Put simply, VAT compliance requires creating detailed invoices, keeping good records, and making sure your VAT recovery documents are submitted correctly and completely. The high-level process is quite simple and straightforward. However, remaining compliant is more complicated in practice.
What Makes VAT Compliance Complicated?
Most countries in the world have a Value-Added Tax (VAT), and each country has their own rules for VAT compliance and criteria for VAT invoices. If you are doing business in any other countries besides your own, there is a good chance you will need to comply with different VAT rules and will need to submit foreign VAT reclaim.
This process becomes more complicated the more countries you do business in. Not only does each country have its own rules for VAT compliance, they also have their own administrative processes, timelines, and documentation requirements. Some countries have as few as four boxes of information to fill in, others have over 50. The additional information required slows down the process for both the businesses filing for a business VAT refund, and the people processing the returns, which means the process can become extremely time-consuming for everyone involved.
To complicate matters further, some countries administer VAT with the same tax authority as they administer corporate income taxes and some countries administer the two taxes separately. This means, depending on your business model and where you do business, you may have to submit tax information to two separate tax authorities.
What Can You Do to Ensure VAT Compliance?
You have a few different options for simplifying VAT compliance and foreign VAT reclaim, each with its own pros, cons, and risks.
1. Limit the number of countries with which you do business.
Pros: Your Finance and Accounting staff have fewer VAT rules to keep track of, have fewer modifications to their processes, and have a simpler follow-up calendar for tracking foreign VAT reclaim status.
Cons: You may not be able to take advantage of some excellent business opportunities, valuable conferences and conventions for staff development, and relationship-building with potential business partners.
Risks: Placing limitations on where you do business can drastically reduce your profitability and success as a business.
2. Have staff manually process each and every VAT-related invoice.
Pros: You will be able to do business with any of the countries that have VAT, your staff can go to conferences and conventions all over the world, and you will not have to worry about which countries you can and cannot do business with based on complications of VAT.
Cons: You may have to hire more staff to handle the complicated VAT process, especially when you start doing business with more and more countries. Additionally, humans are error-prone and can make mistakes.
Risks: Potential compliance risks when errors sneak past your staff. A hit to the bottom line if you are not getting all your VAT refunds due to compliance issues.
3. Automated VAT filing with VATBox
Pros: VATBox is always up-to-date with the rules and regulations for each and every country’s VAT process. VATBox can track timelines automatically, will process each VAT claim no matter how small the dollar amount, and takes the burden off your staff so they can focus on more important work than manually checking invoices.
Cons: You will not be able to use complicated VAT compliance as an excuse to limit your business.
Risks: You risk having happier Finance and Accounting staff, who can focus on their other work.
Based on these three options, which solution do we recommend? Automations are the way to go. Get your VAT returns done automatically. Get them done with VATBox.
If you are looking for a technology solution for your VAT process, keep in mind that VATBox is the only technology company focused on simplifying the complex VAT reclaim process through expertly designed automation. In addition to maximizing returns, providing better visibility into your VAT spending, and helping you maintain compliance, VATBox offers a centralized platform for all your VAT needs, with powerful reporting capabilities and actionable insights.