Why do you need to check intra-community VAT numbers?

‍Validity of the VAT number: condition for the exemption of intra-Community supplies

Article 138 of the 2018/1910 Directive, known as the “Quick fixes” Directive, provides that, since 1 January 2020, the exemption of intra-community supplies - that is to say the sale of a good from one Member State to another or the transfer of one's own goods - is conditional on the communication of a VAT number valid in another Member State of the European Union. This provision was transposed into French law by the 2020 Finance Act in article 262 ter of the French Tax Code (FTC).

In this context, in the absence of a valid VAT number provided in another Member State, the Company selling the goods or transporting its own goods cannot apply the exemption for intra-Community supplies. In other words, it must collect local VAT on the transaction from the recipient.

If not, the local tax authority may contest the exemption and claim VAT beyond the price paid or the value of the goods ((up to 20% for some Member States) and apply penalties. The risk is the same when the VAT number provided was valid at the time the exempt transaction was carried out but the company does not have any proof.

Therefore, in the same way as transport proofs, it is necessary to set up a procedure for the periodic verification of VAT numbers and to keep evidence of such checks. This concerns operations carried out from France as well as in other member states of the European Union.

‍

Cyplom provides its customers with a platform dedicated to the management of VAT number databases. The platform makes it easy to integrate a customer base and set up regular checks (daily, weekly, or monthly).

The platform keeps evidence and sends alerts in the event of a change in the status of VAT numbers. It allows companies to calmly apply the VAT exemption linked to intra-Community deliveries (more information here or “contact us for a presentation”).

Communication of a valid VAT number: the central point of some regimes

Often forgotten, the communication of a VAT number is a necessity for the application of certain regimes.

Indeed, the communication of a valid VAT number and its country of attachment is a condition of the following regimes:

• the application of a presumption of status as a taxable person for VAT: in the presence of a valid number, the customer or supplier is deemed to be subject to VAT. If the number provided is not linked to the correct person or if it proves to be invalid, it may lead to the application of other VAT regimes (tax treatment (B2C, for example);
• the local application of mechanisms for reversing the taxpayer: in some Member States, there are mechanisms for reversing the taxpayer. In other words, customers are required to autoliquidate VAT if suppliers are not established or if they do not have VAT numbers. Some states, such as France, make the application of this regime and the absence of supplier registration conditional on the provision by the customer of a valid local VAT number;
• determining the nature of transactions in the context of chain sales: Introduced as part of the “Quick fixes” reform, the new chain sales regime provides that when a single intra-Community transport is allocated to several sales, it is necessary to determine the VAT regime applicable to each transaction. In accordance with the EMAG case law (ECJ, 1st ch., 6 Apr. 2006, aff. C-245/04, Emag Handel Eder), only one transaction may benefit from the exemption relating to intra-Community supplies. When the transport is carried out through the intermediary (the first purchaser in a chain of three operators), Communication of the VAT number makes it possible to determine which transaction constitutes an intra-Community supply: if a valid VAT number from the country of departure is provided, the first transaction constitutes a local sale and the second sale carried out by the intermediary operator constitutes an intra-Community supply. In the context of the communication of a VAT number in another Member State, this suggests that the first transaction constitutes an intra-Community supply and the second sale a local sale in the country of destination;
• the simplification of triangulars: good management of VAT numbers also makes it possible to manage the application of the simplification of triangular forms ((absence of taxation of certain intra-Community acquisitions in the context of tripartite sales) and to ensure that the authorities cannot call into question the regime;
• the management of intrastat reporting obligations (for France, declarations for the exchange of goods or European services);
• the management of reports from the tax administration in the framework of platform solidarity: when a user is reported by the tax authority, the platform must act in order to sanction and force the user to comply. In this context, the platform can communicate a valid check of its user's VAT number to the tax authority. Through this communication, it can thus avoid the imposition of payment solidarity against it (articles 283 bis and 293 A ter of the FTC);
• controls as part of the company's billing audit trail (Article 289 VII of the FTC).
  

Presence of a valid VAT number: the fight against fraud and carousel schemes

More generally, verifying VAT numbers is a good practice in the context of KYC and supplier identity verification procedures.

Indeed, some authorities consider that the absence of verification of the VAT number of suppliers or customers may constitute a lack of due diligence on the part of a company in the fight against fraud. Indeed, the VAT number allows access to data on the identity of counterparties.

The verification of the latter constitutes an operation that makes it possible to avoid any questioning of the Company's conduct and therefore the application of the latter's responsibility (directly by means of a liability action or the establishment of payment solidarity).