The 2010 VAT changes are like medicine – “they are good for you,” we are told, but understanding their impact, setting them up in your systems and processes, and managing them going forward can leave a bitter taste. Costs and effort aside, these changes introduce more risk in the VAT management equation. And they pave the way for further changes and additional complexities down the road in 2011, 2013 and 2015.
With time growing short, here are the steps a business should take to make the most of the projected benefits of the 2010 VAT changes while minimizing their operational impact.
1. Evaluate all your customers. To start, you need to definitively determine whether each of your EU customers is VAT taxable or not under the changed rules. To this end, you need to request and verify their VAT registration numbers. Then and only then can you confidently know whether to include a customer on an ESL or determine whether the new place of supply rules apply.
2. Review and update your relevant business processes. Any process that touches an order, invoice or the creation and filing of a VAT return or ESL needs to be reevaluated and modified. This includes educating all pertinent people on the new changes and their importance, and retraining them on any new procedures.
3. Uncouple VAT management from your current financial systems. In terms of business and sustained compliance advantages, this is huge. Consigning VAT management to ERP implementations or custom built systems is tantamount to turning VAT management over to IT, when in fact it is tax departments that should be managing tax. An application that is purpose-built for automating tax management is the optimal solution for VAT, now and going forward.