Originated from the now-famous tweet by President Donald Trump, the word ‘covfefe’ has come to be synonymous with mistake, error, blunder, gaffe or even the ubiquitous boo-boo. In the spirit of giving meaning to the meaningless, we present the Top 10 Covfefe of the VAT process.
1. VAT and Sales Tax are one and the same
While VAT and Sales Tax certainly share some similarities and generate revenue for governments, the one major difference is that sales tax is only charged at the final point of sale, while VAT is charged throughout the process – from the raw materials, to the manufacturer, to the distributor, to the retail stores, and then of course, to the customer.
2. VAT will cost your business money
What you are essentially doing is acting as a tax collector, an agent of the government. You collect the VAT from customers, pay the “Tax Man” and then in many cases, you can recover this VAT on your expenditures.
3. You don’t need to charge VAT if you sell products online
Sellers of online products should be aware that they do indeed need to collect VAT from customers, according to the VAT rates and laws set by the country where the customer lives.
4. There are uniform regulations for submitting your VAT documentation
The rules differ for each and every country with regard to everything from how invoices must be submitted, which exchange rate to use, and in what format your forms must be presented. Some governments require copies of documents while others not only require the originals but also insist that they are notarized as well. You need to research each country’s rules and regulations to avoid incorrect submissions.
5. Only the bigger countries charge VAT
Over 160 countries around the world charge VAT, including large countries such as China and India, most of Europe, as well as smaller governments such as the Bahamas, Qatar and Puerto Rico.
6. There is one rate for VAT across the EU
If you thought that being tax compliant in your home country was complicated enough, consider the fact that there are actually 28 member states of the EU and over 75 different VAT rates within those 28 states. You need to learn the rules and learn them well.
7. Since I have a small business and there is a revenue threshold for VAT, I don’t have to pay
Unfortunately, this is no longer the case. Businesses of sizes and revenue levels are now required to comply with VAT laws, especially throughout the EU. Meaning, even if you sell one or two small items, you need to consider the VAT implications.
8. I can ignore VAT and nothing will happen
Maybe nothing will happen……….but maybe not! By not registering your business and following the rules and regulations of VAT in each respective country, you are taking a significant risk. Should you be audited by the tax authorities, you will be held accountable for the missed VAT plus penalties. As more and more countries begin cooperating with each other on tax-related audits, you could find yourself answerable to a court of law.
9. VAT increases the risk of strokes, diabetes and heart attacks
While the use of certain drugs can cause excessive accumulation of VAT, or visceral adipose tissue, which can then lead to serious health issues, paying your (VAT) value-added tax properly will help you avoid any heart or diabetes issues.
10. The word VAT cannot be used when playing Scrabble
Actually, it can. According to the official site at merriam-webster.com, a vat is described as a large vessel (such as a cistern, tub, or barrel) especially for holding liquors in an immature state or preparations for dyeing or tanning.
So whether you are playing VAT or paying VAT, it’s imperative to know the rules to avoid any covfefe, and to ensure that your business is well positioned for success.
If you’d like to learn more about the VAT process, VATBox can help. VATBox, an automated, enterprise-wide, cloud-based VAT recovery solution, has successfully streamlined the global VAT recovery process, providing businesses with unrivaled visibility, compliance, and data integrity, and ultimately boosting its bottom line. VATBox can help ensure that your company is always in compliance with the latest VAT laws and always has access to the most current VAT-related information. Request a free demo here.