The Tax ID Validation Tool You Need

TL;DR

“You get what you pay for” - this age-old saying applies to tax ID validation. While the VIES service is technically “free” to use, it has several limitations that you, ultimately, pay for in other ways - with missing VAT IDs(!), latencies, downtimes, and inaccuracies. These costs are borne by business and for cost far more than a subscription to a reliable global solution.

Thankfully, there is a better option - Fonoa Lookup.

It's Time to Ditch VIES

Verifying a tax ID is difficult, especially for digital businesses operating internationally. But at least for businesses operating in Europe, the EU offers a unified service that works for all 27 countries… with some limitations.

Below, we list some of the biggest VIES limitations.

Not every VAT ID is in VIES

Even for the EU, not every VAT ID can be found via this portal.

This is not a bug - this is a feature. For many countries, VIES only shares data for businesses that have specifically registered for “cross-border trade”. Doing so is not a default for many small businesses, sole traders or freelance workers in the sharing and gig economy.

To give you hard evidence we collected some examples. In the below countries VIES is missing the following percentage of businesses’ tax IDs:

• France: 12%
• Italy: 17%
• Portugal: 61%
• Poland: 13%
• Romania: 9%
• Estonia: 40%

If you block transactions based on negative tax ID validation results from VIES, you could potentially lose the above percentages of your total revenues in these countries. Or, you could be incorrectly charging VAT for cross-border electronic supplies in the respective percentage of cases, paying VAT you shouldn’t have.

Therefore, VIES is woefully inadequate for any company that needs to validate the VAT IDs of their buyers or digital platforms and marketplaces that are required to validate their underlying sellers.

For the same reason, the VIES portal is equally unreliable when checking if your vendors are properly registered to charge VAT. Therefore, using VIES during vendor onboarding is also far from ideal, so leading companies no longer rely exclusively on this portal for such use cases.

While VIES can help to validate numbers registered for intra-EU transactions, if a business hopes to obtain value beyond EC sales list declarations, it must look to verify numbers with local EU databases wherever possible.

Luckily you have Lookup.

With Lookup, you can validate all (valid) tax IDs that VIES cannot - freeing you from the burden of handling the outfall of false negatives.. This is because Lookup also checks with local country databases and does not exclusively rely on VIES.

More broadly, with Lookup, you can rest assured, that you are not missing any valid tax IDs. This means that businesses can feel confident that their B2B customers or VAT-registered sellers or suppliers are being accounted for, regardless of whether they operate primarily within or outside of the EU.

Limited Geographic Coverage

One obvious limitation is that VIES only covers the EU member states (and Northern Ireland). So other frequently sought European countries (like Switzerland, Norway, and the UK) are not included. And this coverage is not likely to expand.

Luckily, Lookup fills these gaps. It covers well over 110 jurisdictions and can access VIES as well as all of the other prominent European countries including Albania, Iceland, Liechtenstein, Montenegro, Norway, Serbia, Switzerland, Turkey and United Kingdom.

Limited Tax ID Scope

Unlike other tools, VIES is not designed for tax ID’s beyond VAT IDs. Therefore, it can't help you with tax IDs of businesses that are not registered for VAT, tax IDs of individuals (personal) or Business Regisatration Numbers.

Luckily, Lookup picks up the slack here too. Lookup covers non-VAT registered businesses, and individual tax ID for all EU countries, with database checks available in eight member states. This means that businesses can rely on Lookup to support a wider range of use cases like DAC7.

Unpredictable Downtime

Even when VIES can validate your numbers, the VIES portal is often down - up to 17% of the time for some territories. And this is often without any notification.

The downtime severely impacts a business's ability to verify their tax IDs of buyers or suppliers. Waiting around for VIES to start functioning again is not an option as it can lead to frustration or abandonment of your partners.

Unlike VIES, Lookup is always up and ready to use. Even when VIES is down, Lookup is capable of continuing to validate against local databases and provide meaningful results.

Before using Fonoa Lookup, our clients didn’t get a response in 12% of the cases, leading to lost business. By implementing Lookup, they could achieve a 10% response rate increase, directly leading to more revenue. This is due to Lookup's unique capability to queue and retry or use another source. So, even if VIES fails to provide a result, Lookup will automatically try again later or go beyond VIES and use a local database to find a result.

Support Gap

The lack of dedicated support for VIES can pose a significant challenge for businesses operating within the European Union. While VIES offers a convenient way to verify the VAT registration status, the absence of formal support can lead to several drawbacks.

Firstly, encountering errors or inconsistencies during VIES checks can leave businesses in limbo. Without a clear troubleshooting channel or dedicated support team, it can be difficult to determine if the issue lies with the VIES system, the customer's VAT registration, or a technical problem on your end. This lack of guidance can delay processing transactions and potentially lose sales opportunities.

Secondly, staying up-to-date on any changes or updates to the VIES system becomes an additional burden for businesses. With no official support channel to provide notifications or answer questions, businesses may miss crucial information that could impact the accuracy of their VAT checks. This could lead to inadvertent non-compliance with EU VAT regulations, potentially resulting in fines or penalties.

Of course there is an email you can write to for technical issues, bugs or improvement suggestions, but based on our experiences, businesses can’t expect much in response.

With Lookup, this is different. Not only do you have a team for support, but our product managers are also closely listening to our clients for improvements in features, functionality, and coverage. Much of what the tool is capable of today was built following extensive client consultations to ensure every addition to the tool meets market expectations.

No Data Enhancement

When VIES is working, it typically only returns three data fields - confirmation of a valid VAT number, taxpayer name and taxpayer address.

Running validations using Lookup provides richer information about tax IDs than VIES. Lookup connects with local databases to provide more information, including business activity status, VAT registration status, legal entity type, and VAT de/registration dates.

Globally, Lookup provides users with 30 data points that enhance decisions in VAT/GST recovery, tax calculation, e-invoicing and digital reporting.

Using Lookup is still beneficial for businesses that are exclusively interested in VIES validations. Using Lookup can help enrich your data by adding more data to your records than offered by VIES alone.

With Lookup, companies can also search for and find the tax IDs of companies purely based on their names in over 20 countries. This has proven useful for our clients with gaps in their internal buyer/supplier records, in terms of tax IDs.

Recap - Say Goodbye to VIES

VIES has severe limitations for modern-day tax and commercial teams demanding accuracy, speed and efficiency at scale. This is why so many leading companies already use Lookup. These businesses cover all their bases, minimise errors, and make the verification process more efficient.

With richer information, easy technical implementation, coverage of individual tax IDs, and better uptime, it's time to say goodbye to VIES.

PS: Fonoa Lookup isn't just a superhero for EU tax verification - we're global!

With the ability to validate tax IDs in over 110 countries, we keep it global. This means that no matter where your business operates, we've got you covered. So, if you need a tool that's versatile, reliable, and can handle tax ID validations on a global scale, you know who to call.