My customer is charged taxes on his invoice even after the EU VAT number has been updated? Why is this happening?

Problem Statement

This article helps you understand my customer is charged taxes on his invoice even after the eu vat number has been updated? why is this happening.

Solution

This article covers

Does EU VAT get applied for a B2B business?

Summary

Chargebee supports reverse charge mechanism when selling between business within the EU, taxes do not apply for B2B transaction with a valid VAT number.

However, if the seller (you) or the buyer has an invalid tax number, taxes are subject to apply to the invoice. This is because the validation status moves to 'Failure' and the reverse charge fails to apply.

Chargebee uses VIES to validate the valid VAT number and this is done when a customer is added or the VAT number is updated or during the renewal of a subscription. If any of these validations fail the VAT number status will be set to "Failure" and the invoice will be generated including taxes.

How to update the incorrect invoice of my customer?

After your customer validates his VAT with VIES, you can re-issue the invoice to be sent to the customer by voiding the old one.

How to make sure I avoid this in the future?

Ensure you update your customer's valid VAT number by using the 'Update Billing Info' available at the customer level or select the 'Update Invoice Address' available at the invoice level.

Attached below are the screenshots for your reference,

Image 1: Update Billing Info

_Image 2: Update invoice address_

Note: Introducing Jump to section, with this enhancement users can easily navigate between sections on Leap UI detail pages such as the Customer Details page, and Subscription Details page. Refer to this link for more information.