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 and 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 can differ significantly between territories. As demands increase, more companies are realising the benefits from embracing a managed service approach to all or part of their VAT obligations.
From the many conversations we have with our customers, the reasons for appointing a managed service provider (MSP) for VAT compliance are varied and apart from cost, fall broadly into three categories.
Staffing, training and retaining a team of indirect tax specialists can be expensive and time consuming. Accessing external expertise allows you to benefit not only from wider and more detailed knowledge but also 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 and 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?
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 helping 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 – such as Spain’s SII – which 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.
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 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 and 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 and to continue trading with confidence. Appointing an experienced global MSP which blends human expertise and technology can provide the perfect balance to face the changing VAT landscape head on.
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.