Businesses trading cross-border are often highly desirable to private equity houses seeking to invest in successful but developing companies.
However, as Nicholas Hallam writes in Private Equity News this month, many PE houses may be exposing their portfolios to significant risk if the companies they are investing in are not VAT compliant.
But how often is VAT considered as part of strategic planning for expansion? How many private equity houses are sure their portfolio is VAT compliant across all EU Member States and how many would be able to quantify the associated risk?
Responsibilisation has been increasingly rapidly across the EU, and the EU Commission has recently cemented its stance with the publication of its EU VAT Action Plan – their main focus is on closing the €170 Billion VAT gap by increasing cross-border audits, imposing fines and penalties where appropriate, and developing the Mutual Assistance Recovery Directive (“which sees unparalleled co-operations between tax authorities in pursuit of revenue”).
Nick goes on to suggest that Private equity houses must build VAT risk assessments into the due diligence process in order to ensure that they are investing wisely and not exposing themselves to unduly.
Read the full article here