VAT compliance in Europe


VAT compliance in Europe-Factors that affect compliance and stages of compliance


VAT compliance is becoming more difficult by the day because the rules and regulations keep changing and legislations keep undergoing amendments. VAT compliance is even tougher for those exporting and importing goods and services because they have to ensure VAT compliance across multiple jurisdictions. The burden of compliance on businesses varies a lot because although the principles of tax remain the same in every country but the rules can be re enacted and implemented differently in each country.


The cost of compliance for the businesses depends upon two things. First is the time required for VAT compliance in every country and second is the way in which taxes are implemented with the help of different administrative practices.


VAT compliance takes less time in developed nations when compared to their counterparts in the developing nations. Also, VAT compliance takes more time in countries where indirect taxes such as VAT and corporate income tax are administered by different authorities.


Administrative procedures differ in each country and help to decide how long VAT compliance takes. In general in countries where online filing and payment methods are available there people take less time to comply with VAT. Another factor which decides how long VAT compliance takes is the frequency with which VAT returns are filed. And quite understandably it takes longer for VAT compliance in countries where extra documentation is needed to submit a VAT return.


Now that we have seen the factors which determine how long it will take to comply with the VAT requirements let us see which steps and activities form part of VAT compliance. The first step of compliance is the preparation stage. This stage includes gathering data, analysis of accounting data, calculating tax liability and if the tax authority demands tax records then preparation and maintenance of the same. This along with compliance with changing rates of taxes relevant in the given year form part of preparation activities. The next set of activities which form a part of compliance are the filing activities. These include filling in the tax return forms and attaching any other additional documents that may be required. The next obvious step is to submit the forms and if online filing is required then doing the same.


I would like to conclude this article with telling you that you can hire fiscal representatives for VAT compliance because in a dynamic business and regulatory environment it is necessary for business owners to remain fully aware of the laws and ignorance of law is no excuse and if you do not comply with the VAT requirements then you might incur fines and penalties. It might be challenging therefore fiscal representatives can help ease the burden. These representatives are not just tax experts but also language experts and help in a great way. Finally I would like to add that one ought not to lose hope because the ultimate goal is still to have a simplified and more unified VAT system for Europe.