Trends and Updates on VAT Compliance

VAT Trends: Toward Continuous Transaction Controls, 12th Edition

Welcome to the 12th edition of Sovos’ annual trends report, “VAT Trends: Toward Continuous Transaction Controls” where we put a spotlight on current and near-term legal requirements across regions and VAT compliance domains.

This report provides a comprehensive look at the regulatory landscape as governments across the globe are enacting complex new policies to enforce VAT mandates and are demanding unprecedented insight into economic data to close revenue gaps.

The focus of this year’s report is on four emerging megatrends with potential to drive change in the way organizations approach regulatory reporting and manage compliance. Authored by a team of international tax compliance experts, we provide extensive recommendations on how companies can prepare for and thrive through these changes.

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 The four mega-trends that we examine are:

  1. Continuous Transaction Controls (CTCs) – Countries with existing CTC regimes are seeing improvements in revenue collection and economic transparency. Now, other countries in Europe, Asia and Africa are moving away from post-audit regulation to adoption of these CTC-inspired approaches.
  2. A shift toward destination taxability for certain cross-border transactions – Cross-border services have historically often escaped VAT collection in the country of the consumer. Due to a large increase of cross-border trade in low-value goods and digital services over the past decade, administrations are taking significant measures to tax such supplies in the country of consumption or destination.
  3. Aggregator liability – With the increase of tax reporting or e-invoicing obligations across different taxpayer categories, tax administrations are increasingly looking for ways to concentrate tax reporting liability in platforms that naturally aggregate large numbers of transactions already.  Ecommerce marketplaces and business transaction management cloud vendors will increasingly be on the hook for sending data from companies on their networks to the government, potentially even inheriting liability for paying their taxes.
  4. E-accounting and e-assessment – Combining CTCs with obligations to synchronize entire accounting ledgers makes onsite audit necessary only in cases showing major anomalies across these rich data sources. Over time, the objective is for VAT returns and other tax reports to be prefilled by the tax administration based on taxpayers’ own, strongly authenticated source system data.

Continuous transaction controls have emerged as the primary concern for multinational companies looking to ensure compliance despite growing diversity in VAT enforcement approaches. Tax authorities are steadfast in their commitment to closing the VAT gap and will use all tools at their disposal to collect revenue owed. This holds especially true in the aftermath of COVID-19, when governments are expected to face unprecedented budget shortfalls.

In addition, this report includes a major review of the country and regional requirement profiles. These profiles provide a snapshot of current and near-term planned legal requirements across the different VAT compliance domains.

Sales Tax Toolkit: Your Guide to Annual Filings

To help you better manage your time, meet sales tax deadlines and avoid costly penalties, we’ve compiled a toolkit to get you through the sales tax annual filing period.

January is right around the corner which means the time to prepare for sales tax filing is now. If you continue to file taxes the same way you always have and hope that nothing is overlooked, it might be time for a new strategy. Remember, hope is not a plan. Sovos has what you need to ensure that you stay compliant, even as regulations change.

The sales tax filing process is often just that: a process. But it doesn’t have to be that way. Understandably, January is a stressful time of year; businesses often have monthly, quarterly and annual returns to finalize and submit. If you operate in multiple states – either with physical presence or as a remote seller – there may be numerous state annual reconciliations to consider. Additionally, local, state and federal tax regulations are ever-evolving, meaning businesses must remain vigilant to avoid inaccurate reporting that can lead to hefty financial penalties. 

It is also easy to feel overwhelmed with ensuring sales tax filing compliance. Burnout can happen when businesses lack necessary tools that help employees stay on track with tasks, while also maintaining a healthy work-life balance. When your employees are stressed, it may be more difficult for them to focus, which could lead to overlooked steps with your sales tax filing. But is there really a way to guarantee that balance? How can businesses make sure all sales tax filing deadlines are met without overwhelming employees? 

For anyone who has thought, “Help me sales tax,” we understand. Whether you are concerned about annual sales tax liability, updates at the local or state level or just with meeting all sales tax filing dates, Sovos is here to help. Our team understands that the sales tax filing landscape is changing and we want to provide you with the knowledge and tools you need to ensure state sales tax compliance.

