Nowadays, it is very common for freelancers or companies to provide their services not only at a national level, but also addressing the European market. Either they have customers there, or they want to expand and explore new markets. If this is your case and you need to start sending or receiving invoices from any country in the European Union, you will need an intra-community tax ID number (international VAT), also known as ROI in Spanish. In this article, we teach you everything you need to know about this number: main differences with VIES, how it works, how to apply for it, and much more!
What is the intra-community tax ID number and VIES?
The intracommunity NIF is the identification number that allows companies in Spain (and in any other EU country) to start operating at a European level by issuing and receiving invoices from any of these countries without the need to add VAT.
It was created because, within Europe, tax differences exist between its countries. There are different tax rates, and this makes it difficult to issue an invoice abroad. Thus, this intra-community number acts as a unifier. It eliminates the need to charge VAT on foreign invoices which in many countries would not be deductible or would be non-existent for a particular service received.
It is also known as the ROI, which stands for “register of intra-Community operators”. And this is because once you request this number, you will register your company (or yourself as a self-employed person) in a database of all EU companies that operate at an intra-community level. This database is the ROI, which can be checked through the VIES.
We will talk more about the VIES in the last section.
How does it work?
Let’s use an example.
Suppose that a self-employed worker in Spain has provided computer services to a company located in Germany.
In this case, and because it is an intra-community operation, both must be registered in the VIES (the register containing all ROI numbers).
Thus, when issuing the corresponding invoice for the provided services, the Spanish computer specialist will not include the VAT on the invoice.
The same would happen in the case of purchasing products, goods, or services from an intra-community supplier.
In just you are wondering, here you will find a complete guide on what to include in each of your invoices to comply with the Spanish law.
Which are its advantages?
Its main advantage is the same fact that it exempts you from having to add VAT to your invoices, or having to pay this tax when you buy from a foreign supplier (the purchase being cheaper).
And this fact, which may seem like a simple procedure, becomes a truly remarkable advantage. It affects your business competitiveness in a positive way.
Think about it.
Suppose that in Europe there are only two companies that sell product X: yours and your main competitor, located in Germany.
A potential Italian customer is considering whether to buy from you or from your competitor, X. Obviously, the price will be a very important factor. Both of you have very similar production costs.
Because you have applied for your intra-community VAT number, you do not have to add the extra VAT to your sales price. On the other hand, the X-competitor, who has not requested it, has to.
Thanks to this, your final sales price is much lower than your competitor’s: he has to add an extra 21%, which makes the product less attractive.
You finally get the sale.
Does this mean that I do not pay VAT if I buy or sell to Europe?
No. Although at first glance it may seem so, the opposite is true.
That is, if we have an intra-community VAT number, it is absolutely certain that 1. we will not add VAT to the invoices we issue (therefore we do not collect it from the customer), and that 2. if we buy from any country in the Union we will not pay this tax either.
However, there will be a tax adjustment between countries.
In our quarterly VAT returns, which we do using form 303, there is a specific section in which we must specify our intra-community acquisitions and sales. You can read more about how quarterly tax returns work as a self-employed individual here.
In addition, you must submit form 349 in which you list the operations that have been carried out within any European country.
By using these documents, the UE countries can formalize the relevant arrangements and are able to offset the VAT derived from the operations produced.
However, in case you move to any EU country and carry out there the provision of services or sale of products there, the operation would be exempt from VAT. In other words, VAT would only be applied if you are within Spain (and if you do not have an intra-community VAT number).
How do I register in the VIES and obtain the intra-community VAT number?
Applying for the intra-community NIF is a fairly simple process, although the application acceptance may not be that simple.
You must fill in form 037 (if you are self-employed), or 036 (if you are a company). You can find both documents here.
By means of this application, you must also register as an application for the intra-community tax number. To do so, you simply need to mark checkbox 582, relating to registration in the ROI (register of intra-community transactions).
Something very important in this application is to demonstrate the need to sell or buy in Europe, also indicating who your customers and/or suppliers are.
With this, you will receive an international VAT number. This is only your DNI or NIE if you are self-employed or CIF if you are a company, with the letters ES in front (in the case of another country, the identification code will be different).
How long does it take to get it?
Although in some cases you can be given this number in just 2 or 3 days, the process can take up to 6 months.
We must take into account that the approval is subject to a verification procedure, which makes the process longer. Especially if you have just registered your company or you have just become as a self-employed individual, and therefore not have any prior activity, the process can be longer than normal.
What does this process consist of? In most cases, it will consist of a tax inspector coming to your business physical location to verify everything related to your business activity. As we have said, it is necessary to demonstrate the need to buy or sell to Europe. That is why the tax authorities verify that anyone is really working there, the number of people doing so, under what type of contracts, how the activity is carried out, etc.
In addition, in the case of a company, the AEAT usually requests a series of documents, such as the rental contract or pro forma invoices that justify the request to provide services abroad. Its purpose with this clear is easy: to avoid frauds.
However, and as we have already pointed out, there are cases in which this process is almost non-existent and you receive the international NIF in record time; the number being granted without any request or extra requirement. It all depends on your particular case.
Keep in mind that if you have any debt with the tax agency, the application will be denied automatically. So make sure to solve that part before starting.
Does the VIES or international NIF number expire?
Yes, if you have not carried out any type of intra-community activity during a period of 12 months, the number will expire and you will need to reapply for it again.
In addition, if you have had any significant debt with the Spanish Tax Agency, it is also very likely that it will be withdrawn.
In either case, it means starting the application process (and therefore inspection) from 0.
Therefore, before issuing an invoice, we recommend that you check the validity of your registration in the VIES. You may have not noticed it, but the number could have expired.
Here is how to check it.
Check your intra-community VAT number at the AEAT: VIES Registry
Imagine that you already have your first intra-community customer and you are going to submit your invoice. The first thing you will need to do is ask her for his international VAT number, and verify that this number is validly registered in the ROI.
To do this you have the VIES: to consult the intra-community operators and see that this customer is indeed one of them.
In the case that this client (whether self-employed or a company) in any EU country does not have an approved international VAT number, then you must add VAT to the invoice.
Get help from an experienced lawyer
Although with the previous link you will be able to verify the validity of this number for both your company and for your client or supplier, we recommend you go one step further and back yourself up legally.
Thus, having an expert lawyer specialized in tax and business matters may be the best alternative to start operating abroad.
In Balcells Group we will help you to prepare your invoices, define if you have to include VAT or not, how to adjust to the international NIF, and how to make your quarterly tax declarations incorporating all these European transactions.
So if you have any doubt, our team is ready to help you 24/7: