Skip to main content
Avalara Help Center

How does the "Buyer's VAT Number" field work in AvaTax?

Overview

I am working with customers in the European Union (EU), and I would like to know what impact the "Buyer's VAT No." field has on transactions.

Environment

Avalara AvaTax

Resolution

Clients with sales in the European Union (EU) that have global access enabled in their account can use Avalara AvaTax just as they do for US and Canadian taxes, but there are some important considerations regarding whether the buyer is a VAT-registered business or a non-business consumer that affect where the tax is sourced (origin or destination) and whether or not a tax amount should be calculated. The VAT decision process utilizes the Buyer's VAT No. field, which is where you will send the buyer’s VAT registration ID.

Many EU countries also require prices to be displayed inclusive of tax. You can use the "TaxIncluded" option for this, and when this option is enabled on a line item tax will be backcalculated out of the total line amount provided.

Note: VAT jurisdictions aren't enabled on all accounts automatically. Your company will need to request that when signing up for AvaTax.

Testing Scenarios

Here are most of the scenarios that you might consider during testing for VAT usage:

  • Seller in EU country; Buyer in same EU country.
    • Does not matter if the sale is business-to-business (B2B) or business-to-consumer (B2C).
    • If the product is taxable, tax is returned at appropriate rate.
    • If the product is not taxable, transaction is Exempt.
    • In summary, the "Buyer's VAT No." field has no impact on these transactions.
  • Seller in EU country, Buyer is outside EU.
    • If Seller has selected nexus in the non-EU country, then destination country tax rules will be followed.
    • If Seller has not selected nexus in the non-EU country, the tax engine looks at "Buyer's VAT No."
    • If the buyer is a VAT-registered business, send the buyer's VAT ID in the "Buyer's VAT No." field, and an origin country zero rate is returned.
    • If the buyer is not VAT-registered, leave "Buyer's VAT No." empty. The Tax Code is checked to determine if it is a physical good or service/digital good.
    • If it is a physical good, then an origin country zero rate is returned.
    • If it is a service or digital good, then the appropriate origin country rate is applied.
  • Seller in EU country, Buyer in another EU country.
    • If the buyer is a VAT-registered business, send the buyer's VAT ID in "Buyer's VAT No." , then an origin country zero rate is returned.
    • If the buyer is not VAT-registered, leave "Buyer's VAT No." empty. The TaxCode is checked to determine if it is a physical good or service/digital good.
    • If it is a service or digital good, then the appropriate destination country rate is applied.
    • If it is a physical good, seller nexus is checked to see if this destination country is selected.
    • If nexus is enabled in the destination country, the appropriate destination country tax is returned.
    • If nexus is not enabled in the destination country, the appropriate origin country tax is returned.