NEWSLETTER 2022 - 05
- not only with regard to VAT and customs law
Most companies have defined, standardized, and recorded their internal processes. However, the external processes regarding the cooperation with customers, suppliers and service providers are also important. The definition and determination of the sequence of the individual steps necessary to achieve a certain result is part of process management. The (fiscal) consequences should also be considered.
Why should processes be defined and recorded?
Employees regularly change their jobs and look for new challenges in other companies. In most cases, these are then gone faster than desired – and with them not only the manpower, but also a certain know-how. A handover of pending tasks – if this takes place at all – is usually only half-hearted and incomplete. The successor brings his or her expertise with him or her, but has no knowledge of the specific internal and external processes of the company. This includes filing systems of important documents, submitted (VAT) returns, rulings, etc. as well as a functioning supply chain. If the newcomer then "just does something" due to a lack of knowledge of the processes, without knowing all the (tax) implications of the procedure in detail, then it could become risky. In addition, a tax audit without complete documentation is also rather unpleasant and, after a (costly) intensive, complex and time-consuming reappraisal process, is increasingly associated with offsets.
Which processes should be defined?
Of course, it varies from company to company which processes should be defined and recorded, since on the one hand the external supply and service chains look different for each company, and on the other hand internal processes depend on the number of employees, area of responsibility, etc. The most important thing here is to define the processes for each company. However, it is essential to comply with all (tax) regulations applicable to the company: Which activity must be carried out by whom and when in order to achieve a certain goal?
The following points can be defined and recorded:
Company or organizational structure
Responsibilities for which tax types
Responsibility for meeting deadlines
Necessary steps until the submission of a declaration (data procurement, draft, review and release)
Filing of documents (electronic and/or physical; where?)
Which persons need to be informed after a declaration has been submitted in order to proceed with further processes (e.g. payment runs and posting)?
How is it ensured that information on new legal regulations is not overlooked?
Processes are not limited to the tax area per se. However, in the area of VAT and customs law, processes are of great importance. Upcoming revisions can be prepared and subsequently implemented at low cost and time.
Supply chains from a VAT perspective
Companies often no longer question their own transactions. In some cases, they are not even aware of which countries are actually involved in their purchases and sales. This is associated with risks: If you consider that the average VAT rate in the EU is around 22%, then you can calculate how much money can be affected if transactions are processed incorrectly.
In most cases, goods are not only sold from one party to the other, but are also sold via other parties in between, whereby the goods are usually delivered directly from the first to the last party. In such chain transactions, the VAT implications of all parties involved must be checked and known – ideally before the delivery takes place. Parties outside the EU are suddenly confronted with VAT registrations and additional costs they did not expect. But also, possible tax exemptions have to be declared as such for VAT purposes and documented correctly.
Unfortunately, in larger companies the internal tax department is rarely or too late informed about which sales the sales department has just been able to carry out again. This leads to high risks from a VAT perspective. The mapping and allocation of all company transactions is therefore extremely important. Only then can those responsible for taxes keep the threads in their hands. Based on a so-called transaction mapping, the VAT and customs consequences can be evaluated, risks can be reduced, and opportunities can be explored. In this regard, the following questions shall be answered:
Are all existing VAT registrations really still necessary?
Do further VAT registrations have to be made?
Are all the possibilities offered to the company by a state from an indirect tax perspective being used?
Can customs duties be avoided?
Are the goods correctly declared under customs law and correctly accounted for under VAT law?
The processes are set up - and now?
The defined processes are implemented and should of course be adhered to. However, a company is always in a state of change and further development. Therefore, it is important that the processes are regularly evaluated and adjusted to increase the efficiency, transparency and quality of the defined processes.
We are happy to support you in the evaluation, implementation and optimization of VAT and customs processes to realize a more successful business management.
With best regards from your VAT/Customs team
Mónika Molnár Florian Hanslik Anita Machin