Evolution of VAT compliance

VAT responsibility within your business

Responsibility for correct VAT compliance reaches beyond Finance into all departments in an organization as VAT reporting digitalizes

Over 160 countries worldwide have a VAT system, more of less similar as we have in Europe. If VAT is applied correctly, VAT is cost neutral for most businesses. VAT legislation per country differs, even within the European Union, the cradle of VAT.

Although an EU VAT Directive is in place, local VAT legislation differs in many aspects. Hence, in-depth VAT knowledge per EU country is required. VAT is a transaction based tax. This means that for manufacturers, wholesalers, etc, several departments within their company are confronted with VAT. As such, as their employees make decisions, whether consciously or not, that will have an impact on the VAT position of the company. It starts with the purchase of goods, the logistic agreements and ends with the final sale to the customer. Traditionally, it is the finance department that must make the best of all these decisions made.

Trending is the change of how tax authorities monitor transactions by changing their VAT regulations by gathering transaction information in real time, like Continuous Transaction Controls (CTC) and e-invoicing obligations. This means that ERP systems need to be converted and adjusted regularly. An enrichment of the master data of customers, vendors and information about the flow of goods is required. Departments need to be aware what information for VAT purposes it absolutely necessary and what is nice to have. All this information should be funneled into a smart VAT decision tree to meet the different VAT compliance requirements per EU country. Most of these decision trees are custom build and is actually one of the biggest challenges to translate the requirements into an IT environment.

Another change that remains underexposed in our opinion is Intrastat. Recent changes across Europe have led to improved reconciliation capabilities by local authorities. The Intrastat information in itself contains so much VAT-relevant data that is often not used for preparing the VAT return.

Our experience is that companies do have access to the necessary data. However, they do not make optimal use of this which results in VAT and Intrastat gaps. With an average EU standard VAT rate of approximately 21%, you can image that tax authorities are steadfast in their commitment to collect revenue owed.

TaxPoint can help you to improve your master data for VAT and Intrastat purposes and be your preferred outsourcing partner of VAT and Intrastat compliance obligations across the EU.

Are you struggling or looking for VAT support? Feel free to reach out to us to talk to a VAT specialist directly.

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