Stricter VAT Compliance Drives the Need for P2P Automation
According to a Grant Thornton survey, 45% of CFOs say the #1 challenge to company growth is the increasing costs of compliance. This is becoming more and more exacerbated because governments are cracking down on tax evasion and mandating the real-time collection of invoice data. By requiring real-time reports with additional validation rules, governments are able to track invoices more closely and close the tax collection gap. Mexico and Brazil have collected billions of dollars by mandating eInvoicing and European countries are beginning to follow suit. Spain, Poland, and Hungary are the first of the European countries to adopt this style of VAT collection and the UK, Italy and Portugal are close. Now that governments are requiring traceable documents in real-time, the best solution for companies to limit audits, penalties and the cost of compliance is an automation eInvoicing solution.
This month, Mexico and Spain will implement new VAT mandates. Mexico is moving to cross-border transactions to monitor exported goods. Previously, Mexico did not have a process to identify foreign importers and Mexican exporters. In order to combat this gap in their process and limit illegal activities by companies, there are now going to be 29 additional validations to cross-check invoice data. In addition to the 29 validations, Mexico will also be tracking payments. Now, the government will know when the seller gets paid and will be able to easily distinguish between invoices and payments. Spain is shifting away from ad hoc summarized reports to real-time transactional data to conduct their audits more effectively, fight VAT fraud, and close a two million Euro gap in tax collection. In this new mandate, VAT books of invoices issues, invoices received, intra-EU operations and investment goods must be submitted in real-time.
With the addition of these stricter audits, automation is the most effective strategy for companies to overcome the challenge of compliance costs and limit VAT penalties. Most companies don’t have the master data or the streamlined process to deal with the increase in validations and necessary reporting. Without clear visibility into your invoicing process and organized, accessible records of transactions, real-time compliance and reporting are laborious and error-prone. Automated solutions provide increased visibility and traceability your invoicing process. eInvoicing and workflow tools continuously track and trace documents in real-time to avoid penalties and ensure reports and documents are submitted on time. With these tools, all relevant documentation, workflow, and history are available in a single, controlled location. Additionally, because governments are updating the VAT mandates frequently, it is important to have an automation solution that can integrate any new legislation into automated business rules and practices. In order to stay ahead of the curve and not be penalized for failing to comply with a new mandate, automation solutions allow business practices to be updated and modified to remain in compliance. Automation solutions are the key to tackling the increasing costs of compliance and with the new mandates being implemented this month, now is the optimal time to evaluate your current invoicing process and the electronic invoicing and automation solutions available to your company.
To learn more about the role of eInvoicing in VAT compliance and how to leverage automation in your company, watch this webinar hosted by Direct Commerce and the VAT Consultancy or visit directcommerce.com.