Intra-EU transactions, involving the exchange of goods or services between member states, are exempt from Value Added Tax (VAT) under specific conditions. However, this exemption has been widely exploited through fraudulent schemes, particularly carousel fraud, which accounts for a substantial share of VAT revenue losses across the European Union.
To address this issue, the EU amended VAT Directive 2006/112/EC through Council Directive (EU) 2018/1910, effective January 2020, mandating the validation of VAT registration numbers for all intra-EU transactions via the VAT Information Exchange System (VIES). VIES is an online platform that connects national VAT databases, enabling businesses to verify VAT numbers individually, in batches, or through API integration, thereby reducing the risk of errors and fraud.
Compliance with this directive is now a legal requirement for businesses engaged in intra-EU trade. To support this, SAP and Vertex provide automated solutions that integrate with VIES, allowing organizations to validate VAT registration numbers efficiently and maintain audit-ready compliance. This article explains these SAP and Vertex solutions in summary and compares their effectiveness in mitigating VAT fraud while streamlining tax compliance processes.
For detailed step-by-step instructions with screenshots on implementing SAP or Vertex solutions, please read my paper available for free download at the following link: Transforming VAT Compliance: Leveraging VIES and SAP Solutions to Combat EU Fraud.
What is VAT Information Exchange System (VIES)?
The VAT Information Exchange System (VIES) is a publicly accessible search engine that connects to the national VAT databases of EU member states. Owned by the European Commission, VIES allows users to validate VAT registration numbers issued by any member state. The system can be accessed via the following website: VIES VAT Validation.
VIES supports seamless integration with ERP systems through API calls via SOAP or REST web services, allowing multinational companies to automate VAT validation efficiently.
SAP Solution to VIES Interface
SAP customers can validate VAT registration numbers using VIES-on-the-Web services via two primary solutions:
Online Validation Framework (OVF)Online Validation Service (OVS)
1. VAT Validation with SAP OVF (Online Validation Framework)
The OVF implementation follows a three-step process:
Implement SAP Notes to Activate Functionality: Integrate OVF into SAP by implementing SAP note 2866929, which provides detailed instructions for connecting to VIES.Customize the Service: Use transaction code OVF_CHECKS to configure the service:Define the Check ID and request format.Maintain Result Codes.Maintain Validity of Checks.Maintain Partner Function for VIES.Establish a connection to the VIES service: An RFC (Remote Function Call) connection must be created and maintained in the activation customization.Execute transaction SM59 to configure the RFC connection to VIES.Execute T-Code OVF_CHECKS to activate and connect to external services by maintaining the RFC connection created above.Enable selective online validation for different integration points.
2. VAT Validation Using SAP OVS (Online Validation Service)
OVS is the newer SAP solution, designed to integrate seamlessly with Business Partner (BP) data, Sales, and Master Data Governance (MDG). Unlike OVF, OVS extends functionality to the NetWeaver layer (SAP_ABA) for broader integration.
The implementation of OVS follows a three-step process:
Implement SAP Notes to Enable the Functionality: Use SAP note 3085468 to enable OVS functionality. SAP note 3291504 provides the XML files (OVS_VIES_v1.XML) that can be imported using the Note Analyzer app via SNOTE to activate the service.Customization to Enable the Service: Use transaction code OVS_CHECKS to configure the services:Define the Check ID.Maintain Result Codes.Enable selective online validation.Maintain VIES-specific parameters, including the requestor’s VAT number.Establish a connection to the VIES service: Configure an RFC connection using SM59 and activate the service in SAP via OVS_CHECKACTIV, associating the RFC connection with the Check ID.
VAT Validation via Vertex Webservice
Vertex Inc. provides solutions to automate indirect tax compliance and VAT validation. Its VIES Webservice, part of the Vertex Accelerator license, can validate multiple VAT numbers simultaneously.
Implementation Steps:
Installing Vertex Accelerator Tool: Install external Vertex transports and activate the Accelerator tool using the provided Vertex activation guide.Web Service Customization: Access SOAMANAGER in SAP and select Web Service Configuration.Enter Object Name: VERTEX and select /VERTEX/CO_CHECK_VAT_PORT_TYPE.Create a WSDL-based configuration with logical port VERTEX_VIES_PORT.Enter ‘Vertex VAT Validation Proxy Port’ for Description.Tick Logical Port is Default and click Next.Select Via File and upload the VIES.wsdl file provided by Vertex, then click Next.Verify proxy and port settings and click Next.Verify Message ID Protocol is set to Suppress ID Transfer, then click Finish.
