VAT audits can be really stressful, so it’s no wonder we get so many questions about them. Knowledge is power, so we’ve answered the most common VAT audit procedure questions in one place for your reference.
Getting audited doesn’t necessarily mean you’ve done something wrong. You could have to face a VAT audit for several reasons:
Selling across borders increases the likelihood you’ll be audited, as you’ll be working with more tax authorities.
How long you need to keep your records varies by country, but generally speaking, it’s between 5 and 10 years. If you do business in multiple countries, you’ll need to keep everything for the longest required period. For example, if one country requires records for 10 years and another for 6, keep everything for 10. This is so that you have the complete picture for a period, should you be audited.
Penalties really depend on the situation and your behaviour. By that we mean:
The Tax Authority doing the audit also makes a difference to the level of penalty you get. Every country has different laws that set out levels of penalty and the situations in which they apply.
A desk audit is done remotely. The Tax Authority will review the returns you’ve submitted and the electronic versions of supporting documents. A field audit involves physical documents, and sometimes an auditor will visit your business in person. This is usually reserved for cases where serious fraud is suspected.
For ecommerce sellers shipping internationally, desk audits are far more common.
Some countries require specific documents, but generally, ecommerce businesses should have:
You should store these documents by date and by country. Even if you have a period with no sales, hold onto any relevant documents from that time.
Yes, and in fact, this is something that SimplyVAT can help you with. We can talk to the Tax Authorities on your behalf and handle all the paperwork for you. Audits can be stressful, especially if you don’t speak the same language as the Tax Authority. Working with a team like ours gets you process expertise in over 10 languages.
The most common mistakes we see that have triggered an audit are:
Incorrect invoicing is a really common problem and causes all sorts of issues – not just getting audited.
It’s important to remember that a good portion of audits are routine, and not because you’ve done something wrong. You might be chosen at random or because a Tax Authority has a policy of conducting an audit when you take a specific action. For example, requesting a refund in Poland might trigger an audit.
The easiest way to store your records is by country and date. Use a consistent naming convention for all your files and timestamp them. Building a master spreadsheet isn’t a bad idea, but even better would be finding accounting software that can help you keep everything in order.
Yes! If an audit uncovers that you’ve overpaid VAT, you might end up with credit or be in a position to claim a refund.
Many EU countries allow audits to review up to the last 10 years. However, it depends on the local statute of limitations. When you’re selling internationally, you’ll be dealing with multiple jurisdictions. You should keep your records for the longest period in any of the countries you’re operating in.
Even if you stop trading in a country and de-register, you should keep your records for the required period. The Tax Authority can audit you within the period of the statute of limitations, even if you’re not VAT-registered in their jurisdiction anymore.
