VAT Management |
Posted: December 11, 2019 |
VAT Management: What Are The Challenges For Companies?
For businesses, VAT (Value Added Tax) is a neutral tax. However, because of their mission to collect VAT from the end customer, they must make a careful management of this tax, under penalty of sanctions. Many accounting firms consider it as their primary responsibilty to manage VAT services for their clients.
What is VAT?Cocorico can be proud of having invented VAT, tax widely exported since its adoption by the French Parliament in April 1954 . A success that can be explained by an undeniable simplicity of implementation. Replacing many indirect levies on production or turnover, VAT is nothing more than a tax on consumption paid by the final consumer. The latter pays a percentage of the purchase price to the company, which pays it back to the State on a monthly, quarterly or annual basis. Initially set at 16.85%, its normal rate undergoes regular variations. Since 2014, it has risen to 20%. For the State, VAT is a major source of income, since this tax represents half of the tax revenue. For 2019, the state budget planned to achieve 129.2 billion euros of revenue via VAT (source: Performance-public ). Businesses are not subject to VAT, which is why it is called a "neutral tax". On the other hand, they play a role of collector, as an intermediary between the final customer and the state. Specifically, it is for them to calculate the difference between the VAT they must recover on purchases paid to their suppliers (= VAT deductible) and the one they have received on their sales (= VAT collected). If the amount is positive, the company must pay it to the Tax Administration, if it is negative, it is the Tax Administration that reimburses the company.
VAT On Collection Or VAT On Debit?There are two ways of calculating VAT, depending on the nature of the business activity. VAT on receipts for service delivery activities. The company will have to declare VAT on the receipts, that is to say on the payments actually received during the period of reference. VAT on debits for activities related to the sale of goods. In this case, the company will have to pay the VAT on the debits, the month following the invoicing. This method of calculation requires a more refined cash flow monitoring since the invoices may not have already been paid. Therefore it is advisable to use the VAT Management Services of a professional company.
VAT Return: What Are The Obligations?All companies except micro-enterprises, with sales of 82,000 euros for sales activities and 33,200 euros for service activities, are subject to VAT. However, their tax regime may vary according to their turnover, as indicated on the DGFiP website : The simplified scheme (RSI) concerns companies with a turnover between 82,800 euros and 789,000 euros for activities related to sales and between 33,200 euros excluding VAT and 238,000 euros for services and including VAT due is less than 15,000 euros. Companies subject to the simplified VAT system are required to remit and pay two semi-annual installments (a first equivalent to 55% of the VAT due for the previous financial year in July and a second equivalent to 40% in December) and teletransmit an annual adjustment statement once the year has ended (at the latest in May). The normal real regime (RN) concerns companies whose turnover is higher than 238 000 euros excluding VAT for sales activities or 789 000 euros excluding VAT for services. It may also concern companies that have applied for it (subject to conditions). This scheme involves a monthly VAT return (or quarterly if the amount of net VAT due annually is less than 4,000 euros).
The Stakes Of A Good VAT ManagementFor VSEs / SMEs, the establishment of VAT returns is a real issue since financial penalties for errors or delays can be significant. Especially since, given the financial windfall represented by VAT, the State remains very vigilant regarding the collection of this tax, as evidenced by the introduction of the anti-fraud law on VAT on 1 January 2018. In In addition, the cash flow of a company can also be strongly impacted in the case of significant variations from one quarter to another or if the entrepreneur has not reasoned in HT for example, hence the need for a fine management of VAT.
The company must also keep abreast of tax news as the reporting deadlines for the simplified plan change every year. Just like the vintage of the CA3 or CA12 return, which differs from one year to the next. However, it is essential to make his VAT return on the correct form, on pain of rejection of the Tax Administration. So many constraints easily surmountable by automating the management of VAT within his company using an accounting software.
Why Automate VAT In Companies?When an accounting software is used to automatically import the bank statements of the company, this ensures the reliability of these accounting data. After this step, the VAT return is automatically powered based on this collected information.
To Simplify Sending Of Your VAT ReturnVia an accounting solution, the company can send its pre-filled declaration in EDI in a completely secure way. With the EBP service, the teledeclaration and the teletransmission of the VAT to the Tax Administration only take a few clicks. The company is notified in real time of the receipt or failure to send the document to the DGFiP. The use of a solution like EBP Compta PRO online, which combines these two automation services, saves time and makes the VAT declaration more reliable.
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