Checklist for VAT-Registered Businesses

June Nguyen -

If your business is VAT-registered, it means you're part of the VAT system, which can bring both responsibilities and opportunities. VAT registration helps your business claim back tax on purchases and gives you a professional edge, especially if you're doing business internationally. However, it also means that there are certain rules and regulations to follow. To help you stay on top of things, we’ve put together an easy-to-follow checklist to guide you through your VAT journey and ensure your business stays compliant.

1. Ensure You’re Charging VAT Correctly

One of the most important things to get right is charging VAT. If you’re not charging VAT correctly, you could face fines and penalties. Here’s what to keep in mind:

Domestic Sales:

In most countries, you need to apply the correct VAT rate depending on the goods or services you’re selling. This could be a standard rate, a reduced rate, or in some cases, a zero rate. Make sure you understand the VAT rate for the products you’re offering.

International Sales:

  • EU Sales: When selling within the EU, things get a little more complicated. If you’re selling to other EU countries, you’ll need to apply the VAT rate of the customer’s country once you exceed a specific sales threshold. If you don’t meet the threshold, you apply your local rate.
  • Non-EU Sales: Generally, sales outside the EU are exempt from VAT. But make sure you check the rules of the destination country to be sure.

2. Issue VAT-Compliant Invoices

Once you’re VAT-registered, your invoices must follow specific guidelines. Proper invoices not only keep you compliant but also help your customers claim back VAT.

Include Key Details: Your business VAT number, the VAT number of the customer (for B2B transactions), a clear breakdown of the VAT charged, and the VAT rate applied to each item.

Keep Copies of Your Invoices: Don’t forget to keep copies of all your issued invoices. This is crucial for VAT returns and for any audits that may come your way.

Fordeer’s Invoicing Solution - Makes issuing VAT-compliant invoices simple and efficient:

  • VAT Information: Display your company’s VAT number and the VAT rate applied to each item.
  • VAT Breakdown: Show clear VAT breakdowns, including the tax name and rate for each product/service.
  • Easy Access: Customers can download or print invoices anytime for easy record-keeping.
  • Bulk Processing: Generate multiple VAT-compliant invoices in just a few clicks to save time.

3. Keep Accurate and Detailed Records

Having detailed records isn’t just a good idea—it’s a requirement. Proper record-keeping ensures that you can file your VAT returns accurately and claim the VAT you’ve paid on purchases.

Track Sales: Record the amount of VAT you’ve collected from each sale. Make sure it’s clear whether your customer is VAT-registered, as this will affect the VAT you charge.

Track Purchases: Keep track of the VAT you’ve paid on business expenses. This is money you can potentially claim back, so having organized records will save you time and hassle.

4. File Your VAT Returns on Time

Filing VAT returns is a vital task that must be done on time to avoid penalties. Make sure you know the frequency at which you need to file VAT returns—monthly, quarterly, or annually—depending on your country’s rules.

Know Your Filing Deadlines: Missing a deadline can result in fines, so set up reminders to ensure you never miss a filing.

Check Your Figures: Double-check the VAT figures before submitting your return. Mistakes could lead to costly fines or even an audit.

5. Pay VAT on Time

If you owe VAT to the tax authorities, be sure to pay on time. Late payments can result in interest charges or penalties. Staying on top of your VAT payments is key to keeping your business in good standing.

6. Claim VAT Refunds Where Applicable

One of the benefits of being VAT-registered is the ability to claim back VAT on your business expenses. If the VAT you’ve paid on purchases exceeds what you’ve collected on sales, you may be eligible for a VAT refund.

Track Your Purchases: Keep records of all your purchases that include VAT, especially large ones like equipment or services. These can be used to reduce the VAT you owe or even result in a refund.

7. Stay Informed About Changes to VAT Rules

VAT rules can change, both domestically and internationally. It’s important to stay updated on any changes to ensure you’re charging the right VAT rates and staying compliant.

Changes in VAT Rates: VAT rates may change, and new categories of goods or services might be added or removed. Keeping up with these changes ensures you never charge the wrong rate.

Changes in International VAT Rules: If you sell internationally, be aware of changes in the VAT rules for cross-border sales. For instance, the EU’s One-Stop-Shop (OSS) system simplifies VAT reporting for businesses that sell across EU borders.

8. Prepare for VAT Audits

While audits may not happen often, it’s still important to be prepared. If your business is selected for a VAT audit, having organized and accurate records will make the process much smoother.

Audit-Ready Records: Keep all your VAT-related records in one place and ensure they’re accurate. This includes sales invoices, purchase receipts, and VAT returns.

Understand Your Rights: Familiarize yourself with the audit process in your country. This way, if you’re ever audited, you’ll know what to expect and how to cooperate with tax authorities.

Conclusion: Stay Compliant, Stay Successful

VAT registration can seem overwhelming at first, but with the right practices in place, you can manage it easily. By following this checklist, you’ll stay compliant, avoid penalties, and make the most out of the benefits VAT registration offers. Whether you’re a small local business or an international seller, keeping your VAT obligations in order will help your business grow and thrive.