Unclaimed VAT audit

If for some reason a company failed to account for Input VAT on some purchases invoices of goods or services in a previous period, it is possible to proceed to a correction of the relevant bookings and reclaim those values.

According to our experience, VAT can remain unclaimed for multiple reasons:

  • Invoices are booked with gross amount without disclosing the VAT into a VAT account
  • VAT is not identified in the supplier’s invoice and not booked into the ERP
  • Incorrect Tax key used
  • Corrupted data during the processing of the information when different systems or files are used
  • VAT excluded by the operators of the refund reports due to a wrong interpretation of the regulations
  • VAT not claimed due to a punctual lack of required documentation and no follow-up

These error potentials increase significantly when other risk factors are present such as externalization of booking process, high staff turnover, understaffed finance teams, mergers & acquisitions, new ERP or accounting systems, multiple IT interfaces within the source to pay process.

 

Our Methodology

TALA Consult developed a process and uses the most performing tools of the market to maximize the volume of transactions audited and to increase the accuracy of the final results. Our consultants are trained to ensure a high level of VAT expertize and implement their analytical skills.

After performing interviews to understand your internal processes and identify potential weaknesses and constraints, our consultants proceed to the extraction, processing and analysis of three categories of Data during the project.

 

For clients using SAP, the data extractions can be directly performed with our SAP certified tool in less than 30 minutes. This improves considerably the time execution of the project and preserves the time of your resources.

Once the unclaimed VAT has been identified, TALA Consult can assist the client in preparing the claims to the related administrations.

 

Case Study

Our consultants performed a Cash Management project for a German manufacturer of automotive components in order to identify potential of “cash saving” related to unclaimed VAT of domestic and international transactions. A deep analysis of 4 years data has been performed for the 3 company’s entities.

We identified 11 invoices of domestic transactions for which the VAT had not been reclaimed and 8 related to importation tax.

 

FAQ

What is the maximum time to recover unclaimed VAT?
Generally we can recover the unclaimed VAT till four years after the invoice date. This is the case for example for Germany and the United Kingdom but each country has a different regulation.

What is the involvement of the client on this type of project?
Since the project is fully performed by the TALA Consultants, the implication of the client is just needed for the data extraction and for the validation of the final result.

By reclaiming VAT to the local authorities do we increase our risk to be audited?
Generally, the financial authorities are used treat VAT corrections since the company is applying its rights. In addition, by performing any kind of audit within a financial department, the client demonstrates its willingness to improve processes and ensure the correct application of the regulations. In parallel, TALA Consult performs also VAT compliance audits in order to verify the correct execution of the legislation related to the output VAT calculations.

What is the cost of this type a project ?
TALA Consult remuneration is based on the results of the projects. We provide this success fee remuneration scheme for all projects of our “Cash Management” offer.  Contact us here to receive our pricing structure.

What happens if the financial outcomes of the project are low?
According to our experience, all businesses (global corporations or companies of the mid-cap sector) registered unclaimed VAT. When the related amount of cash identified is low, the processes in place are strong and the risk of “cash leakage” is limited. By performing this project your company benefits also of this risk assessment.

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