Tax Authority VAT audits are carried out periodically at the discretion of the individual tax authorities.
It is crucial that tax authority audits are managed correctly in order to minimise the time and cost associated with the audit and also to ensure that the tax authority fully understands the business’ activities and how it is accounting for VAT.
Accordance can deal with the tax authorities on your behalf in order to successfully negotiate the audit. This can involve reviewing your VAT position, checking invoices issued and reviewing the calculations declared on VAT Returns prior to the audit. Moreover, our dedicated team can review the correspondence and approach the authorities in the local language to quickly resolve the query.
International businesses often need to resolve issues with local Tax Authorities when trading cross-border. Issues may also arise with suppliers or customers.
Tax Authorities are increasingly focussing on VAT due to budget deficits, so it is becoming more important than ever to ensure businesses understand and fulfil their obligations.
Disputes may arise for a number of reasons, and may depend on the nature of your business and the countries in which you are operating, but they may occur due to:
Experienced VAT professionals at Accordance, with local language capabilities, can help your business when negotiating with local Tax Authorities and third parties – our experience and knowledge of local regulations often speeds up negotiations, can resolve disputes, and helps ensure the most positive outcome.
VAT rules and regulations can be ambiguous and do not explain clearly how the law is applied in a particular situation. In addition, it is necessary to take into account how the law is applied from a practical perspective.
Consequently, it can often be necessary to contact the relevant local tax authority to agree on how to deal with VAT. Issues to be discussed may include what rate of VAT to charge for a particular product or service; whether an exemption applies; or clarification about the place of supply, and who has the obligation to account for the VAT due.
Accordance has obtained tax rulings for clients in a wide range of situations in multiple locations. These rulings have given the business confidence in how to account for VAT and can also lead to real savings: for example, through the application of reduced VAT rates. Rulings can provide certainty for clients, thus removing exposure to tax authority fines and penalties.
Where a business makes compliance or reporting errors, tax authorities can issue penalties and impose interest charges.
These penalties can be based on a percentage of the error or for a fixed amount and can be significant, often running into thousands of Euros. Some penalty assessments are automatically generated by the reporting systems used by the authorities when a return or payment is made late. In other cases, the penalties are issued by a tax officer who has reviewed the particular issue.
Many countries have a legal framework in place which systematically determines how penalties should be levied whilst others are taken on a case-by-case basis. It is important for businesses to be aware of the potential to mitigate penalties either through reviewing the position from a VAT-technical standpoint, or by being aware of the ways in which the local tax authorities operate.
We have successfully negotiated with tax authorities in many countries in order to mitigate penalties when clients have made errors on their VAT returns – or not registered for VAT at the correct time. Our intervention has resulted in penalties being waived completely in many instances; whilst in other cases, our work has resulted in significant reductions to fines. In all cases, we will work with the business on how to avoid repetitions of the error which triggered the penalty.