Prepare for January sales tax filings now

If you continue to file taxes the same way you always have and hope that nothing is overlooked, it might be time for a new strategy. Remember, hope is not a plan. Sovos has what you need to ensure that you stay compliant, even as regulations change.

This Sales Tax Toolkit includes:

  • A filing deadline calendar for your returns due in January.
  • A compliance filing checklist to reduce your risk of inaccurate reporting and penalties.
  • Information on which states require annual reconciliations, and how to file them.
  • Tips from our Managed Services team on maintaining work-life balance and avoiding burnout.

When you download our Sales Tax Toolkit, you’ll also have the option to select a gift for added boost when it comes to juggling the increased workload come January.

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Your Guide to Annual Filings

Meet your sales tax obligations and maintain mental wellness this January.
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Brexit and VAT

Brexit is here with a new trade deal agreed between the EU and UK, but that’s not the end of the story for businesses. Ensuring VAT compliance of goods is essential to any successful Brexit plan as is recognizing that not all EU Member States have the same requirements.

Now is the time for businesses of all sizes and across all industries to take action and remain VAT compliant as the UK begins its new trading relationship with the EU.

 

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What will change in the new year?

From 1 January 2021, the way in which cross-border trade between the United Kingdom and the European Union is conducted will undergo seismic shifts. At the end of the Brexit transition period in December 2020, the UK became a third country in relation to the European Union. As a result, the concept of acquisitions and dispatches is removed for trade between the UK and EU, to be replaced instead by exports and imports. This has far reaching implications for VAT accounting, importing and supply chains, and it is crucial that businesses consider postponed import accounting for VAT, in addition to VAT registrations and the need for fiscal representation.

What are the crucial steps businesses must take?

There are a range of preparations and mitigations businesses can put into action. Among the most important steps to be taken are to:

  • Identify all supply chains that could be impacted by Brexit
  • Determine in which EU Member States VAT registrations must be maintained
  • Establish whether any new VAT registrations will be required
  • Consider changes to customs requirements, such as EORI numbers in the UK and EU
  • Plan for changes to VAT reporting requirements
  • Understand where fiscal representation may be required, and take steps to secure it if necessary

Whether your planning is complete pending review, at a mid-stage point or as yet uninitiated, assistance is on hand. Our Brexit and VAT white paper offers vital information on how best to understand the impact of Brexit on VAT and will provide actionable guidance on how best to future-proof your business activity into 2021 and beyond.

Sovos is a trusted European VAT expert, providing a single tax partner for compliance everywhere you do business. We solve tax for good, and can help you centralise, standardise and automate all your VAT and fiscal reporting needs

2020 State of Sales & Use Tax Inaugural Report

The report provides a here and now assessment of sales tax administration, examining trends in nexus laws and regulations and how current economic circumstances brought on by the COVID-19 pandemic are impacting state’s abilities to collect taxes owed and preserve revenue streams.

Governments at every level have expanded investments in technology to digitize the sales tax collection process and close existing tax gaps. When combined with the Wayfair decision, which vastly expanded the nexus footprint of organizations, states moved quickly to establish new regulations to maximize income. This Sovos report details how rapidly the sales tax landscape is evolving.

This new approach to sales tax is forcing organizations to reexamine how they facilitate processes internally to ensure compliance. While manual processes and custom solutions may have been suitable in past environments, increased levels of speed, oversight and complexity now demand more sophisticated methods. In the report, our experts explore the relationship between tax and IT and why better collaboration between the two should be an integral part of your compliance strategy.

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New: 2021 Sales and Use Tax Annual Report

Get this year's latest expert analysis on economic nexus laws and new bills being considered.
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Overcome the Challenges of Tax Reporting for Cryptocurrency Exchanges

Download your complimentary copy of the Tax Reporting for Cryptocurrency Exchanges report for concise and clear analysis of emerging guidance on tax reporting challenges and solutions for exchanges and traders.  

This report was created by the tax reporting experts at Sovos and CryptoTrader.Tax.

Download your free report and get:

  • Insights into rapidly evolving IRS guidance on the reporting of cryptocurrency gains and losses
  • The evolution of the 1099-B and what it means for exchanges and traders
  • Analysis of various approaches being implemented by exchanges today
  • The benefits of modern software for cryptocurrency accounting and reporting

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Insurance Premium Tax: Back to Basics

Taxes on insurance are fragmented. Achieving compliance can be a headache requiring specialist knowledge. No two jurisdictions are the same and currencies, rates, deadlines and location of risk rules may vary by country.

