VAT Information Exchange System and Microsoft Dynamics GP

The EU established the VAT Information Exchange System (VIES) to deter abuse of the zero-rate sales tax provisions for goods traded in the EU by EU member traders. Each Member State must collect and store specific information about traders and their trades. Auditing 

Basically, if an Irish based trader sells goods to another Irish based trader, then the sales invoice includes VAT (currently say 21.5%). If the same trader sells to a VAT Registered trader in another EU member State, then Zero VAT can be charged. In order to stop traders being fraudulent (ie selling goods to a ‘consumer’ in another EU country, and not charging VAT)…VIES was introduced. There are no thresholds like with Intrastat. Every single sale you make to another VAT registered trader in another EU Member State, where you charge Zero Rate VAT, must be included on your VIES return. Returns are due monthly or quarterly – yearly in exceptional cases. There are specific steps you must take (ie including their VAT number on invoices)…if you are intending to charge zero rate VAT, so check with your home tax authorities for details.

The onus is on the seller to ensure that the buyer is VAT registered. Receiving confirmation of their VAT registration number usually suffices. If they are not VAT registered, then the prevailing sales tax rate of the home country is charged, and the transaction is irrelevant from a VIES reporting point of view.

In GP, the most common solution to automating the production of data for your VIES return is to set up EU specific Sales Tax Schedules…for example: SALES-EU-ZERO…this distinguishes this transaction from another transaction for zero VAT within the home country or legitimate Zero rated goods sold to consumers. The standard VAT reports then can be used to analyse your transactions by Tax Schedule, thus getting the data required for the VIES return.

Remember this only applies to export sales, so ignore purchases…if you import goods from another VAT registered trader, in another member state, they will charge you Zero Rate Sales Tax. They will return this data to VIES…not you! Nil declarations must be made where appropriate.

In the EU, VAT registration numbers are somewhat standardised and start with the Member State prefix as follows:

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