You may find it challenging to set the appropriate VAT codes for goods and services, especially when the business is global. Thankfully, IT technology companies have built VAT API tools for automated validation of VAT and VAT rates.
Businesses need to pay the correct value-added tax (VAT) to the tax authority where they operate and collect the tax amount from the consumers by adjusting the product/service pricing. VATs tend to change from time to time, and accordingly, merchants change their product rates. Furthermore, the VAT rates differ from state to state in the domestic market.
If your business goes global, there are hundreds of different VAT rules and rates. It is impossible to maintain a notebook of VAT rates or policies with so many rates and rules. Here comes the VAT API to your rescue!
If you own a business or are a developer looking for inspiration, read on to find out some of the best VAT validation and calculation APIs that you can use.
What Is Value Added Tax (VAT)?
VAT is an indirect tax charged at every production and supply chain touchpoint where a monetary transaction happens. It is one of the most important general taxation systems in the European Union (EU). Apart from the EU, other countries around the globe also use the VAT system.
According to an Organisation for Economic Co-operation and Development (OECD) report, 170 countries and territories globally have adopted or implemented the VAT system as of November 1, 2020.
VAT is essentially a consumption tax that consumers pay at every level of goods sales or service provisioning. It does not burden the goods manufacturing or service provisioning business since the business can charge it to their customers.
VAT calculation is a complicated task since there are several tax slabs. Furthermore, since it is a fractional tax, you need to correctly deduct already paid VAT related to the product and then pay the rest by charging the total VAT from your customers.
To ease the business operations, software developers have studied the VAT guidelines of the entire world and developed application programming interfaces or APIs for appropriate VAT rate calculation or VAT ID validation. VAT APIs are highly recommended when you operate eCommerce platforms.
These tools are essentially easy to integrate code bases that you can connect with your enterprise resource planning (ERP), accounting tools, or ordering system to automate the VAT process.
Importance of VAT Validation
#1. VAT is one of the major sources of revenue for governments around the world. If there is no centralized and online system of VAT ID validation, then VAT policy violations will occur. Businesses and the end-user may devise alternatives to escape VATs, and the government treasury will suffer.
#2. VAT ID validation is the most trusted source of confirming the tax status of the party with whom you are doing a transaction.
#3. By validating the VAT ID, you come to know the VAT rate paid previously in the supply chain so that you can adjust your own rate and avoid paying extra or less to the VAT authority.
#4. All invoices in the EU region (except a few of the EU countries) must carry a VAT number so that the governments can seamlessly track financial activities.
Let’s now look at the best VAT APIs.
If you are the software developer for a business house and entrusted to pick the right API for tax rate identification or VAT validation, you must try Abstract’s VAT Validation API. You can integrate the tool effortlessly with existing business tools for automated VAT operations. Some of the notable features of this API are:
- The API developer updates VAT data whenever there is a change in policy or rate.
- It helps your systems fetch reduced or standard rates for commodities and services.
- Abstract’s VAT validation API offers complete VAT coverage for all the EU countries.
- The API comes with banking systems-grade security like 256-bit SSL encryption.
Abstract’s VAT calculation API comes with easy-to-use libraries, set up tutorials, and elaborated documentation so that developers do not need to jump through hoops. The developer built the API around representational state transfer, also known as the REST architecture.
Want to scale up your business and reach a massive customer base in the entire EU region? Is cross-border VAT implementation in the EU states stopping you? Well, not anymore if you start using VAT API’s services like VAT number validation, VAT rates calculation, and VAT invoicing.
Some other salient features are:
- Best in class security, metrics, and performance via Amazon API Gateway service.
- Since the developer hosts the API on Amazon Web Services (AWS), it can cater to thousands of requests per second.
- Get the correct VAT rate for your customer by using IP address, geolocation, or ISO country codes.
- Instantly fetch customers’ status, whether they are businesses or consumers, by looking up VAT IDs in the EU’s VIES or HMRC’s VAT database.
The API comes with two use cases: Telecommunication, Broadcasting or Electronic (TBE), and GOODS for physical commodities. Thus, the API tool is perfect for any industry in any country that follows the VAT system.
Vatlayer is yet another popular name for value-added tax API tools. If you are a developer or business owner in charge of automating the VAT process of your organization, you can try out this API for free. It offers vital services like EU VAT rates calculation, instant VAT ID validation of EU states, and VAT compliant price calculation.
When you think you need to increase the scale of operations and send more API requests than 100, you can get paid subscription according to the load. The premium subscriptions also offer 256-bit HTTPS encryption so that your business data does not fall into the hands of cybercriminals.
Vatstack VAT API has long been a reliable and trusted tool for companies that handle cross-border B2B sales. It comes with automatic B2B VAT solutions like VAT Rates, VAT Validations, and VAT Reports. Using the tool, you can ensure whether your client is a business entity or consumer and set the correct tax status.
Vatstack is essentially a collection of APIs for value-added tax processing through business software integrations. Since it is a REST API, the implementation is effortless.
Further, its predictable resource-oriented architecture enables the API to receive form-encoded requests and deliver JSON encoded responses. Moreover, the API request authentication requires either a secret key or a public key for data security.
If you want to focus on business marketing and revenue growth rather than complex VAT processing, you can try out Lovat APIs for automatic VAT compliance. It comes with separate APIs for dedicated performance. For example, you can use the FEED API to upload transaction details, and the VAT RATE API delivers accurate VAT rates for services or products you sell.
Lovat VAT API suite also follows a stringent set of security features to protect business data. For example, you need to always authenticate all the requests using a secret key. Furthermore, you must send all the call requests for API via HTTPS data transmission protocol. If you send HTTP API requests, the Lovat API will decline those calls.
VAT Sense API
If you intend to sell your products or services to the EU, the UK, and the global market, VAT Sense API helps you stay VAT compliant and price the offerings accurately. Apart from complying with VAT guidelines, VATSense’s API also enables your business to validate the VAT numbers of the counterparties with whom you do monetary transactions.
Furthermore, the REST API also lets you fetch the correct VAT rate for the EU, UK, and global regions. That’s not all! You can also get GST rates and price your product correctly for international customers. Finally, there are additional features like automatic currency conversion and VAT compliant invoices.
Valdit VAT API
Valdit VAT API has been built on the REST development architecture to facilitate easier integration of API requests. The Valdit API connects itself with the EU VAT Information Exchange System (VIES). Therefore, it can help you fetch the correct VAT status for all the clients within the 27 member states of the EU.
It also offers a simplified data-entry system for online checkout so that customers do not overwhelm when you ask for unnecessary VAT details. At the backend, the API ensures that the client has an active VAT number. Moreover, you can centralize the VAT ID verification tasks for accounting and audit purposes.
If you are looking for a free and open-source alternative for VAT API, you must try VATcomply API. Apart from validating VAT numbers online, the tool also lets you fetch several VAT details of your client through the geolocation of IP addresses. Additionally, it lets you get exchange rates for foreign currencies when doing business with international clients.
The developer built the tool on the asynchronous server gateway interface (ASGI) platform Starlette. Since Starlette is one of the best toolkits for building asynchronous web apps in Python, VATcomply API supports high-throughput API requests up to 1,000 API calls per second.
VAT is a complex indirect taxation system. Hence, you need to pay extra attention when pricing your commodities or services for the end-user. It will enable you to avoid non-compliance with VAT guidelines. Moreover, proper VAT implementation in your business allows you to enter the foreign market and expand your customer base.
You may use any of the above VAT APIs to validate a customer or calculate the correct price when selling products or services in the domestic or foreign markets.
You may also be interested in these shipping APIs if you need to manage product delivery at scale.