The automotive industry faces particularly complicated VAT challenges.
Automotive manufacturing is a complex process, involving a dizzying array of components and specialised machinery. In addition, globalised trade has seen automotive firms optimise costs by manufacturing parts in multiple countries.
Let’s consider a few of the VAT compliance complexities faced by the automotive industry – so that we can better understand how to optimise compliance and anticipate future changes.
Tooling VAT in the automotive industry
Automotive manufacturers commonly incur significant tooling VAT is incurred on machine tools used in the manufacturing process.
The VAT incurred can add a substantial amount to the total manufacturing cost. The good news is that tooling VAT can frequently be reclaimed.
However, ensuring that tooling VAT is optimally reclaimable requires careful planning and ongoing attention to compliance requirements.
Leveraging global VAT regulations
Automotive industry VAT compliance is truly global in nature. Components parts are manufactured and assembled in different countries, and parts and finished vehicles are shipped around the world.
Each country in which a factory is situated, or to which manufacturing is outsourced, imposes its own requirements for VAT compliance. Shipping across borders raises additional compliance issues.
Automotive companies will generally frequently need to register for VAT in multiple countries, and comply with local regulations.
In addition, to minimise costs and manage cash flow, you need to ensure all eligible VAT is reclaimed. Moreover, more complex regulatory frameworks, as VAT deferment schemes, need to be effectively harnessed.
Optimising cash flow therefore requires a deep understanding of country-level regulations, as well as a global perspective on how those regimes fit together.
Staying ahead of global VAT regulations
Given the global scope of the automotive industry, automotive companies are particularly sensitive to regional regulatory changes.
The enlargement of the European Union had important consequences in terms of where manufacturers situated their factories and warehouses. In turn, developments such as Brexit will also have far-reaching consequences.
Beyond Europe, manufacturers need to be able to anticipate the VAT implications of regional trade agreements and county-level regulatory changes.
For these reasons, automotive manufacturers require a VAT consultant with a truly global focus, which can closely monitor regulatory developments at a global, regional and local level.
Anticipating the future of VAT today means better business decisions tomorrow.
Record keeping for VAT
As with any large-scale global manufacturers, the VAT compliance in the automotive industry presents an enormous administrative challenge.
Manufacturers need to track transactions, and submit them in the appropriate format to tax authorities in each country in which they have a VAT obligation.
A technology-driven way to manage VAT compliance
Fortunately, we now have VAT compliance solutions that especially designed to meet the demands of complex globalised manufacturing.
Vatglobal’s proprietary VAT technology makes the complexities of global VAT compliance simple to manage.
Vatglobal provides a single point of contact for global compliance, supported by a team of experts relentlessly focused on developments in global VAT regulations.
It’s precisely this combination of powerful automation with unmatched human expertise that makes Vatglobal such a trusted partner of the automotive industry. Get in touch with Vatglobal to find out what world class expertise supported by technology can do for your company.