In this article
- What is a VAT number?
- What is Value-Added Tax (VAT)?
- What does a VAT number look like?
- Guide to EU VAT ID number formats
- Tracking your business’ input & output VAT
- How do I issue invoices from my VAT number in the EU?
- How to get a VAT number
- What is a VAT Number in the US?
- How long does it take to get a VAT number?
- Do I need a VAT number?
The VAT number is a common first step for businesses who are growing and want to comply with tax rules in the European Union.
We’ve been working in EU tax compliance for over 10 years, helping online businesses like yours figure this out. Our experience has taught us all the ins and outs of the VAT number process, so we're happy to answer all of your questions here!
What is a VAT number?
A VAT number is a registered tax identification number in tax systems that use Value-Added Tax (VAT). When you register for VAT in a single country, you receive this identifier for their system. We’ll cover what exactly it’s used for in a section below.
Important note: A VAT number is not the same as a local tax number or tax ID. A VAT number is exclusively for the Value-Added Tax scheme.
What is Value-Added Tax (VAT)?
Glad you asked! VAT is a specific kind of consumption tax, applied to the sale of goods and services.
With VAT, the consumption tax is charged at each stage of the production chain. At each stage, it’s assumed there’s an increase in the value of the good or service. That increase, the “value added,” is what’s being taxed. But the cool thing is that, as a business owner, you get back whatever VAT you’ve paid in the chain. Only the end consumer pays out of pocket.
The largest market using VAT is the European Union. If you’re curious to learn more about EU VAT, check out this guide to EU VAT’s digital tax rules.
What does a VAT number look like?
VAT numbers can vary from country to country, but there’s one general similarity: there is a country code followed by some other characters.
VAT registration number
Also known as a VAT registration number or VRN, your number is assigned when you register your business for taxes. So, it will appear on the tax registration documents you receive from the member state where you’ve registered.
The registration number can have between 4 and 15 digits total. It starts with the two-digit country code (e.g.- DE for Germany or IT for Italy), followed by 2-13 other characters.
Guide to EU VAT ID number formats
|Austria||AT||U12345678||9 characters||9 characters; the first character is always a ‘U’|
|Belgium||BE||1234567890||10 characters||Prefix with zero ‘0’ if the customer provides a 9-digit VAT number|
|Bulgaria||BG||123456789, 1234567890||9 or 10 characters||-|
|Cyprus||CY||12345678X||9 characters||The last character must always be a letter|
|Czech Republic||CZ||12345678 123456789 1234567890||8, 9, or 10 characters||If more than 10 characters are provided, delete the first 3|
|France||FR||12345678901 X1234567890 1X123456789 XX123456789||11 characters||Could include alphabetical characters (all but O or I) as the first or second or first and second characters|
|Ireland||IE||1234567WA (companies) 1234567FA (individuals)||8 or 9 characters||Includes one or two alphabetical characters (last, or second and last, or last 2)|
|Lithuania||LT||123456789 123456789012||9 or 12 characters||-|
|Netherlands||NL||123456789B01 or 123456789BO2||12 characters||The 10th character is always going to be a "B". Companies forming a VAT Group have the suffix BO2|
|Norway (non-EU)||123456789MVA||9 digits and the letters 'MVA' to indicate VAT registration||The last (ninth) digit is a MOD11 checksum digit||-|
|Spain||ES||X12345678 12345678X X1234567X||9 characters||Includes 1 or 2 alphabetical characters (first or last or first and last)|
|Switzerland (non-EU)||CH||123.456.789||9 numbers plus MWST/TVA/IVA||The German part of Switzerland is MWST, The French part is TVA, and the Italian part is IVA|
|United Kingdom (non-EU)||GB||123456789||9 characters||-|
Tracking your business’ input & output VAT
You or your business receive a VAT number upon registering for the VAT tax system in a certain country. The VAT number is used to track how much tax your business pays and collects through purchases and sales (expenses and revenue).
You should put your VAT number on all of your invoices and transaction documents. More on that in a minute.
For selling B2B
When you sell to a VAT-registered business, they will provide you with their business’ VAT number. Then you can often use the reverse-charge mechanism for the transaction.
