Why VAT Can Still Apply When a Customer Provides a VAT Number – Recurly

A valid EU VAT registration number does not always remove VAT from an invoice. If your Business Entity and the customer are located in the same EU country, VAT is expected to apply even when the customer provides a valid VAT number.

The reverse charge mechanism applies when the customer is an EU business in a different EU country from your Business Entity and provides a valid VAT registration number. It does not apply to same-country domestic VAT transactions.

Key takeaway: Same-country EU business transactions are still taxable. A valid VAT number identifies the customer as a business, but it does not create reverse charge treatment when the seller and customer are in the same EU country.

How Recurly Determines the Expected VAT Treatment

Business Entity and customer location	VAT number provided?	Expected result
Same EU country	Yes	VAT applies for the domestic transaction.
Different EU countries	Yes, and valid	Reverse charge applies, so VAT is not charged on the invoice.
Different EU countries	No, invalid, or unavailable	VAT may apply based on your tax configuration and the customer's location.

Example

If your Business Entity is in Germany and the customer is also in Germany, German VAT applies even when the customer provides a German VAT registration number. The transaction is domestic, so the reverse charge mechanism does not remove VAT.

If your Business Entity is in Germany and the customer is in another EU country with a valid VAT registration number, the invoice can qualify for reverse charge treatment instead.

What to Check Before Opening a Support Ticket

Confirm the country assigned to the Recurly Business Entity on the invoice.
Confirm the customer's billing country on the invoice.
Confirm whether the VAT number was present and valid at the time the invoice was created.
Check whether the Business Entity country and customer country are the same.
Review whether the invoice includes reverse charge notes when the countries differ.

If VAT Still Looks Incorrect

If the customer and Business Entity are in different EU countries, the customer has a valid VAT number, and VAT was still charged, gather the invoice number, customer billing country, Business Entity, and VAT number details before contacting Recurly Support.

For additional detail, see EU VAT registered customers.