The EU reverse charge mechanism that requires business to identify as businesses is not implemented or supported due to the highly automated nature of the service.
EU business entities purchasing the Service will be charged their local VAT like consumers and can recover the collected taxes from their local tax authorities based on the VAT invoices issued by the Service Provider.
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The idea to reverse tax liability for B2B is well-meant.
The verification of businesses in the European Union (EU) is a highly fragile and immature process that poses significant challenges for companies like AIPRM, Corp. Despite the existence of value-added tax (VAT) identification (ID) API servers, these systems have not proven to be stable or reliable over the years.
One of the most common problems is customers using fake VAT IDs and addresses from other companies to obtain "a better deal." This deceptive practice not only leads to costly changes but also triggers cross-border tax investigations for even small invoice amounts as low as 20 EUR, causing significant administrative nightmares for sellers, sometimes years later.
Moreover, many customers often neglect to enter their VAT IDs for low-priced purchases, leading to further complications for sellers. This can result in accounting departments requesting changes in invoices for past months, leading to lengthy and costly processes to fix the faulty accounted revenues.
For a highly automated, low-price SaaS business like AIPRM, Corp, such manual interventions are not commercially viable.
While the reverse charge tax scheme is a well-meant option, it is only practical for invoicing on a real B2B level with invoices of tens of thousands of euros, where a couple of hundred manual processing costs are "accepted" but not acceptable. As a result, AIPRM, Corp has made the strategic decision not to offer the "EU reverse charge" tax scheme option for its sales.
The EU's current verification of businesses and VAT ID system poses significant challenges for companies like AIPRM, Corp. With customers using fake IDs and neglecting to enter their IDs for low-priced purchases, the reverse charge tax scheme is not practical for low-price product sales. Until the EU improves its verification and taxation system, companies will continue to face significant administrative and financial burdens, and AIPRM, Corp will not offer the "reverse charge option" before.
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