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Does your ERP system ensure a correct VAT determination?

The tax authorities expect companies to put the correct amount of VAT on their outgoing invoices. And that they carefully check incoming invoices for the calculated VAT percentage. If your company only has transactions within the Netherlands, the VAT deduction is not a complicated task. It becomes complex when you do business with foreign customers and suppliers. After all, in these transactions you transfer the VAT to the client. In addition, goods are subject to different legal guidelines than services. And countries that are members of the European Union have a different VAT regime than non-EU countries. It is therefore about time to provide insight into the added value of your ERP system in correctly calculating, checking and posting VAT.

Statutory guidelines for VAT

The Member States of the European Union have the freedom to determine the level of VAT themselves within the generally used guidelines. The differences are large within the EU countries. In a number of countries, VAT guidelines are laid down by law and much stricter. If a company violates these legal guidelines, the tax authorities intervene immediately with an admonition or a fine. More and more governments involve themselves in combatting fraud. For example, the Spanish tax authorities require companies to send all incoming and outgoing invoices electronically via a portal. Tax officials then take care of the VAT return themselves. There is a good chance that the Netherlands and other EU countries will take a similar path.

Consequences of Brexit for EU countries

The tax authorities distinguish between transactions to EU countries (intra-community supplies) and transactions to countries that are not members of the European Union. Within the EU, companies can also send their invoices afterwards. For transactions to non-EU countries, the paperwork (invoice, VAT percentage, delivery conditions and descriptions of goods) must be available in advance and 100% in order. From this perspective, the English Brexit has consequences for EU countries that do business with English customers and suppliers. As a non-EU country, England gets a different VAT code and the invoice must be in order if a truck starts driving. In addition, companies that start exporting to England need special permits. This can lead to long waiting times at customs.

VAT knowledge: more than a plus

The VAT determination must be good for every flow of goods. Companies trust that the VAT determination within their automated ERP system is properly arranged. Practice shows a different picture. Many suppliers limit themselves in their ERP system to the largest common denominator in order to properly handle goods flows. However, correct VAT deduction requires customization. Suppose you receive goods from China. The corresponding invoice comes from a German supplier. And your company takes care of the import to the Netherlands itself. How do you know if the calculated VAT is correct? Is this an intra-community supply or not? In short, entering incoming and outgoing invoices requires VAT expertise and knowledge of goods and services flows.

Special functionality in ERP system

Large companies employ separate employees who pre-code incoming invoices. If this expertise is lacking or if this extra check takes a lot of time – with tens, hundreds or thousands of invoices per day – you can have a special functionality built into your ERP system. This functionality scans, recognizes and encrypts your invoices. This allows your responsible employee to see at a glance which choices he must make in order to ensure a correct VAT determination. A professional, tailor-made ERP system is his most important tool.

Would you like to know more about what our VAT-related SAP solutions and consultancy can mean for your organization?

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