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Don't let VAT stand in the way of your international growth plans!

Published on: 01 augustus 2023
Type of publication Insight

‘The world may be getting smaller but the market is growing. Entrepreneurs are responding to this: more and more businesses are expanding their operations to other countries.’ Marisa Hut, Partner VAT & Customs Advisory at Baker Tilly, explains the challenges she and her team advise clients on. ‘Each situation is different and each VAT query we receive is unique.’ Is there a common thread running through everyday practice? ‘There certainly is!’ Maria laughs. ‘For those businesses that obtain sound advice beforehand, VAT doesn’t need to stand in the way of international growth!’

Many entrepreneurs see VAT and customs obligations as a burden. ‘Dutch legislation is generally reasonably comprehensible. But as soon as you start to do business in or with another country, things can get complicated. What implications does this have? Which VAT is applicable? Does the business need to register anywhere? And how do you arrange the administrative side of things? These are the matters we help our clients with.’

Keep track of any differences and changes

‘VAT is largely harmonised within the European Union,’ Marisa explains. ‘Yet individual countries still have their own laws and legislation and the playing field is constantly evolving. New case law, new rules for e.g. digital services: it can sometimes be hard to keep up with it all. Especially when you have a business to run.’ As an entrepreneur, you need to take into account changes both to rules and to business operations. ‘Say you’ve been selling products to German consumers from the Netherlands for a while. You’ve established that Dutch VAT rules apply in this case because you remain below a specific threshold and therefore your invoices include 21% Dutch VAT. You declare this in your Dutch VAT return. At some point you expand your operations and start selling products to French consumers as well. If you’re unaware that the threshold also applies to these transactions and it’s the overall total that counts, you’ll end up charging the wrong VAT rate. Your VAT declaration will then also be incorrect and you’ll face VAT declaration and payment requirements in both Germany and France. You’ll need to rectify this, which can be time-consuming and costly.’

Avoid delays caused by customs formalities

Caution is also due with respect to customs rules. ‘Customs legislation plays a more prominent role when you do business with countries outside the European Union, such as the United Kingdom, Norway and Switzerland. You can’t ignore it.’ Marisa explains using the example of an entrepreneur who turned to them with questions about the import of goods. ‘Too late really. The entrepreneur was used to doing business with Belgium and Germany and hadn’t realised that imports from the United States were subject to different rules. They didn’t have the required paperwork. The result was that their goods were stuck in the port of Rotterdam. We were eventually able to help them sort everything out, but it took some time. Their customers were not too happy about the delay.’

With thorough preparation and a pro-active advisor at your side, you can anticipate problems like these. ‘Whether it concerns a single transaction or a completely new distribution model, our clients can count on our expertise and support. To us there’s no greater challenge than being presented with a difficult question and explaining the VAT and customs implications to the entrepreneur in a clear manner. Solving problems and transforming challenges into opportunities.’

Simplifying administrative processes

To clarify all the trends and developments, Marisa and her colleagues regularly sit down with their clients, either online or in real life. ‘It’s important to stay on top of things. We regularly publish articles on new trends and developments, which we share with our clients, but it’s usually the in-depth discussions that yield the interesting insights. Sometimes we need to discuss new obligations but often we can actually make life easier for the business. For example, by pointing out schemes that simplify the administrative processes, such as the One Stop Shop. This scheme enables all EU VAT returns for specific transactions to be submitted in a single country rather than in each individual member state.’

Convert data into sharp insights

In addition, Baker Tilly has developed a number of tools that provide practical insights into the VAT position and compliance of businesses. One example is the International Trading Tool (ITT). Marisa: ‘Our ITT enables you to extract more information from the data than what is already present in your records. Among other things, the tool uncovers input errors, inaccuracies and imperfections in VAT processes and records. Based on these findings, you then can determine relatively easily whether it’s possible to optimise the VAT position.’

And Marisa’s final words of wisdom? ‘You have a clear picture of what you want to achieve as a business, but make sure you’re also clear about the VAT and customs obligations. The rules may be quite complicated. Yet with sound advice and the right support they don’t need to stand in the way of your international growth ambitions!’

Keen to find out more about international growth? Our experts outline a number of important aspects you need to consider. Read more here or contact one of our advisors today.

The legislation and regulations in this area may be subject to change. We recommend that you discuss the potential impact of this with your Baker Tilly advisor.