Electronic Determination for Tax Authorities: A New Era for Tax and VAT returns

 Posted by Tony Bowers

 Tuesday 29 March 2022

The manner in which businesses and tax authorities interact is changing. There is an increasing global trend of taxation authorities seeking to collect information from businesses’ ERP solutions and other internal core systems in real-time by electronic means.

There is a fundamental shift in how data is being collected and exchanged – we are moving away from information being ‘pushed’ to taxation authorities towards a position where it is being ‘pulled’ by them. There is a drive towards a future of fully integrated and live transfer of data between business and authorities. This means that there is no time lag between the transaction and the reporting of Tax. The correct determination must take place first time every time.

A number of European jurisdictions, such as UK, Spain, Hungary and Poland, have already introduced digital regimes which affect VAT reporting. Increasingly countries are looking to introduce a system similar to Standard Audit File for Tax (‘SAF-T’) / real-time VAT reporting.

Although this does not necessarily mean businesses will have to store each invoice and receipt digitally, the transaction and determination data will need to be stored digitally. This includes an accounts payable and accounts receivable transactional listing, including intracompany transactions. This becomes increasingly complex with the inclusion of scenarios such as EU triangulation or Plants Abroad.

All businesses should start to ascertain whether their existing ERP system is capable of submitting VAT returns digitally. More generally, businesses should now also be looking at their full VAT compliance process, and in particular where the data for this comes from, which systems are used, and how this information is adjusted and consolidated.

This end-to-end flow of information should be digital and capable of being audited going forward. Some organisations may be doing this currently by downloading reports and files, but where this information is being manually entered into spreadsheets or tax compliance software, the impact of automating this process should be considered.

It is likely that a digital audit trail from the submission of information to the underlying accounting records may be required, and potentially the submission of the underlying documents.

The advantage of using Meridian’s VAT Add-on or Arco automated VAT determination solutions for SAP is that the process of recording managing the underlying transaction and submission information  is automated with a full transaction trail for audit purposes.

Meeting real-time reporting requirements

The SAF-T digital submission is making it harder for your team to manually check transactional data and act upon any discrepancies. There simply isn’t the time; any error is now flagged and visible to relevant bodies immediately. But Meridian’s VAT automation applications ensure real-time data is correct and eliminates discrepancies.

Improve relationships with tax authorities

Providing automated and correct tax determination to authorities proves your organisation is in control of all critical processes and is more likely to be compliant and providing accurate returns. An improved working relationship with tax authorities will reduce VAT underpayment penalties and reduce the workload for your team.

Ensure VAT submision is consistent and correct first time

Meridian VAT automation ensures that all stages of the VAT transaction – from determination to reporting – is conducted consistently in every single transaction. This will ensure your data is correct, ensuring ongoing high-quality data for tax authorities and audit departments.

Please contact us to further discuss how Meridian can automate your SAP VAT return submission.

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