Do I Need a VAT Number to Buy From Europe?

Value Added Tax (VAT) is a consumption tax applied to most goods and services within the European Union (EU). When purchasing from Europe, whether a VAT number is necessary depends on the buyer’s status (individual or business), location, and the transaction type (goods or services).

Understanding Value Added Tax

Value Added Tax (VAT) is a consumption tax applied to most goods and services within the European Union (EU), levied on the value added at each stage of production and distribution. This multi-stage tax is ultimately borne by the final consumer, not by businesses in the supply chain. Its primary purpose is to generate revenue for governments.

Businesses charge VAT on their sales (output VAT) and can recover VAT paid on their purchases (input VAT). The net difference between output VAT and input VAT is then remitted to the tax authorities.

The EU VAT system operates on the “destination principle,” meaning VAT is charged where goods or services are consumed. This prevents double taxation and promotes neutrality in international trade.

EU member states apply various VAT rates, including standard (at least 15%, up to 27%), reduced (not below 5%), and zero rates. Zero rates mean no VAT is charged, but businesses can still deduct input VAT.

VAT Considerations for Individual Buyers

Individuals purchasing goods from Europe for personal use do not need a VAT number. VAT is always due for goods imported into the EU, as the €22 exemption was removed in 2021.

For low-value goods (under €150), VAT is often included in the price by the European seller using the Import One Stop Shop (IOSS) scheme. This allows the seller to collect and remit VAT through one EU member state, simplifying customs.

If IOSS is used, consumers pay VAT at checkout, avoiding additional tax charges upon delivery. If the seller does not use IOSS or for goods exceeding €150, import VAT is collected at importation by customs or the shipping carrier. The consumer is responsible for paying this VAT, along with any customs duties, before goods are released.

For services purchased by individuals, VAT is usually charged at the seller’s location or where the service is consumed, depending on the service type. Individuals do not require a VAT number for these transactions.

VAT Considerations for Business Buyers

Businesses buying from Europe face different VAT considerations, particularly regarding the necessity of a VAT number. For goods exported from the EU to businesses outside the EU, the EU seller zero-rates the supply for VAT purposes. This means the EU seller does not charge EU VAT, and the non-EU business buyer does not need an EU VAT number. However, the non-EU business will likely be responsible for paying import VAT in their own country upon arrival, plus any customs duties.

For services supplied by an EU business to a non-EU business (B2B services), the “general rule” shifts the VAT liability to the recipient’s country. This is known as the reverse charge mechanism: the EU supplier does not charge EU VAT, and the non-EU business buyer, if VAT-registered, accounts for the VAT themselves. The EU supplier issues an invoice without VAT but with a reference to the reverse charge. This mechanism simplifies cross-border B2B transactions.

Businesses within the EU buying goods from other EU suppliers engage in “intra-community acquisitions.” If both businesses are VAT-registered in their respective EU member states, the buyer uses their VAT number, and the reverse charge mechanism applies. The seller zero-rates the supply, and the buyer accounts for the VAT in their own member state. This process ensures VAT is collected at the destination of consumption within the EU’s single market.

VAT-registered businesses, both within and outside the EU, may reclaim input VAT incurred on purchases, subject to refund schemes and local regulations. For non-EU businesses, this involves a refund procedure in the EU member state where VAT was paid. A non-EU business might need to register for VAT in an EU country under certain circumstances, such as storing goods in an EU country before selling them within the EU, handling import procedures for customers, or selling directly to EU consumers above certain thresholds without using schemes like IOSS. These scenarios require obtaining a local EU VAT number.

Navigating Import Duties and Customs

Beyond Value Added Tax, buyers importing goods from Europe must also consider import duties and customs procedures. Customs duties, also known as tariffs, are taxes levied on imported goods by the importing country’s government. These duties are distinct from VAT and are determined by the type of goods, their origin, and trade agreements. Goods are classified using Harmonized System (HS) codes, which are global numerical codes. In the U.S., the HS code expands to a 10-digit Harmonized Tariff Schedule (HTS) code for duty rates and regulatory requirements.

Customs duties are calculated as a percentage of the imported goods’ declared value. The importer of record, often the buyer, pays these duties to U.S. Customs and Border Protection (CBP). For shipments exceeding $800, a formal entry process is required, including filing with CBP within 15 days of arrival. Documentation includes a commercial invoice, packing list, and bill of lading or air waybill.

The customs clearance process involves verifying documentation, assessing duties and taxes, and potentially physical inspection by CBP. Once fees are paid and the shipment clears, goods are released. Many importers use customs brokers, licensed professionals authorized by CBP, to assist with document preparation, goods classification (HS/HTS codes), duty calculation, and compliance. Their expertise helps avoid delays and penalties.