Navigate the New EU VAT Data Compliance Requirements
We’ve talked about the new EU VAT rate changes for digital services, which will now be based on the purchasing customer’s country. Where things become more complex for merchants is in the area of compliance. Two Main Points of Consideration for Merchants
Merchants will need to maintain, have access, and archive specific customer data for 10 years from the date of the transaction.
Merchants must have two non-conflicting points of address proof for each customer.
The points of proof will likely create the most difficulties with many implications to consider. In terms of what qualifies as address proof, these include:
Credit card BIN
SIM card country code
Any of the 28 EU member states can request an audit of a company at any time within 10 years after a transaction takes place. If you aren’t in compliance (e.g. failure to register or file returns in a timely manner), penalties can range from being fined twice the amount of VAT unpaid (Denmark and Belgium) to various levels depending on the member state (50% in Spain).
Recurly provides a feature called VAT Location Validation that automates this compliance. When enabled, customers are required to provide two pieces of location evidence before an invoice can be created. Recurly stores the evidence for successful invoices in an easily accessible export for any reporting needs. Read the full details of our VAT Location Validation feature in our documentation.
Whether or not you agree with the new VAT rules, the changes point to increased vigilance by merchants to review their current billing systems to ensure compliance. Next time, we’ll cover VAT registration options and the implications on your pricing strategy. In the mean time, let us know if you have any questions at firstname.lastname@example.org.