Preventing audits by correctly reporting Intrastat
In this article, I would like to inform you about detailed data exchange between statistical and tax authorities & how correctly reporting can prevent audits.
Often Intrastat declarations are being used to check the figures submitted through VAT returns. As we have reported before, FRIBS (Framework Regulation Integrating Business Statistics) will make the Intrastat dispatch declaration more detailed, by adding the information below:
- VAT registration number of your business counterpart
- Country of Origin (In most cases, this is already being reported on the arrival declarations)
By adding the VAT number of the counterpart to Intrastat declarations, authorities will be able to reconcile your goods movement on a more detailed level.
Let's have a look at the practical implications
For example, if you are the receiving party of a flow of goods from Belgium to the United Kingdom. Your supplier will have to list your VAT numbers on the Belgium Intrastat dispatch declaration as well as on their EC sales listing. You in turn, will report this flow in your UK Intrastat arrival declaration.
You’re not only relying on your process to align Intrastat and VAT declarations to ensure correct reporting. You are also relying on the correctness of reporting from your suppliers.
Now authorities can collect data for all transactions that have been reported by your supplier against your VAT number (from both Intrastat and VAT declarations) and compare them to your purchases as listed in your VAT returns and Intrastat arrival declarations. Since your VAT return will only disclose total values, Intrastat is being used to check the individual purchase transactions from the various EU member states.
As more and more detailed data is collected through the Intrastat declarations, we see authorities develop algorithms to automate the checks and reconcile declarations on transaction level to pick out all anomalies reported. We have already seen this result in audits for multiple companies in different EU member states. In these cases we see audits triggered by reporting mistakes of suppliers. During these audits, the auditors will disclose the VAT numbers of the suppliers and the total value’s they reported, whilst you get challenged to substantiate that you reported correctly.
Obviously as a supplier, you don’t want to put your client through the scrutiny of auditors. On the other hand, when you are the one getting audited you to want to be sure you aren’t the one at risk.
In these audits we find that companies that dismiss the importance of Intrastat, quickly realize the importance Intrastat has for authorities to validate correctness of other reporting obligations.
Reconciling Intrastat and VAT isn’t as easy as it sounds. For Intrastat all good movements need to get reported, however not for every good movement an invoice value is reported in the VAT return. Correctness of reporting also means applying the correct nature of transaction type allowing to align Intrastat and VAT reporting in accordance with the checks executed by auditors.
If your trade compliance or the supply chain department is responsible to ensure correct Intrastat reporting, these developments will become especially challenging and it may be worthwhile to check out our client's case study.
With the knowledge and expertise of Pincvision’s specialists we can ensure that your Intrastat declarations are correct and reconciled with your VAT declarations and you aren’t at risk in these audits.
In case you are not outsourcing your Intrastat reporting to Pincvision (yet), but like to know what this could mean for your organization? We suggest to read more about our Pincvision Intrastat service. Do you want to speak with one of our experts? Please do not hesitate to contact us by calling +31(0)88-4321800 or send an email to firstname.lastname@example.org