API Purpose

In the European Union and UK, the tax authorities mandate all businesses and enterprises engaging in commercial transactions to validate the VAT registration numbers of their vendors and customers. This is to ensure that correct tax treatment is applied to transactions based on the existence of the vendor or customer as a valid taxable person. Failure to do so could have serious consequences for any business and may even lead to financial difficulties.

To facilitate this, EU commission (HMRC in UK and Federal Central Tax Office in Germany) provide publicly available web services which can be called by any business application and provided the VAT registration numbers to be validated. These publicly available services validate the registration numbers and provide a response to the calling systems which can be used by the companies as evidence of having validated their trading partners when asked by tax authorities.

ONESOURCE Determination, when calculating tax, does not check whether the vendor or customer with whom the transaction is being done is a valid legal entity. While it needs a registration number for proper tax calculation, it does not validate if the provided registration number really belongs to the vendor or customer. Therefore, the validation helps businesses in applying accurate taxes to transactions even after their vendors or customers cease to exist as valid taxable entities.