Over the past year, I have been getting questions from clients about VIES. Typically, the client has received a letter from Revenue advising them that they should be submitting a VIES Return. But the clients typically don’t know what VIES is and have no idea how to make a VIES Return.
At this stage, I have significant experience with VIES. Having worked with larger companies in the past I was very familiar with filing VIES returns. More recently, a lot of my current SME clients have asked for help with the VIES filing.
What is VIES
VIES is an abbreviation for VAT Information Exchange System. It is an EU system and applies to any business that sells to other EU states.
A supplier can apply the zero rate when they sell goods or services to another EU country. In order to ensure this is not abused, the supplier must make reports showing the VAT number of the customer and the value of supplies.
This information is shared between EU tax authorities and the relevant authorities can make checks to ensure the zero rate was correctly applied.
What to do if you are selling to a customer in another EU State
If you sell to a VAT Registered customer in another EU state, you do not have to charge VAT if certain conditions are met.
Verify that your Intra EU EU Customer is VAT Registered
An intra EU sale is a sale from one EU country to a customer in another EU country so it is within the EU.
Where you are selling to a customer in another EU State, you must first verify if that customer is VAT registered.
To do that you go to a website and enter the customers’ VAT number. Click here to visit the website: http://ec.europa.eu/taxation_customs/vies/.
You enter the customer VAT number and country and your own VAT number and country.
You will receive a message to let you know if the customer VAT number is valid or not. If it is valid, the message will include a reference number which you should keep as proof that you performed the check.
Once you have confirmed that the customer’s VAT number is valid, you can apply zero rate VAT to the customer.
Read more about VAT here
There are some conditions for this to be applied correctly.
• Your invoice should include the customer’s VAT number and your own VAT number.
• Your invoice should state that reverse charge VAT is being applied.
Showing EU Sales on your VAT3
When completing your VAT3 return, there are some questions to be answered.
These ask if you have sales of goods to other EU countries or sales of services to other EU countries or purchases of goods from other EU countries or purchases of supplies from other EU countries.
If you answered yes to the questions about sales of goods or supplies then you have to file a VIES return.
Typically, if you get the letter from Revenue asking you to submit a VIES return, it means that you ticked the box saying that you had sales of goods or services to other EU Countries but you haven’t submitted a VIES return.
How to file a VIES Return
The easiest way to file a VIES return is by using ROS.
Firstly gather a list of your sales to customers in other EU countries.
Identify the VAT number for each country and the total value of Sales for each customer.
If your accounting system supports it, you should record your customers VAT number on the system to make it easier to access it. You may be able to generate a VAT report that will show you the VAT numbers and value for all sales to other EU Countries.
Then, login into ROS and select complete a return online.
From there, chose tax type as VIES and chose the appropriate period.
Smaller business file VIES less frequently.
What is on a VIES return.
The VIES return lists the VAT numbers for all of your customers in other EU countries for the period of the return and shows the value of goods or services sold to that customer in that period.
What do the Authorities do with the VIES information?
This information allows the tax authorities in the other states to check that the company exists and that they were entitled to be invoiced at the zero rates.
They can also check if your customer correctly accounted for VAT on the reverse charge basis.
Using Reverse charge, the customer should include a notional sale on their VAT return creating a liability for VAT and at the same time, they claim notional VAT on the purchase from you.
As the VAT on the notional sale is the same as the notional VAT on the purchase from you, they don’t actually owe any VAT. However, they are showing that they did have an intra EU purchase.
In the past, some sellers would sell VAT free to a non-business customer from another EU State but entering an incorrect VAT number. Sometimes customers would supply the VAT number of a legitimate business who did not know that their VAT number was being used in this way. In this way, the non-registered customer avoided the cost of VAT.
With VIES, the VAT authorities are able to check if the seller applied VAT correctly.
The seller should have a valid VAT number for the customer and should be able to show that they checked the validity of each VAT number. If they can’t they will be liable for the VAT.
For suppliers who have complied with all the requirements, filing a VIES is pretty straightforward. You just need to make sure that you have verified the VAT numbers and can show that you did that. If you have a lot of sales to other EU businesses, it would simplify reporting if your system allows you to create the report.
If you have only a few sales, then it should be easy to pull out the customer VAT numbers and Total Values.
Over to you
Have you ever wondered what tax return you need to make for your business? Find the answer in this recently posted article here.
If you have any comments or questions on this, feel free to let me know. The best way to do that is to send me an email.