When it comes to tax compliance, especially if you are an internationally operating company, it is important to make sure you are following the right steps in order to submit your VAT returns correctly each time. Today, we’ll spend some time exploring six steps to consider as you embark on a journey of VAT compliance. If at any stage you have a question about the process, or you wish to get specific help about the execution of the following steps, it may be worth reaching out to an expert, to ensure you get the correct information, tailored to the type of business you have and its individual needs.
- VAT Registration and Timed Declarations
The first step, once you are registered for VAT in a specific country, is to file periodic statutory declarations. A VAT return may be due monthly or quarterly depending on where you are operating. This document summarises all taxable transactions your business has made in a given period, and paints a clear picture of the financial health of your business within that specific time-frame.
- Standardising Data: Templates and Formats
Keep in mind that all VAT returns are different and will have different requirements based on existing standards and reporting formats. You should ensure that you declare all VAT made on sales, which is known as output VAT. Input VAT, which is VAT you have already paid out, may result in an opportunity for you to claim some funds back. This is subject to a holistic view of your taxable activity, but can make a difference to yearly cash-flow, so is important to prioritise.
- Considering Transactional VAT Outcomes, Exchange Rates and Invoice Requirements
Depending on your transaction types and values, your business may have additional funds to pay, or have paid a VAT surplus over the given period. The next step is to make sure you have everything laid out on the table in front of you. Keep in mind that there may be additional considerations to be made based on exchange rates and further invoice requirements based on VAT thresholds, especially if you operate in multiple territories. Once you have all the values in front of you, it will be easier to see if you are eligible for a refund, or if you have additional funds to pay in.
- Doing a Review and Analysis of Data
At this point, It can’t hurt to have another set of eyes looking at the data. Once you’ve gathered all the information and everything is in the correct format, collectively you should do a thorough review and analysis of the data, preferably with a financial director or manager, as well as an external party with expert knowledge in VAT compliance. This will save you a lot of trouble if you are queried by your local tax authority after submission.
- Considering Additional Statutory Reports
On top of your periodic VAT returns, a final consideration to make is that you may be bound to additional statutory reporting obligations, depending on where you are. In the EU for example, each time you are involved in the movement of goods between member states, you are obligated to report these movements to tax and customs authorities. Before you submit your VAT return, make sure you find out about the applicable rules from your local authority.
- Submission and Tax Office Feedback
The final step in the process is to submit the VAT return, and wait for feedback from your local tax authority. While you may be glad that the process is over, it helps to then spend a little bit more time scheduling in your next compliance deadline in your diary, making provision to collect everything you need in the build up to that time. After that, you’re done! If you stay ahead of the curve, you’ll find that VAT compliance is not as complicated as you thought, and is a process that enables you to start new financial years with a clear conscious, and the ability to focus solely on the growth of the business in the upcoming period.