Globalisation is on everyone's lips. The fact that globalisation can also have great impact in the area of indirect taxation in connection with the entry of goods is not always on the radars of internationally active companies, however, this can lead to enormous costs. Our experience tells us that only few companies are really aware that one of the many effects of globalisation can even be a reduction in costs, as the August edition of vat's important reports.
International trade policy has definitely seen better times. On both sides of the "pond", threats of limitations on international trade continue to grow; trade wars already rage between other parts of the globe. Talk is of new borders to be built, not only political but also of an economic nature. New customs duties between the economic regions, which had long been considered dead and gone, have been dug out again from the mothballs of history. Without wanting to be too pessimistic, it smells much like the 1930s.
But few are truly aware that more issues than just custom duties are involved. VAT implications - from future costs to new registrations for VAT purposes - could lead to enormous additional administrative outlay. But while, here and there, this extra outlay can't be avoided altogether, it can at least be reduced.
What does this mean for my company?
The more or less unrestricted international movement of goods has become a normality for us all. Companies no longer scrutinize their own transactions at all; sometimes a company is not even aware what countries are involved in its purchases and sales. This poses risks. When we consider that the average VAT rate within the European Union (EU) is around 22%, it is clear just how much money may be involved in the incorrect handling of a transaction.
Goods are rarely shifted between only two parties: In most cases at least one other party is involved but, empirically, it is usually many more. This means that the first party mostly delivers to the last one. This sort of chain transaction enables efficient business structures and contributes to globalization. Within the EU, however, this leads to VAT implications for all parties involved, in either the sending or the recipient country. The result is detrimental for non-EU companies in particular: such non-EU companies (i.e. those outside the European Union) suddenly find themselves faced with VAT...