Avalara VAT Reporting enhancements make global compliance easier

Navigating VAT compliance can be a challenge, especially for multinational businesses that sell into multiple regions with complex regulations. On top of that, many countries have also adopted e-invoicing mandates, which only further complicate the compliance process. To simplify this challenge, Avalara has developed innovative enhancements to its technology to make the end-to-end VAT compliance process easier, more accurate, and less burdensome for finance teams. 

With these updates, Avalara now supports automatic extraction of VAT and GST data from our core tax calculations product, AvaTax, directly into Avalara VAT Reporting systems, cutting down on manual data entry and minimizing errors. 

Additionally, businesses will also benefit from VAT Reporting and its integration with Avalara E-Invoicing and Live Reporting (ELR). This enhancement provides two-fold benefits to customers — automating e-invoicing status reports for all transactions in VAT Reporting and instant access to transaction data that tax authorities have logged, providing a clear picture of what’s pending. This real-time status tracking also eliminates the need for manual exporting, cross-referencing, and reconciliation across multiple platforms. 

These new enhancements make the VAT compliance process — from calculation to reporting — easier and more manageable, enabling businesses to focus on growth instead of compliance hurdles. 

Global tax laws change frequently, making compliance increasingly complex for businesses. As jurisdictions across many countries implement unique rules and mandates, businesses need to stay vigilant and adaptable to ensure compliance and avoid costly mistakes.

Businesses today face many challenges when it comes to VAT reporting:

• Manual errors and time-consuming processes: Traditional practices of VAT reporting rely heavily on manual data entry and reconciliation. Many businesses still perform labor-intensive tasks of VAT determination and reporting needs, such as manually submitting VAT transactions to VAT reporting systems and reconciling e-invoicing data and VAT returns. These processes are prone to errors and consume valuable time and resources.
• Complex and varied tax laws: VAT and GST regulations vary significantly across countries, requiring businesses to adapt to multiple rules and reporting formats. Furthermore, regulatory requirements mandate significant transaction reporting from businesses, making it a cumbersome process. 
• Increasing e-invoicing mandates: The push for e-invoicing has grown significantly over the years. Despite its widespread adoption across countries, the lack of uniformity and standardization makes VAT reporting difficult for businesses. The unique requirements of e-invoicing for each country mean businesses need to have separate systems in place for filing. 
• Difficulty in tracking real-time data: Without the right tools, it can be difficult for businesses to have clear visibility of their VAT compliance status, resulting in discrepancies.

These challenges make VAT compliance a resource-intensive task, making businesses prone to mistakes and hefty penalties. The Avalara VAT Reporting enhancements are specifically designed to solve these pain points by automating VAT data extraction, streamlining e-invoicing, and providing real-time visibility into tax reporting.

Avalara VAT Reporting enhancements have been created to simplify and optimize compliance for a diverse range of businesses. Here’s how the solutions will benefit different types of customers:

Ecommerce and online retailers: With thousands of VAT transactions occurring daily, it can be a tedious task to accurately track and report each transaction. The VAT Reporting enhancements simplify this with a one-time setup that automatically extracts VAT data into VAT reporting systems, reducing manual effort and ensuring accurate reporting.

Businesses subject to e-invoicing mandates: As countries continue to introduce e-invoicing mandates, Avalara’s VAT Reporting and ELR integration allows businesses to automate e-invoicing status reports for all transactions in VAT Reporting.

Digital service providers: Businesses offering digital services, such as software, streaming, and online subscriptions, often have to navigate varying VAT laws across jurisdictions. With the latest enhancements, VAT calculation, data extraction, and live reporting can be managed with ease.

Effective VAT reporting starts with accurate VAT determination. AvaTax automates the calculation of VAT for each transaction based on location, item, and country-specific rules. This process takes into account the locations of both the buyer and the seller and any exemption rule pertaining to the transaction. Once VAT is accurately determined and applied in AvaTax, Avalara VAT Reporting extracts the transaction data using the AvaTax Extractor, thereby automating the entire VAT return process. 

To set up data extraction in VAT Reporting, you need to first configure AvaTax for VAT determination and then follow these steps:

• Navigate to the integrations section within the VAT Reporting interface and activate the AvaTax extractor. This step links your AvaTax account to VAT Reporting for seamless data transfer.
• Select the time period and region to extract the VAT data. The extractor will automatically pull relevant transactions from AvaTax into VAT Reporting.
• Review the extracted data by accessing the processed documents in VAT Reporting. Verify tax codes, tax rates, and other transaction details and resolve any errors or warnings flagged by the system.
• Generate VAT returns using the extracted data and view the list of returns available for filing. Ensure all the information is correctly populated and select the preferred format for submission.
• Finalize and submit VAT returns to tax authorities based on the local requirements.

For businesses operating in countries with e-invoicing mandates, having full visibility into the e-invoice lifecycle reporting is crucial to rule out any discrepancies and stay fully compliant. To automate data reconciliation between VAT returns and e-invoicing data, follow these steps:

• Navigate to the transactions report section within the VAT Reporting platform and choose “invoice lines report” from the list of available reports. This report will pull out the transaction data for reconciliation.
• Select a time period or a custom date range to generate the reconciled report and trigger the data extraction. This action will pull out the report and match it with the e-invoice lifecycle reporting status. 
• Download the report from a system-generated email and review the status (complete, pending, or failed) along with the dates for each transaction.
• Identify any discrepancies between the data submitted via ELR and the transactions in VAT Reporting.

The AvaTax Extractor has been designed to simplify the entire VAT reporting process by extracting VAT and GST data from the AvaTax transactions report and feeding it directly into the VAT reporting system. The process dramatically reduces the manual effort of data extraction and validation and ensures accurate tax reporting.

This integration is beneficial for businesses operating in countries with e-invoicing mandates. It provides full visibility into the transaction data by highlighting the e-invoice lifecycle reporting status on returns and minimizing the manual effort for reconciliation between e-invoicing data and VAT returns.

Start by setting up and configuring AvaTax; ensure AvaTax is integrated with your ERP or accounting system, and VAT rates and transaction types are configured as per the business requirements. The next step is to activate the AvaTax extractor from the VAT Reporting interface. This links the account for seamless data transfer from AvaTax to VAT Reporting.

The integration provides easy access to the e-invoice lifecycle reporting data, which highlights the status of the transactions as completed, pending, or failed. This visibility into the system helps identify any discrepancy between the data submitted via ELR and the transactions in the VAT Reporting system.

The increasing regulatory requirements have made VAT compliance a complicated process. To stay on top of the obligations, businesses need to automate their compliance processes. Avalara’s AvaTax to VAT Reporting extractor and VAT Reporting and E-Invoicing and Live Reporting integration provide a solution to streamline compliance, reduce manual efforts, and avoid costly audits. Learn more about the enhancements here and understand how they can simplify your compliance journey.