VAT Advisory and Compliance

Global corporations are likely to be dealing with Value Added Tax in many areas of their business. This is a VAT foreign indirect goods and service tax (GST). It is assessed based on the price of the product at various stages including production, distribution and end of sale. Rates can range up to 25% depending on the jurisdiction where the company is located, and the goods are sold.

Companies without a strong value added tax strategy can begin accruing unnecessary expenses. Frost Law will educate you on the various jurisdictions of VAT tax requirements to ensure costs don’t get out of hand. 

Common VAT Compliance Errors Businesses Make 

It is not unusual for businesses to make VAT-related errors that can lead to issues down the road. Here are some of the more common mistakes that are made. 

Misunderstanding of VAT Regulations

Many businesses misunderstand regulations on the deduction of income tax. This can lead to the following VAT calculation issues. 

  • Claiming income VAT on exempt supplies
  • Claiming income VAT on entertainment and non-business expenses
  • The deduction of import VAT paid on behalf of other businesses
  • The incorrect recovery VAT rate assessed on capital assets

Late Registration and Penalties

Companies that don’t fully understand VAT may be late to register. Failure to register for a VAT on time can result in unnecessary penalties. 

To keep this from happening, companies may consider registering for the MOSS (Mini One Stop Shop) which helps you declare and register VAT and keeps track of audits and traders. 

VAT on Non-Compliant Invoices

VAT advisory involves avoiding invoice errors. Examples include when a tax is incorrectly charged (for example, if no tax was due on the supply but was charged anyway) or if the wrong amount of tax was charged. If an entity does not issue a tax invoice or alternative documents when creating a supply, it could be facing significant penalties. 

How Does VAT Differ for Gross Receipts Tax?

Value-added tax differs from gross receipts tax in that it is a tax on consumers rather than the business. It can be imposed in all the steps of making, distributing and selling a product. And while the consumer pays the tax, the business will get a portion of the tax back.

What is Reverse Charge VAT?

A reverse charge is used to calculate VAT. It may serve as an alternative to charging VAT on an invoice. 

In most cases, businesses will charge VAT and supplies and deduct them from purchases. The reverse change is an alternate to the rule. It involves the supplier eliminating the VAT on the invoice and having the customer pay and deduct VAT simultaneously through the VAT return. 

In other words, the client will pay the net amount to the supplier. But when completing the VAT return, they will manually calculate the VAT on the reverse charge invoice and report it as input and output VAT. This will produce no effect for the customer and supplier cash flow. 

Do I Need an Attorney to Assist Me with Value Added Tax Matters?

Value-Added Taxes can get confusing. An attorney will help you understand how each nation handles VAT so you always stay on the right side of the law. They can also defend you if any issues arise. 

If you need assistance with VAT issues, Frost Law is a firm you can trust. We offer a wide range of international tax services. We will provide you with the help you need to reduce tax risks and keep your business running smoothly.

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