Businesses involved in the movement of goods often have complex supply chains involving multiple parties. As a result, navigating successful VAT compliance and meeting customs requirements can be a tricky business. For organisations operating cross border or considering scaling up operations, there is a lot to consider.

The following article will provide actionable guidance on how to understand proposed transactions flows from a VAT point of view. It will outline the steps to take to carry out transaction mapping, with key information on how to identify the basis for application of the reverse charge, specific considerations for transactions like intra-EU dispatches and exports. Read on to understand how to effectively prepare for transaction mapping and the key things to consider.

Start at the beginning

Supplies of goods involving more than one country can lead to complicated VAT issues. It is important to understand the correct VAT treatment before accepting or placing an order. Failing to consider, and follow, the correct VAT treatment could result in:

  • VAT that cannot be recovered
  • A penalty for late payment of VAT due
  • The cost of compliance.

Equally, charging VAT incorrectly to a customer could impact the relationship or even result in a partially unpaid invoice.

It is also important to understand the correct VAT treatment of a transaction when setting tax codes in ERP systems e.g. SAP or MS Dynamics.  But it is not just about the correct VAT (or not) on the invoice; it is also about proof required to support exemptions, invoice formalities, additional reporting, correct Incoterms etc.

Transaction mapping is an essential step which can assist in understanding these processes. The best way to display all relevant information in a meaningful way is to produce a matrix that shows the transaction and all relevant considerations. This forms a reference document by commercial teams placing or receiving orders, by finance staff processing invoices and by IT staff when setting up new tax codes.

Read more here on Accountancy Age

By |December 10th, 2019|