What is a VAT Identification Number?
Similar to your EIN number or FTIN, a VAT identification number is the specific number used by EU state governments to track your business’s activities. You’ll use it to track VAT payments, file returns and earn tax credits.
You’ll receive your EU VAT number (or VRN, for “VAT registered number”) after registering to pay your digital tax. Don’t worry – registering for EU VAT is easier than it sounds!
The EU has tightened local VAT requirements on foreign businesses in the last six years. In 2015, the bloc introduced a 0 registration threshold for digital products, and in 2021 there came new rules for physical products — both for imports and cross-border e-commerce sales.
For US businesses, failing to register for VAT and failing to pay it is much like failing to pay domestic sales tax. EU tax authorities probably aren’t going to come busting down your door (unless you really owe a lot). But you could find yourself subject to fines, back payments, and even fraud charges.
Penalties like these may not be a big deal for multinationals with highly-paid legal counsel on retainer. But for small companies or solopreneurs, even modest fees could put them out of business.
Source Quaderno
