3 VAT E-Compliance Challenges

  • 19.Januar 2021

Widening budget deficits due to the COVID-19 crisis appear likely to drive broader adoption of VAT e-compliance rules throughout the European Union (EU). While tax administration’s position invoice clearance, real-time (or near-real-time) reporting obligations and other forms of e-compliance requirements are a great way to close the VAT gap and enhance compliance efficiencies, the rules post significant challenges to tax departments.

We know that satisfying new e-compliance requirements requires companies to invest substantial time and resources in process improvements and systems adjustments. Given what we’ve learned from recent responses to new e-compliance rules, it’s a safe bet that organizations will need six to 12 months to properly implement and test their new e-compliance solution. Several aspects of existing e-compliance deployments in countries have proven challenging to companies, including the lack of a standard approach, timing issues and language barriers. 

Three challenges are especially worth noting:  

  1. Tight deadlines: A country’s initial announcement that it intends to introduce e-compliance obviously precedes the date that the new requirements take effect—yet the length of that “compliance runway” can be short. Only after the new rules are finalized and made public can businesses initiate impact assessments, implementations and testing processes—work that requires several months to conduct. ERP vendors and other software providers also must wait until a new e-compliance rule has been finalized before adjusting existing offerings and developing new solutions. 
  2. Changes to information systems: All e-compliance rules beg a crucial question: What needs to be done to provide the required mandatory data in the right format to the authorities? Addressing this question requires an in-depth assessment of what data is required and how it can be collected from existing systems. This requires ample testing and reconciling to ensure that the data is consistent, correct and complete. The next step is to assess if the company has adequate systems in place to securely transmit this data, in the correct format, to the tax administration.
  3. Process updates: Since they are part of regulatory financial reporting, e-compliance requirements also affect finance and VAT-management processes and responsibilities. These additional reporting and reconciliation activities need to be assigned and integrated into existing workflows. Additionally, if external vendors perform any portion of these VAT-management activities, service level agreements with those third parties may need to be updated. 

Other challenges, including regulatory requirements pertaining to VAT data, also need to be addressed, as I cover in more detail in this article

Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information. The views and opinions expressed in Tax Matters are those of the authors and do not necessarily reflect the official policy, position, or opinion of Vertex Inc.

Blog Author

Peter Boerhof, VAT Director im Chief Tax Office (CTO) bei Vertex Inc., präsentiert Einblicke in die Auswirkungen steuerlicher Vorschriften, Richtlinien und Durchsetzung sowie aufkommender Technologietrends auf die Abläufe in Steuerabteilungen auf der ganzen Welt.

Peter Boerhof

Director, VAT

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Peter Boerhof ist VAT Director bei Vertex. In seiner Rolle bietet er Einblicke und Denkanstöße zu den Auswirkungen von Steuervorschriften und Steuerpolitik sowie den neuen Technologietrends im globalen Steuerwesen. Herr Boerhof verfügt über umfangreiche Erfahrung in internationalen Transaktionen, Unternehmensumstrukturierungen, Steuerprozessoptimierung und Steuerautomatisierung. Bevor er zu Vertex kam, war er Leiter für indirekte Besteuerung bei AkzoNobel, wo er ein TCF-System entwickelte und implementierte, die Abführung von Umsatzsteuer optimierte und den Übergang zu einem zentralisierten Modell für die Steuerabgabe für globale Steuerprozesse leitete.

Er war auch für die Planung und Einhaltung indirekter Besteuerung bei Fusionen und Übernahmen, Lieferketten- und ERP-Projekten sowie für die Implementierung von Steuerautomatisierungsinitiativen wie Tax Engines und Robotics verantwortlich. Herr Boerhof arbeitete auch bei KPN Royal Dutch Telecom, wo er für die Umsatzsteuer verantwortlich war. Außerdem beriet er bei den Big-Four-Wirtschaftsprüfern Deloitte und Ernst & Young (EY) zu Umsatzsteuer und Optimierungsprozessen. Er hat einen MBA von der Rotterdam School of Management und einen Master in Steuerrecht von der Universität Groningen.

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