What Is a Company VAT Number and Why Do You Need One?

A Value Added Tax (VAT) number is a unique identification code for businesses operating within VAT systems, which are prevalent globally. This identifier helps governments track and manage the collection of VAT, a consumption tax applied at each stage of a supply chain. The VAT system contrasts with sales tax, where the tax is applied only at the final point of sale to the consumer.

What a VAT Number Is

A VAT number, also known as a VAT registration number or VAT identification number, is a specific tax identification number issued to businesses that have registered for Value Added Tax. This identifier allows tax authorities to monitor VAT transactions, enabling businesses to properly charge VAT on their sales and remit it to the government. It also facilitates the process of businesses reclaiming VAT paid on their purchases, which reduces their overall VAT liability.

The format of a VAT number includes a country code followed by digits or alphanumeric characters. For example, a VAT number might be 9 to 12 characters long, starting with a two-letter country code. Businesses need a VAT number if their taxable turnover, which is their revenue from VAT-eligible sales, exceeds a specific threshold set by the tax authority. This number is important for cross-border trade, as it identifies businesses for VAT purposes in international transactions.

Obtaining a Company VAT Number

To obtain a company VAT number, businesses must apply to the relevant tax authority in the country where they conduct taxable activities. This process requires submitting specific company information. Businesses need to provide their legal name, registered address, a detailed description of their business activities, and their expected annual turnover.

Bank account details are also required to facilitate VAT payments and refunds. The obligation to register for VAT arises when a company’s taxable turnover surpasses a predetermined registration threshold within a specific period. These thresholds vary significantly between countries, so businesses must confirm the specific requirements of each jurisdiction where they operate. The application process can take a few weeks once all correct documentation is submitted.

Using and Verifying Company VAT Numbers

Once a company obtains its VAT number, it must use this identifier on various business documents and for specific tax processes. The VAT number is displayed on invoices issued to customers, especially for business-to-business (B2B) transactions, ensuring proper VAT accounting. It is also used on customs declarations when importing or exporting goods, and when interacting with suppliers to ensure correct VAT treatment on purchases.

Verifying the VAT number of another company is a standard practice, particularly for B2B transactions, to ensure the legitimacy of the transaction and to apply the correct VAT rules. For businesses operating within regions like the European Union, the VAT Information Exchange System (VIES) is a common tool for verifying VAT numbers of trading partners. Similar national databases exist in other countries with VAT systems, allowing businesses to confirm a trading partner’s VAT registration status. This verification helps prevent VAT fraud and ensures accurate application of VAT exemptions or reverse charge mechanisms in cross-border sales.