Businesses lose out on millions every year in local VAT returns due to an overwhelming fear around the administration and filing of VAT incurred on local travel and entertainment costs.
The reasons many tax teams fear domestic VAT are the high volumes of tedious paperwork, complex legislation laws and manual processes. However, the overarching reason for why companies don’t delve into domestic VAT on T&E spend is because of the fear of being penalised. Heavy penalties on incorrect inputs can be – for lack of a better word – ‘taxing’ on a company’s bottom line. Although companies do try to recover local input VAT, a whopping 27% are non-compliant because of manual processes that leave room for incorrect filing. The following situations illustrate the problems tax departments face around domestic VAT.
A Cumbersome, Tedious Process
A Company’s travelers often return from business trips with many different forms of spend evidence, most of which will not be compliant immediately for VAT recovery. Therefore, a detailed manual review process is required by finance staff to limit the business risk of non-compliant submissions – It’s difficult, tedious and requires manpower. And every business on earth is trying their hardest to avoid needing manpower in any area, let alone VAT.
“Just to be on the safe side, let’s not submit that invoice”
If you’re in the finance administration team, I bet you’ve heard this one before. This is a fear that most tax departments – especially those in charge of their multinational corporation's multiple foreign VAT registrations and many returns – have when it comes to filing their local VAT returns. A lack of knowledge and resources make it impossible to determine the compliance of every little hotel bill and coffee receipt (some businesses must across many different countries!). In the end, this results in very limited travel spend categories being claimed.
A Lack of Digital Solutions
Businesses are currently relying on their tax teams to facilitate this entire process manually. This is because there is hardly any VAT compliance technology available that specifically addresses the processing and validation of local T&E expense data and invoices.
VAT IT is proud to say that we have worked very hard at addressing these problems. Our Domestic VAT solution offers both industry-leading AI technology – specifically built to enhance your domestic VAT processes – as well as hands-on support from our team of incredibly knowledgeable VAT experts.
To learn more about our Domestic VAT service, click here. Or leave your details in the contact form and someone will be in touch with you shortly.
Conclusion
With reasons like these, you can see why most tax departments have such fear around domestic VAT recovery and compliance. But there is help available that can provide an end-to-end solution to getting it 100% compliant.
Claimable countries & VAT rates
VAT potential calculator
Invoice compliance checklist