Value Added Tax (VAT) is the dominant type of sales tax or turnover tax in the world, applied in over 130 countries.  As a result of the globalization phenomenon, we are witnessing three important trends:

• a strong increase of global trade in terms of volume;
• a diversification of locations from where multinational enterprises produce and distribute goods and services;
• an increase in the participation of midcap and small cap firms in international trade, mainly enabled by the Internet.

As a result, enterprises increasingly face value added tax related issues.

Although simple in structure, VAT appears to be quite complicated in practice, and rules vary significantly among countries. Cross-border transactions, i.e., the movement of both goods and services between two or more jurisdictions, regardless of whether the transactions involve third parties or take place within a consolidated group of companies, are subject to a very specific set of rules. Moreover, a multi-disciplinary approach, including Customs Duties and Transfer Pricing, may be required to offer solutions that really work. Multinational enterprises may find themselves required to register in multiple jurisdictions, and compliance cost can be very high when international business transactions are not planned and structured with VAT in mind. Because of its volume, cash flow planning for VAT can prove advantageous for companies operating in a global world.

The experience that enterprises have with the complexity and financial dangers of VAT, has triggered an increased awareness of the challenges of VAT.

International VAT Consultants can help.