Minding the VAT Gap

Although split payment approaches and mechanisms differ by country, the general concept is similar. Rather than relaying the full payment to the seller, the credit card, debit card, or payment services company extracts the VAT from the transaction and submits it directly to the government agency, typically a treasury organization.

Given the digital nature of this approach, split payment mechanisms are also being seen as a way to enable the real-time reporting and monitoring activities that tax authorities appear eager to conduct.

Read more about how Latin American countries like Argentina, Ecuador, and others are currently managing VAT with a split payment method.