Transforming VAT Compliance: Leveraging VIES and SAP Solutions to Combat EU Fraud

Intra-EU transactions, which involve the exchange of goods or services between EU member states, are exempt from Value Added Tax (VAT) when certain conditions are met. However, this exemption is often exploited in fraudulent schemes, especially carousel fraud, which is responsible for a significant portion of VAT revenue losses within the European Union. As part of the European Union’s efforts to combat VAT fraud, it has mandated the verification of VAT registration numbers for intra-EU transactions, effective from January 2020. The VAT Information Exchange System (VIES), a search engine, was introduced to facilitate this process, providing an online platform to validate VAT numbers against national databases. This paper explores the different methods available for businesses, particularly those using SAP, to validate VAT numbers through VIES. The focus is on comparing two SAP solutions—Online Validation Framework (OVF) and Online Validation Service (OVS)—along with the Vertex solution. The comparison includes aspects such as implementation, customization, and connectivity to the VIES database. The paper concludes with a discussion of the effectiveness of these solutions in mitigating VAT fraud and the ongoing efforts by the EU to modernize VAT compliance in the digital age.