The VIES system is a must for all entrepreneurs doing business in the European Union. This search engine makes it easy to obtain information about foreign contractors. What is this system, why is it important for entrepreneurs, and when can you be removed from it?
What is VIES?
VIES (VAT Information Exchange System) is a search engine launched by the European Commission, is an online VAT information exchange system. It allows you to check the EU VAT number of European companies registered for cross-border trade and whether your trading partner is actually registered for EU VAT.
The system was introduced to facilitate and improve the exchange of VAT-related information between EU member states. Its main purpose is to enable VAT administrations to monitor and control the flow of intra-Community trade to detect all kinds of irregularities, and it also gives easy access to information and improves cross-border trade. It is based on cooperation between the tax authorities of EU member states. At the same time, an integrated search engine is being created to collect information on registered taxpayers. This allows tax authorities and businesses to easily check the status of taxpayers and whether a company is entitled to a reduced VAT rate for cross-border transactions. It is worthwhile to take care of integration with this register when implementing an ERP system such as D365FO to enable verification of contractors data from VIES directly in the system, which 7F Technology Partners’ product allows.
Why is verification in VIES so crucial?
Validation in VIES is very important from VAT settlement perspective. It directly affects the application of the correct VAT rate for supplies of goods to the EU. If you sell goods to an EU contractor, you are entitled to 0% tax rate when the contractor is registered in VIES system. This is one of the conditions for applying a reduced tax rate.
It also works the same way when a Polish entrepreneur wants to purchase from an EU counterparty. To benefit from the reduced VAT rate as a buyer, you must first check whether the counterparty is registered in VIES system.
Taxpayers wishing to trade within the European Union must register as EU VAT payers. In this regard, there is an obligation to inform the head of the tax office of their intention to start performing these activities on the VAT-R form before the first intra-Community supply or the first intra-Community acquisition.
Removal from the taxpayer register
Deletion from the register of taxpayers can occur as a result of the cessation of activities, in which case the company is obliged to report this fact in writing to the head of the tax office.
However, there are circumstances in which, although the taxpayer continues to conduct business activity, and it is not in his interest to be removed from VIES register, the so-called ex officio removal occurs. This happens after the taxpayer fails to comply with the activities specified in the VAT law, in several situations:
- in the case of failure to file JPK declarations by active taxpayers,
- in the case of submission of zero JPK declarations by active taxpayers,
- in the case of failure to file EU VAT returns by active VAT taxpayers and exempt taxpayers.
In the case of the last point, the regulations do not specify whether a taxpayer can lose its VAT status if it fails to submit a “zero” EU VAT summary information. Taxpayers who fail to submit this information within three consecutive months should not be at risk of being struck off VIES register, but nothing prevents a taxpayer from voluntarily submitting “zero” summary information to minimize the risk of being struck off the register.
In addition, deletion of a taxpayer from the register as a VAT taxpayer is equivalent to deletion from VIES register as an EU VAT taxpayer.
So, taking into account the fact that ex officio removal may occur, the verification of the taxpayer and ourselves becomes even more important and becomes an essential step when performing intra-Community transactions. This is where 7F Technology Partners’ product VIES comes in handy, which allows us to validate the counterparty in VIES register. We can validate the counterparty account multiple times, at the stage of its creation, during the generation of transactions or payments, each time such verification will be recorded in the counterparty validation history along with the date and time of validation and the status in the register. With our extensive experience in implementing VIES, we ensure seamless integration and reliable validation processes. We invite you to cooperate with 7F Technology Partners and see more on our website: www.7f-tp.com
Author: Marta Rosa, Senior D365 F&O Consultant.