How to Check if a Customer is VAT-Exempt?

Back when I first started selling digital products internationally, I had no idea about VAT exemptions. I just assumed everyone paid tax, no matter where they were from. Wrong. One day I got an email from a customer in Ireland asking for a “VAT invoice” with their exemption details.

Cue the panic.

When I First Realized VAT Isn’t One-Size-Fits-All

At the time, I was using a basic checkout tool that didn’t even support tax validation. I had to Google what a VAT number was, how to verify it, and whether I needed to apply the tax in the first place.

Turns out, some businesses and individuals are exempt from paying VAT — depending on where they’re located, what they’re buying, and whether they have a valid VAT ID.

If you’re navigating all of this as a digital seller, understanding the EU VAT rules for digital products is crucial. They form the foundation for when VAT is applied and when it isn’t — especially for cross-border B2B sales.

Here’s What I’ve Learned (the Hard Way)

If you want to check whether a customer is VAT-exempt, here’s what you actually need to do:

Step 1: Know Where Your Customer Is Located
VAT rules vary by country. Inside the EU, B2B sales across borders can be VAT-exempt if the buyer has a valid VAT number. For non-EU countries? Whole different ballgame. Sometimes, there’s no VAT required at all — a scenario often covered in how to handle VAT for B2B sales.

Step 2: Ask for a Valid VAT Number
This is the key. If you’re selling to another business within the EU, ask them for their VAT registration number. Most serious businesses know this already — but you’d be surprised how many freelancers don’t.

Step 3: Verify the VAT Number Online
Don’t just take their word for it. Go to VIES (VAT Information Exchange System) — it’s free and easy. Pop in their number and country code, and it’ll tell you if it’s valid. If it’s not registered? You have to charge VAT.

Step 4: Keep Proof for Your Records
Always document the exemption. Take a screenshot of the VIES result or store the verification in your invoice software. If you’re audited later, you’ll need it. Learn more about issuing proper VAT-compliant invoices to customers to stay on the safe side.

Things That Confused Me (But Now Make Sense)

I used to think VAT was just about taxes, but it’s also about how your business is classified. For example:

• If a customer in the EU is a private individual? You must charge VAT, no matter what.

• If they’re a business with a valid VAT number? You can zero-rate the invoice (i.e., no VAT applied).

• Selling digital services to non-EU countries? Often no VAT is charged — but again, depends on the country.

It’s a mess at first. But once you’ve done it a few times, it clicks.

You’ll especially want to get familiar with VAT thresholds and exemptions if you’re approaching the registration limits across countries — these impact who you charge and when.

Tips to Make Life Easier

I got tired of doing all this manually, so here’s what I do now:

• Use tools like Quaderno, TaxJar, or SimplyVAT — they automate VAT checks and apply the right rules per country.

• Add a field on your checkout page for customers to enter their VAT number.

• Set up logic that skips VAT automatically if their number is valid and matches their billing country.

If you’re using Payhip, you’re in luck — it can help you with automated VAT collection for digital products, so you don’t have to track everything yourself.

Oh — and if someone says “I’m exempt” but can’t give you a VAT number? Don’t skip the tax. You gotta cover yourself legally.

Final Thoughts: Don’t Be Afraid to Ask

When I first started, I was too nervous to ask customers for more info. I didn’t want to come off as unprofessional. But now? I’m quick to ask for VAT details, and most customers appreciate the transparency.

Checking VAT exemption isn’t about being difficult, it’s about staying compliant and protecting your biz. A little diligence upfront saves you headaches (and fines) later.