With the reverse-charge mechanism, the responsibility for VAT moves from the supplier back to the buyer, so that the tax money goes directly from the buyer to the government. So you don’t need to add VAT to the sale in these types of transactions.
Important note: You should always verify that the VAT number is valid in that country’s tax system, since giving false VAT numbers is a form of VAT fraud. Here’s how to check if a company is VAT registered.
For filing VAT returns
When it’s time to file VAT returns, you use the number and your invoice records to determine how much your business owes the government, or vice versa! Typically, you must file VAT returns every quarter, but this could change (to monthly or yearly) depending on your annual revenue.
You should always file your returns on time to avoid any late fees. Plus, you might get a refund!
How do I issue invoices from my VAT number in the EU?
Once you have a VAT number, you should put it on all invoices and other transaction documents. In our experience creating thousands of automatic VAT invoices, we think the best place to put your registration number is right below your other business billing information.
If you are registered for VAT in more than one country, you must be careful to always include the right ID on the invoice. For example, if you are registered in both France and Germany, you must use the French VAT number for sales to French customers, and the German number for sales to German customers. Furthermore, your invoices for each VAT ID must have their own separate serial numbers.
How to get a VAT number
Here’s a quick outline of the application process for registering for VAT and receiving the registration number. Please note that these steps are designed for online businesses. More traditional brick-and-mortar businesses might have to follow a different process.
- Choose the EU country where you are physically located or where you have other physical presence, such as real estate or employees. In certain cases, if you sell physical products, you might also need to register in countries where you store inventory.
- Register through the national VAT OSS, or One-Stop Shop. This is an online portal that streamlines both the application process as well as reporting and filing later on.
- Add your company information and bank account details.
- Then enter your personal contact information.
- From there, you’ll be asked about your company’s VAT history, such as other previous or current VAT registrations. This might also include the date when you made your first taxable sale in the country.
- After this, the portal will send you to a summary page where you can review all the information you entered. Make sure it’s all correct!
- Submit. And that’s it!
If you’d like more in-depth guidance, read on about how to get a VAT number in the EU.
What is a VAT Number in the US?
As tax compliance experts, we have experience with all types of queries about VAT, and many people even ask us about VAT numbers in the United States. But actually, there are no VAT numbers in the United States because the country doesn’t use value-added tax!
Instead of a VAT number, US businesses receive a sales tax permit, or seller’s permit, along with a business tax ID. And since sales tax operates on a state level (not the national level), businesses have a different tax ID for each state where they’re registered. Learn more about how sales tax works in the US.
How long does it take to get a VAT number?
The process takes anywhere from a few weeks to a couple of months. In our experience as an EU business helping others manage their VAT, the time it takes to receive a VAT number can vary widely depending on the specific country in which you've applied.
But the processing time is getting shorter! With the help of technology and streamlined tax policies, tax authorities are increasingly offering better services, such as online registration, which help expedite the process.
Do I need a VAT number?
You need a VAT number if your sales surpass the tax registration threshold in a specific country. When you pass a threshold, you are legally obligated to register for taxes and obtain a registration number. Threshold amounts vary depending on what types of products you’re selling.
Because of registration thresholds, monitoring your sales in each country is a necessary part of tax compliance. This can be a painfully manual and time-consuming element of running an online business.
Quaderno helps you stay on top of thresholds and new tax registrations. The app tracks your sales in every country and knows when you will hit a registration threshold. If your business needs to register for VAT in a new place, you’ll get a notification right away!
Once registered, Quaderno can also help you comply with the rest of tax laws anywhere in the world. Quaderno is a tax compliance software that handles sales tax, VAT, and GST for thousands of businesses. It automatically calculates tax, verifies the VAT numbers in B2B sales, sends invoices automatically, and provides instant multi-channel tax reports for sales in any country.
Give us a try for free for 7 days, no card necessary.
Note: At Quaderno we love providing helpful information and best practices about taxes, but we are not certified tax advisors. For further help, or if you are ever in doubt, please consult a professional tax advisor or the Tax Agency.