Processing of international VAT

Within GreenCommerce, we are taking the following steps towards accurate international VAT processing. New developments ensure that the correct VAT rates are determined based on the movement of goods between various international locations. Due to increasing internationalisation, many companies have opened foreign branches for direct trade. When companies work with international locations (with or without their own VAT number), GreenCommerce offers support for ABC transactions, reverse charges, and internal invoices. This marks the first roadmap topic under the theme Finance & Control.

Reason for internationalisation of companies
After the introduction of Brexit, additional controls were put in place, making it difficult for companies to quickly deliver goods to the United Kingdom. As a result, companies started holding stock in the UK (with their own VAT number) to supply their UK customers more efficiently. Developments in GreenCommerce were made earlier to facilitate this.

In recent years, many companies have opened foreign branches for direct trade. However, when goods are delivered directly from a foreign location to a customer in the same country (without crossing the Dutch border), different VAT rules apply. The flow of goods is key in determining VAT. GreenCommerce takes into account both the origin and destination countries for VAT calculation.

Linking a VAT number to a country
Due to increasing internationalisation among fresh produce companies, the need to record international VAT numbers has grown. In the master data under ‘countries’, local VAT rates (high and low) can be recorded without requiring a VAT number for that country. This is necessary for simplified ABC transactions, where VAT can be reverse charged under intra-community deliveries. Additionally, intercompany transactions within a tax entity are supported by recording a characteristic on the (purchase) invoice.

Clean administration
In the master data, VAT numbers can be recorded per country. When a sales order is entered into the system, GreenCommerce distinguishes between who the customer is and where the goods are going; these are treated as separate actions but require only one registration during entry. The same applies to purchase orders, where a distinction is made between the supplier(s) and the origin of the goods. This ensures a clean administration, allowing a single customer to have multiple locations and VAT numbers.

These developments form the basis for registering simplified ABC transactions, in which VAT can be reverse charged to the recipient. Such an ABC transaction involves at least three parties from one or more countries. Party A sells the goods to intermediary Party B, who sells them to Party C. A delivers the goods directly to C. Legally, ownership transfers directly from A to C, but for VAT purposes, there are two deliveries: from A to B and from B to C. Under the scheme, local VAT is reverse charged to C, so B does not need VAT registration in the recipient’s country. This must be clearly stated on the invoice from B to C and is supported in GreenCommerce.

Internal invoices
Further developments have been made to process internal invoices between VAT numbers. This allows companies to record their ‘internal’ VAT numbers at line-level. When goods are purchased from a supplier using a Dutch VAT number and sold using a UK VAT number, internal invoices come into play. Because the goods are stocked in the UK, a UK VAT number is used.

Essentially, the products are sold from the Dutch to the UK VAT number, but to simplify the administration, internal invoices are automatically processed between the countries. This aligns the administration for correct tax reporting.

Questions or more information?
If you have questions or would like more information about international VAT processing in GreenCommerce, please contact us at info@greencommerce.nl or call +31 (0)174 - 642 622.