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VAT Accounting

Dealing with Value Added Tax (VAT) compliance effectively is a real challenge for many organizations. From VAT returns to statistical declarations, such as Intrastat and EC Sales Lists, the scope for error is considerable and the cost associated (including penalties) can be substantial. This is especially true when your company is involved in multi-territory VAT compliance - locally or via Shared Service Centers - or setting up new operations in territories with a VAT regime.

In addition to these challenges, new regulations - such as the Sarbanes-Oxley Act in the USA and similar legislation elsewhere - are forcing companies to review the way they undertake and control VAT compliance and related accounting.

The VAT Compliance Burden

For an expanding multinational company, the sheer volume of VAT and statistical returns which need to be filed is a resource intensive exercise. Consider as well the need for VAT compliant accounting systems in each territory. Failure to meet local requirements can result in assessments and/or penalties and could leave companies with substantial amounts of unrecoverable purchase VAT. Inefficient and/or incorrect VAT compliance processes will cost companies money, even when these costs are sometimes hidden.

To minimize their VAT exposure, companies need to have sufficient resources to meet compliance obligations and have a firm understanding of the ever-changing VAT legislation in each jurisdiction. This can be a real challenge for a tax or financial departments that are short on resources and even shorter on VAT expertise.