VAT regulations in Europe are evolving at a head-spinning pace, forcing companies to quickly adapt their internal systems to comply with complex eLedger, eAccounting and eInvoicing mandates. Adhoc solutions - either forklift upgrades of existing ERPs and accounting systems, or modules bolted onto in-house solutions - may be a short-term fix but could cost your company greatly in the long run.
Change is a constant when it comes to VAT regulations, and if your company is operating in multiple countries, then managing that change becomes exponentially more complex. In-house solutions for compliance require much more than a one-time implementation. Each slight change in regulation - in each country - requires technology updates, process changes, testing and regular maintenance.
Managing this in-house isn't a single full-time job - it may require as many as 15 full-time employees.
When choosing an in-house solution, companies need to consider the hidden costs associated with VAT compliance, including:
- Change Management - Regulations change frequently - sometimes as often as several times per year in a single country. The list of costs associated with this constant change management is lengthy: software upgrades or new license requirements, project management and subject matter experts, regression testing on your ERP system, ABAP development, end-to-end testing of each component, and running systems in parallel during the transition.
- Annual Support - These costs include software/hardware maintenance, middleware for connecting systems, a local compliance server and its related maintenance, and a three-tier environment (internal support cross charges, data center fees and more).
- Annual Support Staff - You'll either need to task your existing employees with more work, or hire additional staff, including those to monitor and support local server and middleware issues. You may also need local business users to support report transmissions to the government and correspondence with customers, as well as those who can fix and resolve data discrepancies and do reconciliations.
- Country-specific - These costs will vary by country, and can include customer-specific customisations, multi-country ERP customisations and integrations, archiving costs and other adaptations to meet each country’s unique specifications.
Failure to address everything required for compliance can increase costs in terms of audits, fines, penalties and even operational shutdowns, which can result in delayed shipments, impounded goods and returned orders.
Now, multiply all these integration, support and change management costs by the total number of countries in which you operate, and it's easy to see how the costs of compliance will continue to grow.
It's definitely not a process that should be managed locally with no corporate oversight.
Sovos can help you evaluate your company’s costs of compliance and assess the benefits of moving to a VAT compliance and reporting solution. Contact us for our ROI calculator.
About the Author
Jeroen Wensveen is Solution Principal at Sovos Compliance and is based in Amsterdam, the Netherlands. He has more than 20 years of international indirect tax experience and is currently responsible for the strategy of the Sovos VAT Reporting global indirect tax software application. He works closely with Sovos clients and partners to facilitate sales, software implementations and international compliance process transformations. Before joining Sovos, Jeroen was one of the founding partners of VAT Resource, a leading European VAT services organization, where he focused on building out the European VAT compliance outsourcing practice and the development of VAT software solutions. He has worked on several indirect tax automation projects for large multinational clients. Jeroen is a Tax Lawyer and has a L.L.M. in Taxation from Leiden University in the Netherlands.More Content by Jeroen Wensveen