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Tax Engine versus Add-on; the right VAT determination solution?

Native ERPs struggle with VAT and GST calculations – is a tax engine or Add-on the answer?

Accounting software, including Enterprise Resource Planning (ERP), invoicing or marketplace platforms generally struggle with cross-border VAT.  The risk is delays in invoice payments, input VAT being deemed irrecoverable and potential fines from the tax authorities. Does a full tax engine or an Add-on hold the answer to securing right calculation of validation of both Accounts Receivable and Accounts Payable VAT?

How are we at VAT Calc doing it differently? Our tax engine, VAT Calculator, is built on the provisions from local law which means it comes ready for all industry verticals, whether B2B, B2C, complex supply chains, digital services, etc, in over 100 countries, with all the otherwise costly luxuries of a regular tax engine and without the inflexibility of an Add-on.  So avoid the major expense, huge IT and finance resource distractions with a rapid and inexpensive implementation – Contact us for free demo.

Why do native ERPs fail the VAT test?

ERPs, accounting or billing systems may adequately handle basic domestic VAT calculations on in-country or domestic sales invoices, but struggle in other areas:

  • Cross-border VAT treatment, including correct application of the reverse charge;
  • Understanding huge variations in each countries’ deductibility rules is a challenge to track and incorporate into applications;
  • Keeping multiple country rates, rules on the place of supply and obligations to pay tax are often too complex for the ERP to retain and process; and
  • Even where much of the above can be contained within the ERP’s own logic, customisation and updating relies of expensive outside experts.

A surprising number of businesses attempt to cope with the above issues relying on their finance or tax teams’ manual efforts. This though is full of risks around accuracy and expensive.  Only automation is up to the job at scale.

Tax automation for VAT – Engine or Add-on?

Another option is an ERP Add-on; a tax engine embedded into the ERP. They are typically built with an ERP version in mind and work within the ERP to override tax rules to produce the right tax codes for VAT determination. SAP Add-ons are common given its basic VAT determination functionality and complex modules.

But which could be right for your business?  Here are the key differences which will help determine the right path:

  • One or more VAT regimes? Add-ons tend to be just capable of single jurisdiction or region’s rules. For larger geographical coverage, an engine will be required, especially outside of Europe.
  • Single or multiple EPR instances?  Add-ons will generally only work on a single ERP instance. If you have multiple ERPs and/or ERP versions, then you will require a full tax engine integration
  • Cloud or hosted on-premise? If your ERP is based in the cloud, then many Add-ons will not work. This varies, so worth checking.
  • Do you have an expert VAT team to support rules and keep the configuration up-to-date? Add-ons require more support on rules and rates than cloud-based engines. The latter usually comes with full remote support and updates – but be weary of the expense.
  • What is your budget?  The tax engine luxury of the depth of content, support and versatility across multiple ERP instances comes with a huge bill, quickly running into many tens of thousands and more of Euros or dollars.

Contact us to see how VATCalc has dodged all the big expensive and IT resource requirements for global VAT determination.

4 reasons VAT Calculator is the best tax engine in the market

VAT Calc's tax engine - operating in days; saving you huge costs and risks on tax liabilities
1. VAT Calculator is the only global tax engine built on tax laws as opposed to custom rules Instant implementations for any business! You won’t need expensive consultants spending months adapting it with their fiddly custom rules that require ongoing maintenance. We already have all the complexity of any use case ready-to-go out of the box: triangulation; 2021 EU ecommerce reforms; gig & sharing economy taxes; customs and warehouse exemptions and the rest of your wish list. In fact, a VAT Calc implementation is mostly just building to our API - days instead of months!
2. Using VAT Script, you take complete, real-time control of the rules Whilst our engine is built from the national tax laws up, you may have requirements that are nuanced to your business. No problem: with VAT Script, our proprietary tax programming interface, which you can be trained-up in minutes, allows you to adapt the assumptions to your business model or interpretation of tax rules. No need to call IT and ERP teams or pay for costly outside help for punishingly lengthy code change-cycles.
3. So good, we built two You may have already done the tax calculations on large batches of transactions, but you need it verified. Our VAT Auditor application will instantly verify the VAT / GST calculations of any size file, and return line-by-line errors and suggested changes. No complex or expensive integrations. You can make the amendments live in the system, and, if you wish, commit to our VAT Filer.
4. It’s on the same single-platform as our VAT Filer returns service Not convinced yet? This is the killer feature. Your calculations are immediately reported in the right return and box without any further connections, integrations, or fiddly reconciliations. That's hundreds of hours and thousands in consulting and software costs saved. VAT Calc is the only tax engine with calculations AND returns on the same application.

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