Report

VAT - the global guide

Alex Baulf Alex Baulf

Understanding how to pay the right level of tax in every country you operate can prove a confusing task, and the cost of getting it wrong can be expensive.

We’ve produced the third edition of our biannual International indirect tax guide to help you navigate the VAT, GST and sales tax systems of 118 countries, as well as highlight some global changes and trends. Our aim is to demystify some of the most complicated tax systems in the world, and show you where your business can benefit from this depth of knowledge.

Some common themes came to light across the globe:

Digitalisation

The direction of travel for international indirect tax compliance is very clear - it’s digital and near real-time. One of the trends we have seen across the globe is a shift to mandatory electronic invoicing.

An example of this is Italy, which will introduce mandatory business-to-business electronic invoicing from January 2019. Tax authorities are increasingly making use of tax data by carrying out sophisticated data analytics, reviewing the full data set looking for anomalies and errors to form the basis for assessments of tax and penalties.

In the UK, HMRC’s move towards digitalisation of compliance, is the Making Tax Digital initiative where it will be mandatory to submit UK VAT returns electronically via API from April 2019. Businesses must understand their current VAT compliance process and ascertain what gaps need to be bridged to meet the new system and data requirements.

Wayfair and the ‘Netflix’ tax

It’s been 15 years since the European Union (EU) introduced specific targeted legislation to tax the digital economy. This is now a significant trend and the legislation has inspired similar laws across the globe. It seems that almost every month another country announces new legislation targeting non-resident supplies of digital services.

This is particularly a growing trend in the APAC region. Australia has introduced the ‘Netflix’ tax, as has New Zealand, South Korea, and Taiwan. It is not just digital services that are increasingly being taxed in the emerging digital economy, but also supplies of goods from suppliers outside of the country or state via ecommerce.

The recent ‘Wayfair’ decision in the US could be the most significant indirect tax court decision in a generation, expanding the definition of ‘nexus’ for sales and use tax and meaning many businesses will have to consider registering across the US where they make sales.

Technology

The evolution and adoption of indirect tax technology and increased automation continues to grow. Not only has this been fuelled by the need to meet complex new tax compliance requirements, but also by the changing tax technology ecosystem.

Many businesses are starting to develop their own tax technology strategies and roadmaps rather than simply looking to purchase a standalone solution to meet a single requirement. However, businesses should realise that technology solutions are not ‘plug and play’. They need to clearly define the functional and tax requirements they need to meet and make sure that the configuration is properly designed in a scalable manner, that the solution is adequately tested and people trained

The international indirect tax issues discussed above affect many different parts of the business, from warehousing and logistics, procurement, finance, legal, marketing and IT. Download the International indirect tax guide to help you navigate the VAT, GST and sales tax systems of 118 countries, as well as understand global changes and trends.

To find out more about navigating the global VAT, GST and sales tax landscape, download the report. [ 8899 kb ]

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