Comparison of Different Methods
Parameters Online Validation Framework (OVF) Online Validation Service (OVS) Vertex VIES Webservice
VAT Registration Validation for Business Partners (BP)Online validation for BPsOnline validation for BPsOffline validation for Customer, Vendor, and Company CodeVAT Validation during Sales Order Creation/ChangeSupportedSupportedNot availableVAT Validation during Billing Document Creation/ChangeSupportedSupportedNot availableExcluding Specific Business PartnersCertain BPs can be excluded using OVF_DISABLEMENTNot availableNot availableSAP Product LayerAvailable in Financial Accounting and Logistics; does not support MDG or other functionsAvailable on SAP NetWeaver layer (SAP_ABA), enabling integration with MDG and other SAP modulesStandard ABAP program; standalone executionIMG Path for CustomizationFinancial Accounting → Accounts Receivable & Accounts Payable → Business Transactions → Online ValidationCross-Application Components → SAP Business Partner → Business Partner → Basic Settings → Online ValidationSOAMANAGER customizationRepeat ValidationCan customize number of days per company code to reuse validation resultsGlobal validation only; cannot set per company codeNot availableActivation of VIES InterfaceSingle transaction (OVF_CHECKS) handles activation and customizationActivation separated from customization; use OVS_CHECKACTIVNo separate activation; ready after configurationSender VAT Registration NumberVIES provides consultation number; VAT number extracted from company codeRequestor’s VAT number can be maintained in customizationNot availableAPI Connection TypeSOAP RFC-based connectionSOAP RFC-based connectionWebservice API; supports batch validation for multiple VAT numbersReport on Past ValidationStored in SAP; accessible via OVF_HISTORYStored in SAP; accessible via OVS_HISTORYNot availableLicensing RequirementStandard SAP deliverable; no additional license requiredStandard SAP deliverable; no additional license requiredRequires Vertex Accelerator license
Conclusion
Automated VAT registration number validation is vital for ensuring compliance and preventing fraud in intra-EU transactions. SAP’s OVF and OVS solutions enable seamless, integrated VAT checks, with OVS offering broader flexibility across SAP systems. The Vertex VIES Webservice provides a fast, external alternative suited for high-volume validations. Selecting the right approach depends on system architecture and compliance needs, but integrating automated validation into business processes enhances accuracy, audit readiness, and control over VAT compliance.
For detailed step-by-step instructions with screenshots on implementing SAP or Vertex solutions, please read my paper available for free download at the following link: Transforming VAT Compliance: Leveraging VIES and SAP Solutions to Combat EU Fraud.
Intra-EU transactions, involving the exchange of goods or services between member states, are exempt from Value Added Tax (VAT) under specific conditions. However, this exemption has been widely exploited through fraudulent schemes, particularly carousel fraud, which accounts for a substantial share of VAT revenue losses across the European Union.To address this issue, the EU amended VAT Directive 2006/112/EC through Council Directive (EU) 2018/1910, effective January 2020, mandating the validation of VAT registration numbers for all intra-EU transactions via the VAT Information Exchange System (VIES). VIES is an online platform that connects national VAT databases, enabling businesses to verify VAT numbers individually, in batches, or through API integration, thereby reducing the risk of errors and fraud.Compliance with this directive is now a legal requirement for businesses engaged in intra-EU trade. To support this, SAP and Vertex provide automated solutions that integrate with VIES, allowing organizations to validate VAT registration numbers efficiently and maintain audit-ready compliance. This article explains these SAP and Vertex solutions in summary and compares their effectiveness in mitigating VAT fraud while streamlining tax compliance processes.For detailed step-by-step instructions with screenshots on implementing SAP or Vertex solutions, please read my paper available for free download at the following link: Transforming VAT Compliance: Leveraging VIES and SAP Solutions to Combat EU Fraud.What is VAT Information Exchange System (VIES)?The VAT Information Exchange System (VIES) is a publicly accessible search engine that connects to the national VAT databases of EU member states. Owned by the European Commission, VIES allows users to validate VAT registration numbers issued by any member state. The system can be accessed via the following website: VIES VAT Validation.VIES supports seamless integration with ERP systems through API calls via SOAP or REST web services, allowing multinational companies to automate VAT validation efficiently.SAP Solution to VIES InterfaceSAP customers can validate VAT registration numbers using VIES-on-the-Web services via two primary solutions:Online Validation Framework (OVF)Online Validation Service (OVS)1. VAT Validation with SAP OVF (Online Validation Framework)The OVF implementation follows a three-step process:Implement SAP Notes to Activate Functionality: Integrate OVF into SAP by implementing SAP note 2866929, which provides detailed instructions for connecting to VIES.Customize the Service: Use transaction code