Three Key Reasons to Appoint a VAT Compliance Managed Service Provider

Sovos
September 23, 2020

This blog was last updated on June 25, 2021

With a VAT gap across EU countries estimated at €140 billion in 2018, tax authorities are continuing to take steps to boost revenues, increase efficiency and reduce fraud.  As a result, VAT compliance obligations are becoming more demanding. Failure to comply can not only result in significant fines but also reputational damage.

Many multinational companies find successfully navigating VAT compliance a challenge. Even more so when trading cross-border where VAT registration and reporting requirements differ significantly between territories. As demands increase, more companies are realising the benefits from embracing a managed service approach. This is to all or part of their VAT obligations.

From conversations with our customers, we identified three reasons for appointing a managed service provider (MSP) for VAT compliance. They are varied and apart from cost, fall broadly into three categories.

People

Staffing, training and retaining a team of indirect tax specialists can be expensive and time consuming. Accessing external expertise allows you to benefit from wider and more detailed knowledge and experience in complying with local tax authority regulations. Understanding local rules requires fluency in both the local language and in understanding tax law plus its implications to interpret the rules accurately. This can be a huge benefit in helping to simplify the complexities of domestic obligations. It can apply to initial VAT registrations, ongoing filings, as well as correspondence with revenue authorities whenever reviews and/or audits occur.  Why struggle with the headache of resourcing and keeping up with the changing compliance landscape when there are specialist providers to ease this pain?

Technology

While the future of VAT reporting is increasingly tech-enabled, building and maintaining your own in-house software is onerous and for many companies is the key driver to getting external help with their VAT compliance obligations. By using a technology enabled MSP, you’ll have access to their VAT compliance software. It will help you stay ahead of changing VAT rates and requirements as they happen wherever you do business. Using a MSP that is technology enabled allows them to take care of any real-time/continuous reporting requirements. This includes  Spain’s SII. This should also be far more cost effective than doing this in-house. Automating at a regular cadence prevents being caught out by missed filings that need to happen all too frequently to be done cost effectively by a person.

The future

Keeping up with the ever changing requirements of VAT rates, new mandates and reporting requirements can be daunting. The VAT compliance landscape will continue to shift as more tax authorities move to enforce continuous transaction controls. The aim is to boost economic efficiency and close VAT gaps.  The right VAT compliance MSP will ensure your business is able to meet your current VAT compliance requirements. They should also have experience in markets you may want to enter in the future. They’ll be able to guide you through VAT registrations and filing requirements as well as interpreting local complexities where needed. A valued VAT compliance MSP will also ease the burden of audits.  They’ll help you whenever an audit occurs but ultimately with robust processes in place, they should also be able to prevent disputes occurring.

VAT legislation is complex and constantly changing. Businesses need the support of both managed services and technology to meet their VAT compliance obligations. In addition to continue trading with confidence.  Appointing an experienced global MSP blends human expertise and technology. This can provide the perfect balance to face the changing VAT landscape head on.

Take Action 

To learn more about the benefits a managed service provider can offer to ease your VAT compliance burden, watch our recent webinar on demand VAT Reporting: Managing Change.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Sovos

Sovos is a global provider of tax, compliance and trust solutions and services that enable businesses to navigate an increasingly regulated world with true confidence. Purpose-built for always-on compliance capabilities, our scalable IT-driven solutions meet the demands of an evolving and complex global regulatory landscape. Sovos’ cloud-based software platform provides an unparalleled level of integration with business applications and government compliance processes. More than 100,000 customers in 100+ countries – including half the Fortune 500 – trust Sovos for their compliance needs. Sovos annually processes more than three billion transactions across 19,000 global tax jurisdictions. Bolstered by a robust partner program more than 400 strong, Sovos brings to bear an unrivaled global network for companies across industries and geographies. Founded in 1979, Sovos has operations across the Americas and Europe, and is owned by Hg and TA Associates.
Share this post

2025 tax filing season
North America Tax Information Reporting
November 21, 2024
Top 5 FAQs to Prepare for the 2025 Tax Filing Season

This blog was last updated on November 21, 2024 While “spooky season” may be over for most of us, the scariest time of year for many businesses is right around the corner: tax filing season. As they brace themselves for the flood of forms, regulatory updates, and tight deadlines, the fear of missing a critical […]

dtc shipping law updates
North America ShipCompliant
November 13, 2024
DtC Shipping Laws: Key Updates for Alcohol Shippers

This blog was last updated on November 13, 2024 When engaging in direct-to-consumer (DtC) shipping of alcohol, compliance with different state laws is paramount and so keeping up with law changes is critical. In 2024, the rules in several states for DtC have already been adjusted or will change soon. Here is a review of […]

sales tax vs. use taxes
North America Sales & Use Tax
November 8, 2024
Sales Tax vs. Use Tax, Explained. Who Reports What, and When?

This blog was last updated on November 19, 2024 One of the core concepts in sales tax compliance is also one of the most frequently misunderstood: the differences between sales tax and use tax. These tax types may look similar on the surface, but knowing the differences is essential for staying compliant and avoiding costly […]

2025 bond project
North America Tax Information Reporting
November 4, 2024
2025 NAIC Bond Project – The Insurer’s Guide

This blog was last updated on November 14, 2024 The regulatory landscape for insurance companies is undergoing significant changes with the Principles-Based Bond Project which is set to take effect on January 1, 2025. These changes, driven by the National Association of Insurance Commissioners (NAIC), will impact how insurance companies classify and value bond investments, […]

E-Invoicing Compliance EMEA VAT & Fiscal Reporting
November 1, 2024
VAT in the Digital Age Approved in ECOFIN

This blog was last updated on November 7, 2024 The long-awaited VAT in the Digital Age (ViDA) proposal has been approved by Member States’ Economic and Finance Ministers. On 5 November 2024, during the Economic and Financial Affairs Council (ECOFIN) meeting, Member States unanimously agreed on adopting the ViDA package. This decision marks a major […]