What is a VAT number? Everything you need to know
Content:
The acronym VAT stands for Value Added Tax .
It is a unique identifier assigned to companies and self-employed individuals who carry out commercial transactions subject to Value Added Tax (VAT) in the European Union. It is an essential part of the EU indirect tax system and allows for the tracking and control of commercial transactions within the European Economic Area.
So, if you have clients outside of Spain or your business uses the European market to purchase goods and services, you should be thoroughly familiar with it...
In this post, we'll address the main questions it raises. Read on and find out!
Who is required to use it?
Any company or self-employed person conducting commercial transactions subject to VAT in the European Union must use a VAT number. This includes all businesses that buy or sell goods and services within the European market.
What is the VAT number for?
The VAT number serves several functions:
- For tax identification.
- To identify companies and self-employed individuals for tax purposes in commercial transactions subject to VAT in the European Union. It allows tax authorities and other companies to identify who is behind each transaction and facilitates the monitoring of tax obligations.
To avoid unfair competition
Each country in the European Common Market establishes a VAT rate . If VAT didn't exist, competition among European companies would depend largely on this indirect tax. This would be pointless, so the decision was made to eliminate this tax from the equation. Thus, Spanish companies and self-employed individuals with a valid VAT number can deduct the VAT paid on their purchases.
This contributes to reducing the tax burden and improving competitiveness .
How do I apply for a VAT number?
This document is mandatory if you carry out intra-community transactions.
In that case, and to avoid penalties from the Treasury, you'll need to register with the Registry of Intra-Community Operators (ROI).
To do this, follow these five steps :
1. Complete form 036.
2. Check box 130 (page 1), “Application for registration/deregistration in the register of intra-community operators”.
3. Select box 582 (page 5) “high in ROI”.
4. Fill in box 584 indicating when you will begin carrying out intra-community transactions.
5. Sign the application and submit it in person or virtually with your electronic certificate, Cl@ve PIN, or DNIe.
How to check your VAT number?
To check the VAT number of a company in the European Union, you have three options:
1. Registry of Intra-Community Operators
The Intra-Community Operators Register (IOR) is a tool that allows you to verify the validity of a company's VAT number in the EU. It can be accessed through the website of the relevant Tax Agency.
2. VIES (VAT Information System in Europe)
The VAT Information System for Europe (VIES) is an online database provided by the European Commission. It allows you to verify the validity of any company's VAT number in the EU.
3. Direct verification with the company
Another easy way to verify a VAT number is to contact the company directly and request their VAT number. This can be useful when transacting with small businesses or local suppliers.
Is there a difference between VAT and NIF-IVA?
This is a common question and easy to answer.
There are no differences; the VAT number and the NIF-IVA refer to the same thing . The VAT number is the most commonly used term, while the NIF-IVA is the Spanish term.
Example of VAT number in Spain
As an example, let's say a self-employed person sells products to European companies and applies for ROI registration.
What will your VAT number be?
If the self-employed worker's NIF is 12345678C, his VAT will be number ES12345678C.
That is, simply add the prefix "ES" before the NIF (Tax Identification Number) to obtain the European VAT number . In short, the VAT number, also known as the NIF (VAT Number), is an essential (and mandatory) tax identification number for companies and self-employed individuals who carry out transactions within the European Union and outside the country.
Want to know more?
If you're self-employed or have a company that carries out intra-community transactions, the process of obtaining and managing a VAT number may seem complex, but don't worry! At InnoTaxes, we're here to help. We're an expert tax, fiscal, and accounting consultancy.
To help you comply with European Union regulations and optimize your business operations. Contact us or write to us on WhatsApp .
We've helped many people manage their VAT numbers, you could be next .