Under the EU One-Stop Shop (OSS) rules, VAT must be charged on SaaS services provided to EU customers who are not registered for VAT. This ensures compliance with EU tax regulations.
If a valid VAT registration is not on file or cannot be verified via the EU VIES (VAT Information Exchange System) system, VAT is applied based on the customer’s country of residence. EU VIES is an online tool used to validate VAT registration numbers of businesses registered in the European Union.
Reasons for charging VAT
No valid VAT registration on file - If your company has not provided a valid VAT/CIF number that can be verified via the EU VIES system, VAT will be applied to your invoices.
Inactive VAT registration - If your VAT number is not active in the EU VIES system, the supplier is required to charge local VAT.
Special cases - For businesses in regions like the Canary Islands, which are outside the EU VAT territory, VAT may still be charged if no verifiable VAT registration is provided. A national tax ID (NIF) alone is insufficient to prove VAT exemption.
Ensuring VAT exemption
To avoid VAT charges on future invoices, do any of the following:
Provide a valid VAT registration - Submit a VAT registration certificate that can be validated via the EU VIES system. This ensures your tax status is recognized and VAT is not applied.
For businesses in the Canary Islands, provide official tax documentation supporting VAT non-applicability under export/extraterritorial rules.
Validate your VAT status - Ensure your VAT number is active and correctly registered in the EU VIES system. If your VAT number is inactive, work with your local tax authority to resolve the issue.
Update your account tax settings - Contact Payhawk Support via chat or at support@payhawk.com to update your account with the correct VAT information. This will prevent VAT from being applied to future invoices.
Correcting misapplied VAT charges
If VAT was charged incorrectly on an invoice, you can request a correction in the following way:
Provide proof of VAT registration - Submit official documentation, such as a VAT registration certificate or equivalent proof, to validate your VAT status.
Request a credit note - Contact Payhawk’s billing team to issue a credit note (invoice reversal) and a corrected invoice without VAT.
Request a refund - Once your VAT status is validated, request a refund for any VAT that was misapplied.
Special considerations for the Canary Islands
The Canary Islands are outside the EU VAT territory, and businesses based there are typically VAT-exempt. However, to ensure VAT exemption:
Provide a valid VAT registration that can be verified via the EU VIES system. A standard NIF is not sufficient.
If you are not VAT-registered, submit official tax documentation that supports VAT non-applicability under export/extraterritorial rules.
VAT number verification for EU companies in Payhawk
As part of the company registration process in Payhawk, EU companies must provide a valid VAT number. This is used for invoicing, proper tax reporting, and enabling VAT reclaim or reverse charge mechanisms where applicable.
A valid VAT number is one that can be successfully verified through the European Commission's VIES system. Your company's VAT number must be successfully verified in the European Commission's VIES system to appear on Payhawk invoices.
In some EU countries, such as Spain, the VAT number may share the same format as the local tax identification number (TIN). However, for Payhawk, it is only valid if it is registered and verified in VIES.