For those tax teams new to insurance premium tax (IPT), this whitepaper provides a useful guide on the principles and foundations required for compliance.

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E-archiving for VAT: Compliance in a Digital World

The importance of compliant archiving of original invoices and similar tax-relevant documents has long been underestimated. For any company, the e-invoice archive is where the evidence of your tax compliance lies, but in today’s highly digitized global environment that evidence tends to be dispersed over multiple systems in multiple countries. Both understanding what rules apply for these records as well as ensuring compliance with them in an ever-changing regulatory landscape can be daunting for multi-national companies.

Against this backdrop, the digital transformation carried out by tax authorities across the globe shows no sign of slowing as governments continue their quest to reduce fraud and tax evasion to close tax gaps. More tax authorities are enforcing their own specific technology-based continuous transaction controls (CTC) frameworks.

The introduction of CTCs coupled with the transformation of business is fundamentally changing the nature and importance of archiving. Whilst many companies have long considered archiving as simply storage, this has now become an outdated and potentially dangerous view.

This white paper dispels that myth and illustrates why archiving today is more than just storage, and more important than ever

Download for an insight into these parallel developments and to understand what steps are needed to future-proof your archiving practice.

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Are You Confident You are Meeting State Reporting Requirements?

Get the complete guide to one of the most complex and time-consuming tax reporting obligations for your business: state reporting.

State reporting requirements vary drastically from state to state and are constantly changing. Most businesses spend countless hours scouring state websites to keep track of these requirements and ensure they won’t be fined. Luckily, our team of tax lawyers and regulatory experts have done the hard work for you. At Sovos we file 620 million forms a year with the IRS and the states and have filled this guide with the same strategies we use to accurately file hundreds of millions of forms.

Download your free guide and get:

  • A detailed breakdown of the differences between nexus and residency
  • A list of challenges state reporting creates for businesses like yours
  • Proven strategies for ensuring compliance with your state reporting requirements

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Raconteur: Digitizing Tax Across Borders

As governments and regulators around the world are embarking on their digital transformation, organizations need to ensure they keep their indirect tax transformation one step ahead. In this series of articles from leading journalists, learn how digital tax is evolving globally and what the changes mean for your business.

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Benefits of a SaaS Solution for Insurance Statutory Reporting

Download the free white paper and learn all the technological, operational and financial benefits of a SaaS solution for insurance statutory reporting, including:

  • Improved data accuracy;
  • Reduced IT, infrastructure and operational expenses;
  • Immediate ROI;
  • And more.

Trends in Continuous Global VAT Compliance, 11th Edition

This Sovos report provides the most complete guide to global VAT enforcement regulations and delivers strategic recommendations for businesses at a time when governments all over the world are enacting complex new policies to enforce VAT mandates.

This edition of “Trends” is the first to expand its scope well beyond e-invoicing compliance to the full universe of continuous transaction controls, including e-archiving, and VAT determination and reporting.

Governments worldwide are moving rapidly toward adopting clearance e-invoicing, making them real-time trading partners in business-to-business transactions. At the same time, corporations are launching massive IT projects to migrate enterprise resource planning (ERP) implementations to a powerful new generation of systems, including SAP S/4HANA. 

As a result, VAT compliance has never been as complex or as critical as it is now. Companies that mishandle it risk halting or even reversing their own digital transformations. This report provides a path to compliance, as well as comprehensive updates on global mandates.

Gotchas in Year-End Tax Reporting & Best Practices for Avoiding Them

The end of the year is rapidly approaching and that means that tax season is nearly upon us.  For the last 30 years, Sovos has helped clients Solve Tax For Good by providing technology and services that help them comply with IRS withholding and information reporting requirements.  And during that time, we have seen many businesses fall victim to last-minute hurdles and obstacles related to year-end reporting.

Download the white paper to learn the most common issues banks and credit unions face during year-end 1099 reporting, followed by the best practices to avoid them.

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Your SAP S/4 Migration and ‘Always On’ VAT Compliance Are on a Collision Course – Here’s How to Manage

If you’re an SAP user and you want to better understand your options in moving to S/4 in relation to tax compliance, this story should help. Download it now.

