United States

Global indirect tax strategy and structure

Effective management of value added tax has positive business impact

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If your company is internationally active, you likely have value-added tax (VAT) obligations. Approximately 160 countries employ a VAT system; with the United States being a notable exception. Although the tax is common, it is often mismanaged or not optimized to provide the maximum benefit to a business. Effective management of your VAT obligations will positively affect and add value to your organization. We recommend the following be considered when evaluating your VAT position:

  • Supply chain and transaction managementSupply chains typically involve a number of separate transactions involving vendors, customers and other group companies. Each transaction has its own VAT implication and taken as a whole can lead to some complex outcomes, particular where supplies across international borders are involved.
  • Risk and compliance assuranceVAT-registered business, through the act of charging, collecting and remitting VAT, are effectively unpaid tax collectors for the tax authorities. However, there is a significant responsibility placed on businesses to ensure they make accurate decisions and comply with all the rules and regulations as well as file VAT returns and make VAT payments on a timely basis.
  • Audit support: Tax authorities routinely inspect the VAT records managed by businesses and this can lead to the identification of errors and assessment.
  • Liability rulings: At an individual transaction level, it is occasionally uncertain how VAT should be accounted for. Knowledgeable resources can be leveraged to help determine the correct VAT rule and rate. However, where there continues to be uncertainly business to submit a ruling request to a tax authority developing and presenting arguments to obtain the most favorable ruling.
  • Corporate transactions: Some of the largest and most complex transactions that an organization enters into occur when businesses are bought and sold, particularly if there are multi-jurisdictional. VAT plays a significant and integral part in this.
If this is the first time your business has taken a strategic view of VAT, a high-level assessment of your VAT position will be a valuable starting point. A focused analysis can help you develop a foundational view of your structure, supply flows, contracting arrangements, compliance obligations, systems capabilities and automated VAT processes from which more detailed strategic and commercial decisions can be made.

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