VAT compliant– Why and how should you

 

VAT is a self assessment tax and the tax authorities depend on businesses which are tax registered to collect VAT from their customers on the behalf of the tax authority and then transfer that collected tax to the authority using VAT returns. That’s why it is so important for a company to be VAT compliant

 

Tax authorities need a proof of sales and purchases which are subject to VAT and the tax authorities need a way to monitor these transactions therefore invoices come into the picture. Preparation and issuance of VAT invoices becomes important in the whole process and also an integral part which ensures the VAT system functions smoothly.

 

Why preparation and issuance of proper VAT invoices is important to the tax authority is because the tax authority can carry out routine VAT audits only when all VAT chargeable transactions are properly evidenced and documented by the business. Accurate records of invoices leaves an auditable trail which shows the accuracy of VAT returns and payments submitted to the tax authority.

 

Following are some good reasons why VAT compliant invoices should be prepared and issued. If the invoice issued is a non compliant VAT invoice then the customer might not pay you because he will need that invoice for future purposes when he reclaims the VAT charged by him. Also, an incorrect VAT invoice could become the reason why you incur penalties from the tax authority. Last but not the least errors in invoices of goods and services sold and supplied can affect VAT return in such as way that cash flow is negatively affected.

 

We have dealt with why a proper and compliant invoice is important so now let us look at how to make a proper VAT invoice. The following are the requisites of a good invoice according to the EU directives on invoicing. First, there should be the date on which invoice was issued.  Second thing to keep in mind is that the invoice should bear a number which indicates the sequence of invoices. Then there should be the VAT number of the supplier. The customer’s  VAT number is the next requirement in case the sales is subject to reverse charge and the customer has to self assess the VAT. The names and addresses of the customer and the supplier should be mentioned as well. Next detail that needs to be mentioned is the quantity and description of goods and services that are at the center of the transaction. Next comes the unit price of goods and services excluding the VAT. Next are the details of any discounts or rebates. Finally the full net amount split by VAT rate or VAT exemption category needs to be disclosed along with the rate of VAT applicable and the total VAT amount. You should be VAT compliant otherwise you would be held accountable and will have to pay the unpaid VAT and also penalties .You might become answerable to the court as well.

 

 

 

https://www.vacue.us/vat-compliant

Comments are closed.