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Sales tax ID: Everything you need to know about the identification number

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Does every entrepreneur need a VAT ID number?

No. If you are a freelancer, self-employed person or entrepreneur who only provides or purchases services within Germany, you do not need a VAT identification number in business transactions. The tax number issued by the tax office is sufficient for invoicing. A VAT ID no. is also not required if goods are sold to private individuals across national borders in Europe. In addition, small business owners who make use of the small business regulation are also excluded from the obligation to provide a sales tax identification number.

Generally speaking, the use of the sales tax identification number is mandatory as soon as products and services are to be sold to or purchased from business customers in the EU. These business relationships between companies in the EU are also known as intra-community delivery. The legal basis for this regulates in detail the sales tax law (§4 and §6 UStG). And only in this case is there an exception to the sales tax to be reported, which we explain in the following paragraph. Make sure that the business partner you are supplying to in other EU countries has a valid VAT identification number.

 

If you do business in other EU countries, you need competent advice from a good tax advisor due to the complexity of VAT issues.

Find a local tax advisor now

Effects of doing business within the EU on sales tax

For those who sell to private individuals within the EU, there are no deviating regulations with regard to sales tax in the accounting. In the traditional way, the sales tax applicable in Germany is added to the net amount. The customer pays the total amount and the company pays the received sales tax as part of the sales tax advance notification to the tax office.

Transactions between companies - i.e. the intra-Community deliveries already mentioned - are treated differently with regard to sales tax. This is called the reverse charge procedure. What does the reverse charge process mean in detail? Let us consider the following example:

  • You sell a product for 1,000 euros to company B in France.
  • In this case, the delivery is exempt from sales tax for your company.
  • Thus, no sales tax is shown in the invoice.
  • Instead, the recipient pays the sales tax applicable in his country (in our case France) to the local tax office.

The following information is required on the invoice so that the procedure just described can be carried out properly:

  • Specifying your own sales tax identification number
  • The reference to the reverse charge procedure
  • And the recipient's VAT number

In order for the Europe-wide unambiguous assignment to work, there are corresponding sales tax identification numbers in each country, usually with the country code as a prefix (DE for Germany or ES for Spain) and an 8 to 12-digit combination of numbers and letters.

How do you get the VAT identification number?

There are basically two ways to easily apply for the VAT identification number:

  • Right from the start: If you register your freelance activity or your company with the tax office, you must fill out the tax registration questionnaire. In this you can also directly tick the issue of the VAT ID number. set and receive them automatically.
  • After the establishment: If you did not apply for the sales tax identification number directly when you founded the company, you can submit an application to the Federal Central Tax Office at any time.

The application for the VAT ID no. at the Federal Central Tax Office, there are two options:

  • On-line: the online form is available here. You can use it between 5 a.m. and 11 p.m. The application must contain your responsible tax office, your tax number, the legal form including name, zip code and city of the company or, in the case of sole proprietorships, the owner's name, first name and date of birth.
  • Written: The written application for the sales tax identification number must be sent to: Federal Central Tax Office, Saarlouis office, 66738 Saarlouis, fax: + 49- (0) 228-406-3801. The application must include the name and address of the applicant, the responsible tax office and the tax number.

You will then receive the sales tax identification number by post. There are costs for applying for the VAT ID no. Not.

Important regulations for the invoice to be issued

While the tax number is sufficient as mandatory for invoices in Germany, the VAT identification number must be included on invoices issued to business customers abroad. In addition, the sales tax identification number of the service recipient must be stated on the invoice. And the note "tax liability of the service recipient" or "reverse charge procedure" must not be missing.

In addition, there is also a time limit that generally applies to transactions with intra-community deliveries. According to § 14 of the Sales Tax Act (UstG), the invoice must be issued by the "fifteenth day of the month following the month in which the sales were made".

The VAT ID no. check my business partner's

If you have any doubts about the validity of the sales tax identification number of a potential business partner, you can check the validity of the sales tax identification number. check very easily. To do this, use the EU's VAT information exchange system, or VIES for short. The request is made online and can be made here. A sales tax identification number can also be checked at the Federal Central Tax Office (BZSt) - online, by telephone or by email.

Your EU customer's VAT identification number is also important. Before entering into a business relationship, get the VAT ID no. Your future business partner and show them on your invoices.

Don't forget: Enter your VAT ID number. in the imprint of the website

In contrast to the tax number, which you do not have to include in the imprint, it is mandatory to enter the sales tax identification number in the imprint, if this has been assigned. This results from Section 5 of the Telemedia Act. Otherwise you risk a warning. As an alternative to the sales tax identification number, the business identification number can also be specified. The allocation of this number is still being planned by the tax authorities - in future it will replace the tax number.

 

Conclusion on the sales tax identification number

With a few exceptions, the sales tax identification number is mandatory for companies that do business with other companies in the EU. As part of these intra-community deliveries, the company providing the service is exempt from sales tax. The recipient of the service, on the other hand, has to pay the sales tax applicable to him in his home country (reverse charge procedure).

For invoicing, this means that the VAT identification numbers of both parties must be included on the invoice. In addition, the addition "tax liability of the service recipient" is required. Furthermore, invoices for intra-community deliveries must usually be submitted by the 15th of the month following the provision of the service.

And there is another obligation for companies from the sales tax identification number: it must be listed in the imprint of the website, otherwise warnings are very easy.

The application for a VAT ID no. is very easy to do. You apply for the VAT ID no. either directly at the establishment in the questionnaire for tax registration or at any later point in time online or by fax at the Federal Central Tax Office.

Author: Für-Gründer.de editors

As editor-in-chief, René Klein has been responsible for the content of the portal and all publications by Für-Gründer.de for over 10 years. He is a regular interlocutor in other media and writes numerous external specialist articles on start-up topics. Before his time as editor-in-chief and co-founder of Für-Gründer.de, he advised listed companies in the field of financial market communication.