The importance of the reconciliation of Intrastat and VAT within the EU
For many years, Intrastat and VAT declarations have been seen and handled as separate declarations. Intrastat declarations are usually submitted to a national statistical bureau while VAT returns are submitted to the national tax authorities. Because of this separation between the authorities, companies often see these obligations as a separate process. Intrastat is often dismissed as "just a statistical requirement." Time for a change!
More and more governments use the Intrastat declaration for the detection of VAT fraud. This development has considerably increased the focus within companies on their Intrastat obligations. Where it was formerly seen as a compulsory burden, that was not submitted or without much priority, it now gets the attention that it needs to be submitted correctly, on time and aligned with the company’s VAT returns.
The correct processing of Intrastat declarations appears to be difficult for many organizations. Intrastat refers to the physical flow of goods, while not every goods movement has an invoice. This therefore leads to differences in the declaration value. Nevertheless, the declarations should align with each other if the correct transaction code is applied. This signals and explains anomalies for the tax authorities.
Due to the increased focus of the authorities on the Intrastat declarations, it is important for companies to make a solid connection between the Intrastat and VAT declarations. The authorities focus mainly on checking VAT declarations on the correct application of the 0% rate. This means that they look at the intra-community deliveries and acquisitions that are mentioned in both the Intrastat and VAT declarations. When no connection found or present, the authority is triggered to do another inspection, which often results in questions for you to explain the differences, however this can also trigger VAT audits and impose additional taxes and penalties.
Who is responsible? Most companies have organized their VAT declarations very well. This is done internally by a VAT team or done by an external party. The question of ‘Who is responsible for Intrastat?’ remains. Traditionally, the responsibility lies within the company’s Customs Department. However, Intrastat has been introduced in 1993 as alternative to obtain the customs information, whilst the EU internal borders were now open. Often, this obligation is accommodated with the Logistics/Customs Department because Intrastat relates to moving physical goods. Fortunately, we notice the tendency of the importance of the alignment between Intrastat and VAT is recognized. The VAT Department accepts the obligations or at least ensures that the declarations are in line.
It is clear that because of the stricter controls, companies need to take measures. Internally this means that there must be focused on the declaration process and that Intrastat obligations are no longer seen as “just a statistical requirement”. When the internal quality is insufficient or not cost-effective, than outsourcing is the logical step.
Upcoming Intrastat Event
Have you ever wondered what triggers your audits? Why authorities ask specific questions and look for certain confirmations? Do you know what information is shared between authorities, statistical bureaus, tax offices, customs & other agencies across the EU?
Come to our yearly Intrastat Event, this year to be held at Wednesday June 6, 2018. Our specialists will gladly provide you with the latest developments. Find out what you can do to avoid triggers for a VAT audit that arise from inaccuracies in your Intrastat declarations.
Please let us know if you would like to be put on our guest list and you will soon receive a personal invitation to the event!