How to minimize VAT liabilities and maximize savings

The VAT recovery process can be rife with challenges. However, although many of these roadblocks are due to the complex VAT landscape, it’s undeniable that many of these challenges can be attributed to internal organizational pitfalls and liabilities - despite an organization’s valiant efforts. 

Naturally, identifying these liabilities hinges on your understanding of the overall VAT treatment for your organization. So, to avoid an ongoing cycle of trial and error, we’re looking into some of the most common VAT liabilities, so you can shake them off once and for all. 

Common challenges within the VAT reclaim process

In a nutshell, if successful VAT recovery means compromising your time, people, or money - you’re most likely caught up in some of these common challenges. Although most businesses are fully entitled to reclaim their expenses on local and international business spend, shared challenges often hinder or drag out the process. Some common pitfalls include: 

• Non-compliance with country-specific deadlines and rules
• A lack of expertise in foreign legislation, language support, and relationships with local tax authorities. 
• A need for knowledge and resources regarding identifying VAT reclaim opportunities. 
• Incorrect or incomplete claims.
• Missing critical VAT reclaim windows as recovery is subject to time limitations. 

So how can organizations tweak their internal structure and processes to overcome some of the most significant challenges? Here's our take. 

Confirm eligible expenses 

One of the most important first steps in minimizing your VAT liabilities is to confirm your organization's eligibility criteria and to identify which expenses are recoverable. Reclaiming costs that aren't recoverable wastes valuable time and resources and ultimately hurts your VAT report with the relevant authorities. Before simply filing a vat refund claim on all business expenses, it's crucial to consider whether or not the supplier is VAT registered or the supply has VAT on it.

Spend visibility 

It's common for larger organizations or enterprises to rely on a project-orientated account system. However, this means many projects aren't necessarily visible from an accountancy point of view, causing a significant VAT recovery liability. For organizations to successfully reclaim the VAT portion of their spending, the expenses must be visible at a leadership level. Therefore, organizations must implement processes that guarantee all invoices are reported into the accounting system to maximize the reclaim opportunity. Not only does this aid the recovery process, but it also helps business leaders gauge the value and significance of individual projects. 

Invoicing instructions

Invoicing instructions are the crux of the reclaim process and can make or break a successful VAT reclaim. The entire VAT recovery process hinges on an organization's compliance with country-specific invoicing and recordkeeping instructions. Unfortunately, this is also one of the most common liabilities and areas of non-compliance due to the technicalities and complex rules regarding correct invoicing. Therefore, keeping all original invoices and ensuring they include the accurate information is critical. Even in the event where claims are filed in digital format, local Tax Offices might request the original invoices on a query level. 

Automate the VAT recovery process

Ultimately, the most surefire way to maximize your VAT recovery savings and mitigate your liabilities is to partner with a VAT solution that does the heavy lifting for you. We work as an extension of your finance team to ensure that you're reclaiming eligible, compliant, and error-free VAT. 

With our unique combination of VAT technology and hands-on personal service, our VAT solution assesses and reviews transactions to ensure that you recover the maximum amount without allowing any internal liabilities to slip through the cracks and sabotage the process. 

Untie yourself from the administrative weight of the VAT recovery process. Instead, tag the VAT IT team into your corner for effortless, streamlined, and maximum VAT recovery.