Conducting business across the European Union (EU) requires a clear understanding of intra-Community VAT rules, especially when it comes to the delivery of goods and services. One of the most critical aspects of such transactions is ensuring that the buyer provides a valid VAT identification number (VAT-EU number). Failure to do so may have significant consequences for the seller in terms of VAT compliance, invoicing, and the applicable VAT rate.
What is an Intra-Community Delivery?
An intra-Community delivery refers to the supply of goods from one EU Member State to another EU Member State. Under the EU VAT system, such supplies are generally exempt from VAT in the country of origin, provided that specific conditions are met. The exemption shifts the obligation to pay VAT to the buyer, who accounts for it as an intra-Community acquisition of goods in their own country under the reverse charge mechanism.
Conditions for Exemption from VAT in Intra-Community Deliveries
For the 0% VAT rate to apply to intra-Community supplies, several requirements must be fulfilled:
| Condition | Requirement |
| 1 | The goods must be dispatched or transported from one EU Member State to another. |
| 2 | The customer must be a VAT-registered business in another EU country. |
| 3 | The seller must obtain and verify the valid VAT identification number of the buyer via the VIES system. |
| 4. | The seller must correctly record the transaction in VAT returns and recapitulative statements. |
| 5 | Before the deadline for submitting the tax declaration for a given settlement period, the taxpayer possesses documentation proving that the goods subject to intra-community supply were transported out of the domestic territory and delivered to the purchaser in the territory of a Member State other than the domestic territory. |
| 6 | The seller, when submitting the tax return in which this supply of goods is reported, is registered as an EU VAT taxpayer. |
If the buyer does not provide a valid VAT identification number, the exemption may be denied, and the seller may be obliged to charge local VAT.
Consequences of Missing or Invalid VAT Number
When a company issues an invoice without a valid EU VAT number of the customer, the tax authorities may challenge the application of the 0% VAT rate. This means:
- The transaction might be reclassified as a domestic supply.
- The seller may have to charge VAT at the local rate (e.g., 23% in Poland).
- The company could face penalties for incorrect VAT reporting.
This underscores the importance of VAT compliance and accurate VAT identification in transactions within the EU.
Judgment of the Court of Justice of the European Union (CJEU)
A landmark case, the Judgment of the Court from September 27, 2012 (C-587/10, VSTR GmbH), clarified the treatment of intra-Community supplies in relation to VAT identification numbers. The Court held that while VAT numbers are important, the substance of the transaction—that goods were genuinely transported from one Member State to another—must prevail over formal deficiencies.
This ruling aligns with the principle of substance over form, which protects taxpayers against disproportionate consequences where no tax loss occurs within the EU.
https://eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX:62010CJ0587
Polish Court Rulings and Council Directive (EU) 2018/1910 of 4 December 2018 amending Directive 2006/112/EC as regards the harmonisation and simplification of certain rules in the value added tax system for the taxation of trade between Member States
Further clarity was provided by Polish court rulings and the Council Directive (EU) 2018/1910, effective from January 1, 2020. According to these legal changes, the inclusion of the buyer’s VAT identification number in VIES has become a substantive condition for the VAT exemption in intra-Community supplies, not a formal requirement. This means that, in addition to proving the transport of goods outside the Member State of supply, the seller must ensure that the buyer’s VAT number is valid and registered.
The Directive provision state that the exemption otherwise should not apply, except where the supplier is acting in good faith, so, where he can duly justify before the competent tax authorities that any of his shortcomings relating to the recapitulative statement, which could also include at that time the provision by the supplier of the correct information as required under Article 264 of Directive 2006/112/EC.
In practice, this reform tightened the VAT rules: without a valid VAT identification number, the seller cannot apply the VAT exemption, regardless of whether the goods were actually transported across borders.
https://eur-lex.europa.eu/eli/dir/2018/1910/oj
Practical Guidance for Businesses
Businesses engaging in intra-Community deliveries of goods or services should:
- Verify VAT numbers of their trading partners in the VIES system before issuing an invoice.
- Keep transport documentation proving that goods were moved between different EU Member States.
- Ensure proper VAT reporting in recapitulative statements and VAT returns.
- Seek professional advice on VAT compliance to avoid unexpected tax obligations.
Why VAT Compliance Matters
Non-compliance with EU VAT rules can lead to:
- Additional VAT assessments.
- Financial penalties and interest.
- Disruption of cross-border trade.
Ensuring that intra-Community transactions are correctly reported and supported by documentation is essential for avoiding costly disputes with tax authorities across EU countries.
Conclusion
The treatment of intra-Community supplies of goods without a valid EU VAT number has evolved significantly in recent years. While earlier CJEU case law emphasized substance over form, recent legal changes such as Directive 2018/1910 have reinforced the requirement of a valid VAT identification number as a substantive condition for applying the VAT exemption. Companies must therefore remain vigilant, verify VAT numbers, and secure proper documentation to ensure compliance.
By doing so, businesses not only simplify VAT obligations but also protect themselves against VAT fraud, penalties, and the risk of double taxation. In short, valid VAT identification is the cornerstone of secure and compliant intra-Community transactions within the European Union.
You can check if a business is registered to trade cross-border within the EU with the EU’s VIES on the web tool.
https://ec.europa.eu/taxation_customs/vies/#/vat-validation
VIES (VAT Information Exchange System) is a search engine owned by the European Commission. The data is retrieved from national VAT databases. The search result that is displayed within the VIES tool can be in one of two ways; EU VAT information exists (valid) or it doesn’t exist (invalid).
Information Invalid appears in case:
- the VAT number does not exist
- the VAT number has not been activated for intra-EU transactions
- the registration is not yet completed