OVF_CHECKS to configure the service:Define the Check ID and request format.Maintain Result Codes.Maintain Validity of Checks.Maintain Partner Function for VIES.Establish a connection to the VIES service: An RFC (Remote Function Call) connection must be created and maintained in the activation customization.Execute transaction SM59 to configure the RFC connection to VIES.Execute T-Code OVF_CHECKS to activate and connect to external services by maintaining the RFC connection created above.Enable selective online validation for different integration points.2. VAT Validation Using SAP OVS (Online Validation Service)OVS is the newer SAP solution, designed to integrate seamlessly with Business Partner (BP) data, Sales, and Master Data Governance (MDG). Unlike OVF, OVS extends functionality to the NetWeaver layer (SAP_ABA) for broader integration.The implementation of OVS follows a three-step process:Implement SAP Notes to Enable the Functionality: Use SAP note 3085468 to enable OVS functionality. SAP note 3291504 provides the XML files (OVS_VIES_v1.XML) that can be imported using the Note Analyzer app via SNOTE to activate the service.Customization to Enable the Service: Use transaction code OVS_CHECKS to configure the services:Define the Check ID.Maintain Result Codes.Enable selective online validation.Maintain VIES-specific parameters, including the requestor’s VAT number.Establish a connection to the VIES service: Configure an RFC connection using SM59 and activate the service in SAP via OVS_CHECKACTIV, associating the RFC connection with the Check ID.VAT Validation via Vertex WebserviceVertex Inc. provides solutions to automate indirect tax compliance and VAT validation. Its VIES Webservice, part of the Vertex Accelerator license, can validate multiple VAT numbers simultaneously.Implementation Steps:Installing Vertex Accelerator Tool: Install external Vertex transports and activate the Accelerator tool using the provided Vertex activation guide.Web Service Customization: Access SOAMANAGER in SAP and select Web Service Configuration.Enter Object Name: VERTEX and select /VERTEX/CO_CHECK_VAT_PORT_TYPE.Create a WSDL-based configuration with logical port VERTEX_VIES_PORT.Enter ‘Vertex VAT Validation Proxy Port’ for Description.Tick Logical Port is Default and click Next.Select Via File and upload the VIES.wsdl file provided by Vertex, then click Next.Verify proxy and port settings and click Next.Verify Message ID Protocol is set to Suppress ID Transfer, then click Finish.Comparison of Different MethodsParameters Online Validation Framework (OVF) Online Validation Service (OVS) Vertex VIES WebserviceVAT Registration Validation for Business Partners (BP)Online validation for BPsOnline validation for BPsOffline validation for Customer, Vendor, and Company CodeVAT Validation during Sales Order Creation/ChangeSupportedSupportedNot availableVAT Validation during Billing Document Creation/ChangeSupportedSupportedNot availableExcluding Specific Business PartnersCertain BPs can be excluded using OVF_DISABLEMENTNot availableNot availableSAP Product LayerAvailable in Financial Accounting and Logistics; does not support MDG or other functionsAvailable on SAP NetWeaver layer (SAP_ABA), enabling integration with MDG and other SAP modulesStandard ABAP program; standalone executionIMG Path for CustomizationFinancial Accounting → Accounts Receivable & Accounts Payable → Business Transactions → Online ValidationCross-Application Components → SAP Business Partner → Business Partner → Basic Settings → Online ValidationSOAMANAGER customizationRepeat ValidationCan customize number of days per company code to reuse validation resultsGlobal validation only; cannot set per company codeNot availableActivation of VIES InterfaceSingle transaction (OVF_CHECKS) handles activation and customizationActivation separated from customization; use OVS_CHECKACTIVNo separate activation; ready after configurationSender VAT Registration NumberVIES provides consultation number; VAT number extracted from company codeRequestor’s VAT number can be maintained in customizationNot availableAPI Connection TypeSOAP RFC-based connectionSOAP RFC-based connectionWebservice API; supports batch validation for multiple VAT numbersReport on Past ValidationStored in SAP; accessible via OVF_HISTORYStored in SAP; accessible via OVS_HISTORYNot availableLicensing RequirementStandard SAP deliverable; no additional license requiredStandard SAP deliverable; no additional license requiredRequires Vertex Accelerator licenseConclusionAutomated VAT registration number validation is vital for ensuring compliance and preventing fraud in intra-EU transactions. SAP’s OVF and OVS solutions enable seamless, integrated VAT checks, with OVS offering broader flexibility across SAP systems. The Vertex VIES Webservice provides a fast, external alternative suited for high-volume validations. Selecting the right approach depends on system architecture and compliance needs, but integrating automated validation into business processes enhances accuracy, audit readiness, and control over VAT compliance.For detailed step-by-step instructions with screenshots on implementing SAP or Vertex solutions, please read my paper available for free download at the following link: Transforming VAT Compliance: Leveraging VIES and SAP Solutions to Combat EU Fraud. Read More Technology Blog Posts by Members articles
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