What is a VAT number?

Updated on June 3, 2022

What is a VAT number?

Value-Added Tax (VAT) systems require taxpayers to use a unique identification number to track their taxable income (VAT). This VAT system identity is provided to you when you register for VAT in a single nation. Afterward, we’ll explain exactly what it’s used for in a section that follows.

Note: This is not the same thing as a tax ID or a municipal tax number. Value-Added Tax (VAT) is the only tax on which a VAT number can be used.

What does a VAT number look like?

In general, there is one thing that all VAT numbers have in common: they all start with a zero. The number of digits can range from 4 to 15. As an example, if you live in Germany, you’ll begin with the country code (e.g., DE for Germany or IT for Italy).

What is a VAT number for?

For tracking your business’ input & output VAT

Upon registering for VAT tax in a certain nation, you or your firm are given this tax ID. It’s a tool for keeping track of the taxes your company owes and the taxes it receives as a result of its business dealings (expenses and revenue). A more technical term for these sums is value-added tax (VAT).
Every time you submit a tax return or invoice, make sure to include your social security number.

For selling B2B

The VAT number of a VAT-registered business will be provided to you if you sell to them. Then, you may be able to take use of the reverse charge mechanism.

A reverse charge mechanism shifts responsibility for VAT from suppliers to buyers so that tax money is transferred directly to government coffers. As a result, in these kinds of transactions, you are not required to charge VAT.
In order to avoid being prosecuted for fraud, you should always verify that the VAT number is genuine in the tax system of the nation in which you are doing business.

For filing VAT returns

If you’re filing VAT returns, you use the number and your invoice records to establish how much your company owes the government, or the other way around! Tax returns are typically due every three months, however this may differ based on your annual earnings.
To prevent late costs, you should always file your taxes on time. It’s possible that you’ll get a refund!

What is Value-Added Tax (VAT)?

I’m glad you brought it up! There are two types of VAT: a consumption tax and an excise tax.

Value-added tax (VAT) is a form of sales tax that is applied at each stage of the manufacturing process. It is expected that the value of the commodity or service increases at each level. Taxes are levied on the “value added,” or the increase in the product’s price. However, as a business owner, you are entitled to a refund of whatever VAT you have paid in the chain. It is only the consumer that bears the brunt of the costs.

Value-added tax is employed in a wide range of countries, including the European Union, but it is also prevalent in many others.

EU VAT for Digital Taxes

Do I need a VAT number?

A VAT number is required if your sales exceed the threshold for tax registration in a certain nation. Depending on the type of product you’re selling, the threshold amount is different.

In this article, you’ll learn how to obtain an EU VAT number even if your company doesn’t have a physical presence in Europe.

With Quaderno’s VAT registration, you’ll be able to comply with local VAT regulations all around the world.

Tax management software Quaderno covers sales tax, VAT, and GST for your online business. For B2B sales, Quaderno automatically calculates tax, checks VAT numbers, distributes tax receipts and invoices, and generates fast multi-channel tax reports.