneurs will have to deal with it.

The Customer’s VAT identification number

A valid VAT identification number of the customer is already a formal requirement for the application of the zero VAT rate in the case of cross-border transactions of goods within the EU. In practice, however, it works differently. This is because the European Court of Justice allows for a broader application of the zero VAT rate. According to established case law, the zero rate may also be applied if only the material conditions have been met. As a result, the zero VAT rate cannot be refused if only a valid VAT identification number is missing.

What is changing?

As a result of the changes, the use of a valid VAT identification number of the customer is a substantive requirement for the application of the zero VAT rate. In other words, without a valid VAT identification number of the customer on the invoice, the zero VAT rate will be refused with effect from 1 January 2020. In addition, the material condition is that this valid VAT identification number is also mentioned in the Intra-Community Supplies Statement. This statement must also be completed and submitted correctly.

Do you have any questions?

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