What are VIES and how does VIES work?

VIES (VAT Information Exchange System) is an electronic system used by European Union (EU) member states to exchange information about VAT-registered businesses. It is primarily designed to help authorities within the EU verify VAT numbers and ensure that businesses are complying with VAT regulations. VIES plays a crucial role in preventing VAT fraud, especially in cross-border transactions within the EU.

How VIES works?

VAT Number Verification

VIES allows businesses and tax authorities to verify whether a VAT number issued by one EU member state is valid in another member state. If you are doing business with a company in another EU country, you can use the VIES system to check if their VAT number is legitimate before proceeding with the transaction.

Cross-Border Transactions

When goods or services are sold between EU countries, businesses must ensure that they are VAT-registered and that their transactions are VAT exempt or subject to the correct rate of VAT. VIES enables the smooth exchange of information, ensuring that VAT is applied correctly across borders and that businesses comply with VAT rules.

Preventing VAT Fraud
VIES helps combat VAT fraud, particularly in “carousel fraud” schemes, where businesses collect VAT on sales but fail to remit the VAT to the tax authorities. By cross-checking VAT numbers, VIES helps tax authorities detect suspicious activity and prevent fraudulent claims for VAT refunds.

Access to VIES
Businesses and tax authorities can access the VIES system online. It is publicly available for businesses to check the validity of a VAT number in real time. The VIES portal can be accessed through the European Commission’s website.

Key Features of VIES:

  • Real-Time VAT Validation: Users can validate VAT numbers in real-time.
  • Cross-Border Business Transactions: It ensures VAT compliance in transactions between EU countries.
  • Fraud Prevention: Helps detect and prevent VAT fraud by verifying business legitimacy.

VIES is an essential tool in the EU’s efforts to ensure proper VAT collection and compliance. It helps businesses verify the VAT numbers of their partners, prevents fraudulent activity, and ensures smooth cross-border trade within the EU. For businesses, using VIES for VAT validation is a crucial step in maintaining legal and tax compliance when conducting transactions across EU borders.