For manufacturers, VAT compliance in a globalised world is complicated. Even a single factory forms part of a complex global supply chain. Let’s briefly consider the practicalities of global manufacturing VAT compliance. We will then examine how you can simplify manufacturing VAT compliance and make more informed decisions.
Managing multinational manufacturing compliance
When a manufacturer’s operations are spread across multiple jurisdictions, VAT compliance becomes very nuanced. For example, if goods are shipped to a warehouse in another country, do they remain under the control of the manufacturer or will they be distributed to clients? What are the VAT implications in either case?
Manufacturing-specific compliance questions
There’s the question of exemptions on capital equipment, PPE and an array of other items.
Capital equipment also creates the potential for tooling VAT, especially in specialised manufacturing sectors, such as the automotive and pharmaceutical industries.
The geopolitics of VAT compliance
In a world of cross-border supply chains and globalised product lines, the regulatory environment is frequently very dynamic.
Brexit provides a clear contemporary case study. Brexit complicates the designation of goods produced in the UK and an EU state, raising urgent VAT compliance issues for affected manufacturers.
Serious regulatory upheaval can be hard to predict. For that reason, manufacturers often benefit from an expert advisory service to help quickly adapt to changes changing VAT regulations.
Record keeping and compliance
For manufacturers, VAT compliance presents two connected challenges.
First, understanding compliance requirements for the production and movement of different kinds of goods, in multiple countries, under varying conditions.
Second, keeping track of all transactions and submitting all relevant documentation to tax authorities in every country in which you have a VAT obligation.
Human expertise, supported by technology
For example, a businesses with factories operating in multiple countries needs to understand the exemptions and obligations in each jurisdiction. That’s obviously important from a tax compliance perspective. The knowledge also helps businesses make strategic decisions about costs at each site.
Disclaimer: Reproduced/Adapted with permission from VATGlobal.