Business have for decades been let-down by VAT automation.
Systems adapted from US sales tax engines fail to deal with the granular demands of global VAT. This means complex and hugely expensive implementations out of reach for all by the largest of enterprises.
Kid Misso, our COO, talks about this market failure to date, and how the VATCalc single platform service, uniquely built on local VAT legislation. This future-proofs businesses as EU VAT in the Digital Age and global reforms merge VAT/GST calculations, e-invoicing and returns reporting in real-time.
How US sales tax adapted solutions struggle to cope with VAT
Indirect tax automation is now well-established in financial technology. Thousands of companies have experienced the benefits of automated tax determination – via tax engines – and dedicated indirect tax reporting systems; allowing them to more easily grow into new markets, saving them time and money and reducing their processing costs.
However, many of these first-generation tax automation systems have been adapted from US sales tax systems and international VAT users have found them hard to implement and have often experienced frustration with their VAT capabilities. These systems often have incomplete country content internationally and may be missing key international features, so time and effort is needed by customers to add their own rules to make it work for them. This results in overly long and costly implementations, means they require unexpected maintenance to stay up to date and can become unwieldy over time.
In addition, very few of the products available offer a complete end to end solution for determination, validation and returns.
The outcomes of this for the companies that have made the leap is that whilst they are achieving some of their automation potential, they are leaving a lot of the automation opportunity on the table and spending too much time and money.
US Sales Tax tech ahead of the choices for VAT / GST
If you contrast this with US sales tax automation, where it very common for even small companies to use a Sales Tax Calculation service, there are two main differences:
- Sales tax engines usually work out of the box with very limited need for adding and maintain custom rules. Companies just connect to the service and start trading with accurate tax. This is because, unlike traditional VAT determination services, the tax legislation content is highly granular and very accurate from a legislation perspective.
- Sales tax engines are usually used at the point of a business transaction to not only calculate tax but also to store the calculated transaction for returns filing. Companies only have to integrate with the calculation service and the systems will automatically collect their transactions and prepare their state and local sales tax returns for them. They rarely need to create specific data extracts from their systems, they don’t have to worry about complex transaction to return reconciliations and they can buy a service that does both determination and returns filing. This is because the same platform is used for both calculation and returns, unlike VAT systems, which are nearly always separate systems that do not work together and require separate integrations with a company’s systems.
VATCalc has seen the opportunity to disrupt VAT tax automation space by building a universal tax service that overcomes these limitations.
Complete legislation-based content
The secret sauce that makes our single platform possible and finally achieves the promise of a determination engine for VAT that works straight out of the box is our disruptive Concept based Content Engine. This engine provides a common framework for rapidly and securely building, testing and deploying any type of tax legislation content.
This has enabled us to build and easily maintain highly complex inter-dependent tax systems. For VAT determination our content includes all the articles of the EU VAT Directive covering the chapters for taxable transactions, place of supply, exemptions and liability to pay. As well as the local legislation covering the determination requirements in VAT countries around the world. The same content model allows us to easily map transactions to the correct boxes in returns, electronic submission formats, e-invoicing formats and to easily address other indirect taxes such as excise and direct taxes such as taxes on restructuring.
This has immense benefits to companies who implement VATCalc because, like implementations of US sales tax systems, they can just connect and start getting the right VAT out of the box without the need for big projects to map out their requirements and build and test complex rules.
This major benefit continues for the life of the implementation because changes to legislation are made immediately available to our customers without fear that they need to test continuously in case one of their custom rules has undesirable consequences on new content.
They also don’t have to invest time and money with multiple integrations to determination and returns or must worry about difficult reconciliations between determination and returns.
Single Platform for calculations and reporting
We have built VAT determination and VAT returns on a single platform that so that companies no longer have to have multiple integrations and disconnected determination and compliance systems and processes. VATCalc can perform VAT determination in real-time so that customer’s systems have the correct VAT treatment at the time of the transaction. VATCalc enriches these transactions with the data needed to identify exactly how to file them and puts them directly where they need to go in the returns service ready for filing.
Even if a company has already determined the VAT on their sales and purchases, so we can import their transactions and use the power of VATCalc determination content to validate these transactions to pick up issues before using the data to automatically make the returns available for filing.
Now, like their US counterparts, international companies can benefit from a single truly combined VAT determination and returns solution.
VATCalc is the only fully legislation-based tax services that uses modern cloud technology and that offers a single platform for VAT determination, VAT Auditor, VAT Advisory and VAT returns and filing.
Contact us to talk to our team and find out VATCalc can help you genuinely realise the amazing benefits of VAT automation and future proof your tax function.