VAT filings and returns are not an option, they are an obligation.
The VAT compliance obligations businesses face are changing faster than ever and it’s a challenge for VAT and Finance teams to keep up. We take a look at the different types of VAT obligations that exist, and when a business becomes liable to file.
In an increasingly digital world, as tax authorities continue to introduce complex VAT rules, understanding your business’ obligations – and investing in the right technology to manage these is critical.
A VAT return is a report which details all sales (output) and purchases (input) associated with taxable supplies for the VAT registered entity. Businesses are obliged to pay VAT to the tax offices where they are registered on all taxable sales within that country. However, they can offset any business related input VAT against this sales VAT in the same country. So depending on the amount of sales versus purchases the business will either be in a payment situation (owing VAT to the tax office) or in a refund situation (where the tax office owes the business a refund of VAT). Businesses can be required to submit monthly VAT returns, or quarterly/annual returns.
EC sales lists (VIES)
An EC Sales Listing (ESL) or VAT Information Exchange System (VIES) is a report that has to be sent to the relevant tax office by VAT-registered businesses who sell goods and services to other businesses in other EU Member States.
A VAT return is usually just a summary of the overall figures you have for sales and purchases whereas a control list is the listing of the transactions with details like invoice number, date, supplier/customer name, address and VAT reg number, NET, VAT and Gross. A full list of countries with control list requirements can be found here.
INTRASTAT is the name given to the system for collecting statistics on the movement of goods, not services, between the Member States of the European Union (EU). The Intrastat returns are submitted where relevant in addition to the local VAT return.
Read more about Intrastat reporting post Brexit here.
When should my business register for VAT?
Examples of activities in foreign countries that may trigger VAT obligations include:
- Importing goods into the country for onward sale or distribution,
- Storing goods in a warehouse for onward sale or distribution,
- Buying and selling goods locally,
- Selling goods over the internet (turnover thresholds apply),
- Events in the country,
- Providing telecommunications, broadcasting or electronic services to consumers.
If your company is performing any of the above activities or other activities that result in VAT obligations, either in your own country or in a foreign country where there is a VAT mechanism, and if you hit certain sales thresholds, then your business must adhere to the VAT laws of that country. This includes possibly VAT registering and filing periodic returns.
A full list of EU VAT Registration thresholds can be found here.
International VAT obligations are extremely complex and vary widely by tax jurisdiction and according to the business activity performed by your company. Different countries have their own specific VAT return deadlines and rules, with different administrative practices for filings – making compliance time consuming and costly for internal staff to manage.
Some countries have reporting obligations with very specific timing requirements (SII in Spain, e-invoicing in Italy, control list obligations in many other countries).
It is a legal requirement for any businesses who is VAT registered to submit their VAT filings on time within very strict deadlines. Failure of a business to comply with their global tax returns can result in huge fines and penalties.
Take control of your VAT obligations
Over 60% of businesses do not meet their VAT obligations as they struggle to have overall visibility and control. Taxback International have found that the reasons for this include:
- Managing compliance in-house typically results in broken paper trails, multiple different data systems, varying deadlines, unstructured internal processes and even mistakes due to a lack of knowledge.
- When outsourcing to traditional providers, companies experienced problems with lack of visibility & control due to dealing with multiple contacts in different regions, often times with no central point of reference, or control.
Work with real VAT experts
With over 15 years’ experience in the area of VAT compliance and consultancy, we handle all countries and languages where VAT obligations exist. We have a dedicated & centralized team of VAT experts, with a reputation of excellence within all global tax offices ready to speak to you about your VAT obligations.