Understanding International VAT Profiles
An essential element to consider for all U.S. multinationals seeking comprehensive international tax solutions is the current impact of their value added tax (VAT) position. Determining a company's VAT profile requires a large amount of data to be gathered from not only finance and tax colleagues, but also information from those working in sales, marketing, businesses development, logistics and other areas.
In order to integrate a company's VAT profile into whatever international tax solutions they may be using, it must first be accurately calculated. Basic VAT profiles for international businesses can be sufficiently built with the following information:
- Understand What the Business Does - Companies operating overseas may be selling different products or services than in the U.S., which means international tax rates and jurisdictional rules may need to be applied when considering VAT.
- VAT Registrations - Determine which countries the company has registered for VAT and the details associated with that registration, such as registration numbers and dates. The existence of VAT groups in those countries and whether or not a company is a member of any groups is also important, as groups can offer benefits such as improved cash flow and filing requirement reduction.
- VAT Cash Flow - Determine VAT totals that companies have billed to customers as well as all VAT charged to companies by suppliers. Adding VAT for sales and purchases for a set period will produce a company's VAT cash flow value.
- VAT Return Filings - Identify if the company has filed all VAT returns and if so, if there is any sort of history for late filing.
- Audit History - Have local tax authorities ever audited the registered company for VAT? If so, what were the results of this audit?
- Regional VAT Profiles - Certain companies' overseas operations may have service responsibilities in more than one country, which means they will also have international tax positions in need of management.
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