COVID-19 VAT cashflow opportunities and complexity makes automation vital

Sep 13, 2020 | Richard Asquith

COVID-19 is creating major international cash savings opportunities as governments use Value Added Tax, Goods and Services Tax and U.S. sales tax as first-measure responses to support and boost the economy. However, businesses relying on basic accounting/ERP and manual VAT management lack visibility and the resources to take advantage them. Follow Avalara’s live global coronavirus Covid-19 VAT measures tracker.

COVID-19 VAT Risks

Missed cashflow opportunities – governments have launched and are extending cash support measures via their VAT regimes. But they are complex and come with varying application processes
Lack of Visibility risks penalties – are returns and payments going in on time with disrupted staffing and office access?
VAT cuts and their anti-forestalling rules risk undercharging VAT and creating customer or supplier disputes.

Avalara can automate the whole process, and leave your tax or accounting team free to focus on more pressing issues as businesses emerge from the pandemic lockdown. The automation is rapid to implement, and thousands of businesses of all sizes across Europe can attest to how it’s helping them through the coronavirus crisis and free up much-needed cash.

What issues is COVID-19 creating for international businesses?

COVID Issue	Challenges for businesses	How Avalara helps
Governments in Europe and beyond are offering a range of emergency VAT filings and payment deferments.	VAT cash flow boosts and compliance easements are being missed: – Details of the information, and language barrier means difficult to track – Each country has varying rules and steps to qualify	Avalara’s service comes with live updates on global COVID VAT reliefs, including how to qualify. These are readily adjusted through our VAT Reporting software settings to ensure you take full advantage of cash savings and postponed work obligations.
As countries move into the Containment and Recovery phases of COVID, next wave VAT responses are being introduced to help boost businesses’ bottom line. For example – changes to VAT bad debt recoverability rules – Right to defer import VAT	Many businesses do not have the VAT expertise to interpret how to implement these changes. Ensuring accurate and complete re-calculation of the changes manually is a huge drain on resources and will inevitably result in expensive errors	Avalara’s tax software is automatically update – whether SaaS or on-premise based with all global changes. This means your teams do not have to worry about foreign, fast-changing tax complexities and distractions
Governments are also rushing through temporary wholesale or sectorial VAT rate cuts to nudge consumers into the high street	Short-term VAT rate changes create a huge hidden administrative and IT cost for businesses: Updating ERPs with complex transition rules; creating and testing new tax codes; and modifying invoice templates. This is compounded on international transactions where local in-house VAT expertise may be limited or committed elsewhere	Avalara’s VAT Reporting is supported by over 50 VAT and GST tax content experts and testers. This means the immense distraction of a multitude of VAT rate cuts (and later, rises), are taken off your hands. VAT changes are fully implemented, on time and accurately. This frees your resources, keeps the tax authorities satisfied and avoids customer disputes on VAT treatment. This same proprietary technology also underpins Avalara’s outsourced VAT registration and returns service.
Out-of-office working with interrupted IT access and work patterns	Difficulties in staff availability makes it challenging to track the filing status of VAT returns, payments and the treatment of more difficult transactions.	Avalara’s international VAT Reporting dashboard and automated deadline alerts keeps all staff fully aware of risks of missed or delayed filings.
Staff illness	Managers may struggle balancing workloads to meet the new working conditions for locked out staff	Work can be quickly reallocated to other staff and teams, with a full audit history

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VAT rallies to the COVID-19 business challenge

This article is taken from our new guide which explains the measures business needs to take to capitalise on the liquidity prospects available in the COVID pandemic... how tax automation can help in this respect... and what might be coming next.

Download the guide