Every day, the world becomes increasingly connected, and even governments have not been left behind. Mobile technology, real time reporting, business intelligence and cloud computing are all examples of the way the digital economy has evolved.

As a result, a good number of tax authorities around the globe are reviewing their tax systems while companies are also reforming their systems, especially for indirect taxes such as VAT, which can be tricky to track accurately.

With these technological advancements, the regulations and legislation have become more stringent and it is crucial to companies for everything to be on time and correct when submitting tax returns. In this article, we will see how businesses can improve their compliance and timing by doing better VAT analysis.

What is VAT?

VAT stands for value added tax, a type of consumption tax imposed on a good from the first stage of production up to when the item reaches the shelves. Currently, 162 economies around the globe impose VAT and its popularity keeps on growing, for instance, the Gulf States and India will be joining this club soon.

This has been largely attributed to the decline of corporate income tax in most governments’ total tax revenues. as a result, it is only natural for organizations as well as governments to put the necessary measures in place to adopt the new changes.

VAT Analysis Tips

In order to ensure you are always on time and accurate with your VAT tax returns, you need to do some proper VAT analysis. This will come in handy for purposes such as reclaiming back VAT, avoiding penalties and getting through an audit without any worries.

It can get quite frustrating and time-consuming for businesses to comply with different local tax requirements, especially when operating overseas. This is because VAT is not a standardized tax among all nations, but implemented and reported differently depending on locality. Even where the rules are the same, it can still be tricky for business.

For example, in the European Union, if you are a company based in France and there is a problem with your German VAT, you will also be persecuted in France due to the harmonization of their VAT tax systems. Using technology, however, you can keep track of everything you need to comply with your VAT taxes regardless of where you are operating from.

If you are a new business, before applying for VAT, you will need some information from the other businesses such as your suppliers and customers. For instance, you may need to require if a customer/supplier is VAT taxable, where their business is located and so forth. Using accounting software such as Sage Accounting can automate this process once you feed in the information for the first time.

Another great VAT analysis tip is looking at the various tax compliance indicators. This method of analyzing VAT helps especially when setting up an internal tax control system. It can rule out the possibility of your organization failing to comply with its tax returns. By running different data analyses on such a system, you will also be able to prove commitment and escape the ever gazing eyes of tax authorities, no matter where you are.