VAT Number
Looking to grow your business when shipping from China to Europe ? You might need to think about getting a VAT number or VAT ID.
Sure, the idea might seem daunting, but the ins-and-outs of value-added tax aren’t as complex as they first appear. However, it’s true that getting a solid understanding of VAT registration numbers can be a challenge.
The web is saturated with countless articles, each offering fragments of the information you’re after. But in this piece, we’ve gathered the crucial knowledge you need about VAT numbers and their impact on your business – all in one convenient place.
What is VAT Number?
VAT, an acronym for value-added tax, is represented by a unique VAT number, VAT registration, or VAT ID. This is a number given by the government to track your business’ taxes in certain countries. It’s widespread, being used in the EU, India, Japan, and 113 more countries.
If you’re shipping goods to or from the EU, having a valid EU VAT number is mandatory. Even in intra-EU trades where the VAT rate is zero, you must still present your VAT registration number.
Additionally, VAT regulations vary between EU countries, meaning businesses operating in multiple EU nations need to register for a VAT number in each country they trade in. You can verify any VAT number on the VIES (VAT Information Exchange System) website of the European Union. VAT shares similarities with the Goods and Services Taxes (GST) that countries such as Singapore and Australia employ. However, there’s a key difference: while VAT is a percentage of value-added, GST is a flat-rate percentage that remains constant.
Important to note, a VAT number isn’t identical to your tax ID. It’s exclusively for the value-added tax system. This system applies to a majority of services and goods, based on a percentage of the total cost of the item.Â
What is the Importance of VAT Numbers?
The importance of a VAT number can’t be understated. Here’s why:
- It helps determine the tax status of the customer
- It pinpoints the location of taxation
- It’s included on invoices for easy tracking
- It ensures that the holder pays taxes accurately as determined by the proper authority
For any business looking to reach other countries and expand, a VAT number is crucial. It can open the door to potentially boosting your sales. Besides the reasons mentioned above, getting a VAT ID for your business could be the key to shifting from limited sales to significant growth.
Advantages of a VAT Number for Your Business
Who Grants a VAT Number?
The issuance of a VAT number is governed by specific policies and systems in each country, meaning the country you’re aiming to sell in will provide your business’s VAT registration. If you’ve already been conducting sales in other countries without a VAT registration, it’s crucial to register straight away to prevent potential penalties. Luckily, the procedure is quite uniform across countries and is reasonably straightforward.
How to Secure a VAT Number
If you’re based outside of VAT-system countries, the process to apply for a VAT number typically involves the following steps:
- Select the country you want to sell to and register via its VAT MOSS
- Provide your bank account and business details
- Input your contact information
- Respond to queries about your VAT history
- Review the information
- Finalize the process
Decoding a VAT Number
Understanding a VAT number isn’t as daunting as it seems. A VAT number can range from 4 to 15 digits. It generally starts with a two-digit country code, which can be numeric or alphabetic (like DE for Germany or IN for India). Following the country code, there will be an additional 2 to 13 digits. You can check out different formats here.
The Format of VAT Numbers
A VAT number typically starts with a 2-letter country code representing the issuing country, followed by 2-13 unique alphanumeric characters. The format varies by country. Here are some examples:
- France: FR12345678901
- Germany: DE123456789
- United Kingdom (Non-EU): GB123456789
When is a VAT Number Unnecessary?
If your business involves exclusively selling B2B digital products, there’s no need to apply for a VAT number. In B2B sales, you can use the VAT number of the company you’re selling to in order to reclaim VAT via the reverse-charge mechanism.
Weighing the Pros and Cons of a Business VAT Number
Here are some advantages and disadvantages of having a business VAT number for international shipping with Super International Shipping
Pros:
- Enables international sales
- Makes you eligible to reclaim some of the VAT
- Excellent for marketing
- Opens up opportunities to collaborate with larger companies
Cons:
- Some of your customers may not be VAT registered
- Requires meticulous tracking of all sales
The benefits of VAT registration clearly outweigh the drawbacks. It could be the game-changer that propels you past your previous sales record and elevates your business performance. Now that you’re armed with all the necessary information to apply for a VAT number, you’re all set to take your business to the next level.
Applying for a VAT Number in Europe
To register for a VAT number in Europe, follow these steps:
- Identify the EU countries where you need to register for VAT.
- Use a customs or VAT calculator to estimate the correct VAT amount for your transactions.
- Visit each country’s official tax authority website or consult a tax attorney to begin the registration process.
- Complete the VAT registration form with details about your business.
- Submit the required documents for VAT registration.
After registration, you will typically receive a VAT certificate within 2-8 weeks.
Essential Documents for VAT Registration
The required documents may vary by country, but commonly requested items include:
- Proof of tax registration in your home country.
- Articles of Association (AoA) or Certificate of Incorporation for your business.
- Extract from the national company registrar confirming your business’s existence.
- Proof of planned trade, such as invoices or trade contracts.
- Letter of Authority or Power of Attorney if you appoint a local tax agent.
When Do You Need a VAT Number?
According to the VAT Directive, you’ll need a VAT number in the following cases:
- When supplying services subject to VAT, such as importing from non-EU countries.
- When trading goods within the EU (intra-community supply).
- When receiving services for which you must pay VAT.
- When providing services where the end customer is responsible for paying VAT.
Additionally, if your VAT-taxable turnover exceeds £85,000, you should register for a DPP VAT number.
Where Do You Need a VAT Number?
As of 2024, more than 170 countries require VAT numbers for various goods and services. This includes all 27 EU countries, as well as major economies like:
- United Kingdom
- Australia
- Canada
- Russia
- China
- India
Many Scandinavian and Latin American countries also require VAT numbers. For a complete list of countries and their VAT formats, refer to the official tax authority websites.
Do I Need a VAT Number for Amazon FBA?
In most cases, yes—especially when shipping to the EU or any country where VAT applies. There is no unified Amazon FBA VAT number for all EU nations; you’ll need a separate VAT number for each country where you sell goods.
However, the EU has a sales threshold limit for FBA sellers. If your sales in an EU country remain below this threshold, you can apply your domestic VAT rates and remit the taxes accordingly. But if your sales exceed the threshold, you must register for a VAT number in that specific country.
For example:
If you’re an Amazon FBA seller based in the UK and want to sell in Germany, you can apply UK VAT rates to your German sales if they stay below a certain threshold (e.g., $15,000). If your sales exceed that threshold, you’ll need to register for a German VAT number and remit the collected tax to the German authorities.
You can register for a VAT number through the Amazon Seller Central portal with the help of a third-party tax service provider.
Does Importing into the US Require a VAT Number?
No, the United States does not require a VAT number for importing goods. Instead, the US imposes sales tax and other federal duties on imports. Importers need an Employer Identification Number (EIN) for US imports. Therefore, VAT number registration is not necessary when shipping to or from the US.
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