A recent guest post on spend matters that called Accounts Payable: The New Tax Department noted that as governments worldwide continue the fight against tax fraud, they are requiring more data from enterprises, even down to the individual invoice level.
The guest post also notes that VAT/GST payers often find these requirements onerous, as they can delay operations and increase processing costs for individual transactions, but it doesn’t have to be this way.
An appropriate software platform that supports both customer e-Invoicing from invoices that originate from the organization and customer paper invoicing and also supports the tracking of each tax collected (against an appropriate tax code) can make the identification, consolidation, and submission of such invoices a snap (as long as it supports the required output data format). One click can generate the “tax package” for a country of choice and a simple upload to the government site can send it on its way. It doesn’t have to be hard.
And even if your organization does not have to do this today, it should plan for it, especially if it wants to go international. Currently, as per the post, 16 countries require individual tax invoices and the number is growing. Moreover, many countries can ask for them at any time and an inability to produce quickly can land you in very hot water.
But even more important than tax payment is tax reclamation. If you have a really good platform, it will allow you to import the invoices you receive from your suppliers, track the tax you pay by tax code, and automatically calculate tax owed to you (as you pay tax you collect and get reimbursed for tax you pay in many countries) as well as the supporting tax package (if required). Remember, the governments typically only care about getting their share and the invoice submission laws are all about making sure you pay what you’re supposed to, not about making sure you get credit for what you pay.
Now, if you are operating in a dozen countries, it will be up to legal and finance to figure out which ones you have to collect in, report in, and what taxes and reports are relevant, and this will generally be beyond the capability of most e-Procurement and AP programs, but the necessary data:
- standard tax code id
- UNSPSC and/or HTS code
- collected / paid
as well as the required data formats (EDI, XML, etc.), and one-click import/export (for a standard date range) are easy to support — and any good e-Procurement platform should support it (and if it doesn’t, it’s not a platform for you). And you need one of these, so you can get the AP department what they need to not only make governments and suppliers happy, but make sure you reclaim every penny of tax globally you are required to. Taxes add up … fast … when not reclaimed. So make sure your Procurement platform does what it needs to do to support your reclamation.