The Author of the Article
To keep in mind
Our three tips for effective VAT management of your sales invoices (AR Account Receivable):
- Master the entire transaction process and identify the appropriate procedure for each transaction.
- Create the sales invoice with the relevant VAT information and configure the ERP system with the corresponding tax code.
- Tackle special cases and call on our VAT experts for advice and experience.
You are the head of a company's tax and accounting department and have to organise the invoicing of sales (AR - Account Receivable). This process involves VAT management, which can be complex depending on the transaction.
To ensure that invoicing is properly integrated with VAT, here are three useful tips:
Understand the entire transaction flow
To manage sales invoices effectively, you need to understand the entire transaction process, from purchases to sales. This enables you to identify the right procedure for each transaction. This involves interacting with various internal departments (such as accounts payable, logistics, sales, purchasing, etc.) to gain a global perspective on the transaction.
Once the VAT treatment of a sales invoice has been established, the following information can be deduced: the country involved, the VAT number required, the mandatory information, the applicable VAT rate and the method of sending the invoice (electronic invoice or paper format).
Let's take an example
When your French company buys a product from a German supplier and resells it to German customers, the transaction is not automatically exempted from intra-Community VAT.
In this situation, since the products do not leave Germany, the transaction is subject to German VAT.
An invoice must therefore be issued with German VAT, ensuring that it complies with German regulations.
Configuring "Tax Codes" in the ERP system
Once the sales invoice has been created, the ERP system needs to be configured to handle current transactions in the accounts and in the VAT return. This is done by assigning a tax code to each transaction, enabling it to be allocated to the correct sections of the income statement and to the appropriate boxes on the VAT return.
If, as in the previous example, you need to issue an invoice with German VAT, you will need to create a specific tax code to create a sales ledger for transactions in Germany and then link this tax code to a box in the German VAT return.
Don't overlook special cases
It is important to deal with special cases, which are often a source of complications. Neglecting these situations could lead to VAT disputes. A thorough examination is essential to establish an appropriate strategy.
An example would be the sale of goods to a German customer who wants delivery in Italy, where analysis of the transaction becomes paramount.
The VAT expert's eye
These particular cases, and others that may arise in cross-border transactions, require a good knowledge of the VAT rules applicable to the different countries.
When you call on our VAT experts, you benefit from their experience and advice on how to manage the VAT on your sales invoices. They will help you determine the right VAT regime, create the appropriate tax codes, draw up VAT returns in line with national legislation, and avoid the risk of adjustments or penalties. By placing your trust in our VAT experts, you can optimise your accounting and taxation while complying with legal obligations.
Contact us for a free, no obligation assessment of your VAT situation, and to find out how we can add value to the management of your international business.