Prepare for the SAP S/4 migration to ensure continued tax compliance

SAP users wanting to better understand their options when migrating to S/4 from a tax compliance perspective should read this e-book. Gain insight into the future of global tax, including paperless transactions, business networks and the advent of transaction-orientated indirect tax enforcement.

The e-book also provides examples that explain the options for moving to a new ERP software – an important decision spanning multiple business departments, such as tax, accounting, IT and revenue.

Download our e-book to understand:

  • What are the greenfield and brownfield S/4 migration options?
  • What has changed in global tax?
  • What other approaches exist for S/4 migration?
  • What are the criteria for a  future-proof VAT compliance solution?
  • How can Sovos help?

SAP plans to discontinue support for ECC6 by 2025 and that deadline will loom closer and closer as the months pass by.

It is quite clear from market data that many companies will not be able to migrate to S/4 prior to the 2025 deadline – even 2025 will prove tight on time for many, and in some cases, companies will find this deadline near-impossible to make.

Furthermore, many SAP users are yet to automate procurement and customer interactions: a significantly large proportion of orders and invoices are still exchanged on paper, often using ample scanning and OCR software in accounts payable.

Tax digitization is a trend that continues to rise in importance, with tax authorities across the globe introducing e-invoicing and continuous transaction controls (CTCs) to close the VAT gap. Tax compliance requires processes to be updated to comply with these digital tax changes.

Legacy reporting processes, organizational structures and technologies that continue to directly interact with your ERP systems need to evolve. The transformation of indirect tax is becoming a reality: manual, decentralized or shared service centre-aided indirect tax reporting will become a peripheral activity while your organization negotiates the transformation to ‘always-on’ compliance.

If these challenges sound familiar, our e-book is equipped to help you overcome them. Our expert team have distilled their knowledge into this easy-to-digest guide on a complex subject that is underpinned by an increasingly urgent deadline.

How Sovos can help

At Sovos our goal is to allow our SAP customers to switch to a single vendor they can entrust their data to. This seamless migration will simplify operations and ensure compliance with each country’s different periodic or continuous controls at any time.

In doing so, you decouple business and tax functionality so you can focus on the former to power your digital and finance transformation – important considerations in an increasingly digital world where widespread digitization is the expected status quo rather than a purely innovative force.

Sovos provides certainty with a future-proof strategy for tackling compliance obligations across all markets as VAT regulations evolve toward continuous e-reporting and other continuous transaction controls requiring increasingly granular data.

Experience end-to-end handling with compliance peace of mind with Sovos.

Risky Business: How to Beat the Inefficiencies of Tax Compliance on Purchases

Americas’ SAP Users’ Group (ASUG) and Sovos worked together on survey research to understand the awareness and potential risks related to sales and use tax and how it affects the procure-to-pay (P2P) process. 

Discover where most finance, IT and procurement leaders’ processes for P2P tax compliance rely on automation vs. manual methods and learn:

  • How companies can be more assured that taxes charged on their purchases are correct.
  • How companies can reduce their risk of enduring an audit.
  • How leaders gained competitive advantage using centralized tax automation software.

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Sovos Joins Wall Street Blockchain Alliance

Sovos has joined the Wall Street Blockchain Alliance, an industry leading non-profit trade association with a mission to guide and promote comprehensive adoption of blockchain technology across global markets. Read the press release. 

By the Numbers: 1099-MISC Nonemployee Compensation Reporting

This is the first in a series of reports on 1099 reporting featuring numbers not available anywhere else. In this number-filled report, discover graphics with exclusive data from Sovos on 1099-MISC nonemployee compensation reporting and understand where the future of the form lies.

Preparing SAP S/4HANA for Continuous Tax Compliance

How Tax Will Impact Key Processes in Your SAP S/4HANA Upgrade

For senior finance, IT and tax professionals, tax compliance should be a key consideration of a SAP S/4HANA implementation, a move to Central Finance, or cloud upgrade strategy. Learn how to minimize business disruption during an S/4HANA upgrade project in the wake of modern tax. 

Exemption Certificate Management – A Sovos Guide to Building Better Process and Systems

Ten tips to improve exemption certificate management compliance and build a better process.

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