How does the VAT identification number work?
December 23, 2022 | 40,00 EUR | answered by Emma Wagner
Dear tax consultant,
my name is Daniel Kockel and I run a small business in the field of online trading. Lately, I have been dealing more with the topic of value added tax and have come across terms such as VAT identification number. Unfortunately, I am not quite clear on how this number works and what significance it has for me and my company.
Currently, I sell my products both within Germany and to customers in other EU countries. I already have a regular tax number, but now I am wondering if I also need a VAT identification number and how I can apply for it.
My biggest concern is that I may make mistakes in handling VAT and thereby face legal consequences. Therefore, it is very important for me to understand how the VAT identification number works and what steps I, as a business owner, need to take to obtain it.
Can you please explain to me what the VAT identification number is all about and whether as a small business owner I also need such a number? What benefits does the VAT identification number bring me and how do I apply for it?
Thank you in advance for your help and support.
Sincerely,
Daniel Kockel
Dear Mr. Kockel,
Thank you for your inquiry regarding the Value Added Tax Identification Number. The Value Added Tax Identification Number, also known as VAT ID, is a special number assigned to entrepreneurs for their business activities within the EU Single Market. This number is used to simplify cross-border transactions within the EU and ensure that VAT is correctly accounted for.
As an online retailer who sells products both within Germany and to other EU countries, it is important to have a VAT Identification Number. This number must be stated on invoices and other business documents when supplying goods or services to other EU entrepreneurs. This ensures that the correct VAT is calculated and remitted.
As a small business owner, you can generally opt not to show VAT on your invoices if you qualify for the small business regulation according to § 19 UStG. In this case, you do not need a VAT Identification Number, as you do not remit VAT to the tax office. However, it may still be beneficial to apply for such a number to conduct cross-border transactions without VAT remittance.
To apply for a VAT Identification Number, you need to contact the Federal Central Tax Office (BZSt). There, you can fill out and submit the appropriate form. After reviewing your documents, you will be assigned the VAT ID and can use it in your business documents.
The advantages of a VAT Identification Number lie primarily in simplifying and securing your cross-border transactions. You can deliver to other EU entrepreneurs without showing VAT and do not have to worry about double taxation. Furthermore, the VAT ID signals to your business partners that you are a reputable entrepreneur who is familiar with international tax regulations.
I hope this information helps you and answers your questions regarding the Value Added Tax Identification Number. If you have any further questions or need assistance, please feel free to contact me.
Sincerely,
Emma Wagner, Tax Advisor
