EU VAT Compliance for Businesses: When and How to Check

When is a VAT check legally required?

For purely domestic sales, VAT validation is optional good practice. The legal obligation to verify a customer's VAT number arises the moment you want to apply the zero rate to an intra-EU B2B supply — when you sell goods or services to a business in another EU member state and invoice without charging VAT.

Under Council Directive 2006/112/EC (the EU VAT Directive), a supply between two VAT-registered businesses in different member states may be exempt from the seller's local VAT, provided all of the following hold:

• The buyer is a taxable person established in a different member state.
• The buyer has provided a valid VAT identification number from that other member state.
• The seller has verified that number through VIES (or an equivalent approved method) and retains evidence of the check.
• For goods: the goods have physically left the seller's member state.

Without meeting all of these conditions, the seller cannot zero-rate the transaction and must charge their own country's VAT rate — even if the buyer later insists they are VAT-registered.

The reverse charge mechanism explained

The reverse charge is the mechanism that allows intra-EU B2B supplies to cross borders without VAT being collected by the seller. Instead of the seller charging VAT and remitting it to their own tax authority, the obligation is shifted entirely to the buyer:

1. Seller issues an invoice with no VAT charged, including the notation "Reverse charge — VAT to be accounted for by the recipient (Article 196, Directive 2006/112/EC)".
2. Buyer receives the invoice and self-assesses: they calculate the VAT that would have been due at their own country's applicable rate.
3. Buyer declares that self-assessed VAT as output tax on their own VAT return, and simultaneously claims it back as input tax — assuming full recovery rights apply.
4. The net cash effect for a fully taxable buyer is zero. No VAT flows across borders between the parties.

Crucially, the reverse charge does not eliminate the seller's obligation to verify the buyer's VAT number. If the buyer's number is invalid and the seller has not verified it, the zero-rating fails and the seller owes the VAT to their own tax authority regardless of what the buyer represented.

Continuous validation: why onboarding is not enough

Many businesses verify a customer's VAT number once during onboarding and then treat it as permanently valid. This is a significant compliance risk. VAT registrations can be:

• Voluntarily deregistered when a business closes, restructures, or falls below the national threshold.
• Cancelled by the tax authority for non-compliance — for example, repeated missed VAT returns.
• Fraudulently obtained and subsequently revoked by the issuing authority.

EU VAT guidance — reinforced by the VIES Quick Reaction Mechanism (QRM) introduced by Regulation (EU) 2018/1541 — makes clear that sellers should validate at or near the time of each taxable transaction, not just at onboarding. In practice, a validation at least once per invoice period, ideally once per invoice, provides the strongest audit defence.

Versys supports continuous validation through its REST API, which lets you trigger a live VIES lookup programmatically at invoice-generation time and store the timestamped validation result alongside the transaction record.

What VIES can and cannot tell you

The EU's VAT Information Exchange System (VIES) is the authoritative database for confirming whether a VAT number is currently active. Here is precisely what it does and does not provide:

Query	Available via VIES?	Notes
Is the number currently active?	Yes	Core result: valid / invalid / unavailable
Registered business name	Sometimes	Only when the member state exposes it; Germany, France and Italy often omit this
Registered address	Sometimes	Same caveat — coverage varies significantly by country
Date of VAT registration	No	Not returned by VIES
Legal form / company type	No	Not returned by VIES
Whether the business is actively trading	No	Active registration does not confirm genuine ongoing trade
UK GB-prefix numbers (post-Brexit)	No	GB numbers left VIES on 1 January 2021; check via HMRC instead

When VIES returns "unavailable" for a given member state, it typically means that country's national system is temporarily offline — not that the number is invalid. Retry after a short interval and document the attempt. Versys caches VIES responses for 24 hours to reduce lookup failures during temporary outages, and flags cached results clearly so you know when a live query was last performed.

Practical 4-step onboarding workflow

When onboarding a new EU business customer you intend to supply on a zero-rated basis, follow this workflow and keep a record of each step:

1. Collect the VAT number in writing. Ask the customer to provide their VAT identification number via a registration form, signed order, or email. Record the date and method of receipt.
2. Run a VIES lookup. Use Versys or the European Commission's VIES portal to confirm the number is currently active. Save the full response — including timestamp, validity status, and any name or address returned — as part of the customer record.
3. Cross-check the returned details. Where VIES returns a business name or address, compare them against the customer's own stated details. Flag material mismatches for manual review before proceeding with the supply.
4. Schedule re-validation. Set a trigger to re-validate at each subsequent invoice, or at minimum quarterly for ongoing relationships. Document every re-validation with a new timestamp.

EU invoice requirements for intra-EU B2B supplies

Under Article 226 of the EU VAT Directive, an invoice for a zero-rated intra-EU supply must include all of the following mandatory elements. Missing even one can invalidate the invoice for VAT purposes:

• Sequential invoice number unique within your invoicing series
• Date of issue
• Your (supplier's) full legal name and address
• Your VAT identification number (with country prefix)
• The customer's full legal name and address
• The customer's VAT identification number (mandatory for zero-rated B2B supplies)
• A clear description of the goods or services supplied
• Quantity of goods or extent of services
• Unit price exclusive of VAT, net of any discounts
• Net taxable amount (the VAT base)
• VAT rate applied — 0% for intra-EU zero-rated supplies
• The reverse charge legend: "Reverse charge — VAT to be accounted for by the recipient" (or equivalent wording citing Article 196 of Directive 2006/112/EC)
• Total invoice amount payable

Do not show a VAT amount line for zero-rated supplies. The invoice total equals the net amount. Including an explicit VAT line reading "€0.00" is permissible but not required; omitting the VAT line entirely is the more common practice for clean zero-rated invoices.

Penalties for incorrectly applied zero-rating

If you zero-rate a supply and the buyer's VAT number turns out to be invalid — because you did not check, the check was not timely, or the registration had lapsed — the tax authority in your member state can take all of the following enforcement actions:

• Assess the VAT you failed to charge, calculated at your local standard rate on the full invoice value.
• Charge statutory interest on the unpaid VAT from the original due date.
• Apply a penalty surcharge — typically 10–50% of the unpaid VAT for negligent errors across most EU member states, and substantially higher for deliberate or repeated evasion.

A documented, timestamped VIES validation record demonstrating good-faith verification is one of the few grounds on which a seller can challenge a subsequent assessment. Several EU tax court decisions have turned on whether the seller held contemporaneous evidence of validation at the time of supply.

Non-EU and UK suppliers after Brexit

Since 1 January 2021, the United Kingdom has been a third country for EU VAT purposes. GB-prefix VAT numbers are no longer searchable on VIES and are not valid for zero-rating intra-EU B2B supplies. For UK-domestic validation, HMRC operates its own VAT number checker, separate from and independent of VIES.

UK VAT numbers follow the format GB + 9 digits (e.g. GB980780684). Versys supports format validation for GB numbers and explicitly flags them as non-VIES-eligible, so you are not misled into treating a format-valid GB number as EU-compliant for zero-rating purposes.

For suppliers based outside both the EU and UK — such as US, Canadian, or Australian businesses — local GST and sales tax registration numbers operate under entirely separate legal frameworks and carry no equivalent zero-rating implications under EU VAT law.