Can Artificial Intelligence Really Replace VAT Compliance Teams?

February 19, 2026 Insights

Artificial intelligence (“AI”) is transforming how businesses manage data, processes, and decision-making. In VAT, AI-driven tools promise faster VAT determination, automated reporting, and real-time compliance at scale.

But can AI entirely replace VAT consultants and VAT compliance teams? The answer is no. AI cannot navigate VAT on its own and without expert oversight, it will get things wrong. But when guided by VAT experts, it becomes a very powerful tool.

 Why VAT Compliance Is Uniquely Complex for AI

 VAT compliance is more than a set of static rules and is shaped by multiple, interdependent factors such as:

  • Constantly evolving legislation
  • Ambiguous rules that require expert evaluation
  • Local tax authority practices and interpretations
  • Complex, business-specific transaction flows
  • Practical application that depends on years of jurisdiction-specific experience

Two identical transactions can produce very different VAT outcomes depending on jurisdiction, contractual structure or context. We’ve all seen it: you ask a generic AI tool, like ChatGPT, a question, and it returns an answer delivered with such confidence but is often completely wrong. The same goes for EU VAT rules as they are complex, with varying interpretations across Member States, and AI lacks the jurisdiction-specific, nuanced understanding required to get it right.”

Even small mistakes can have major consequences such as penalties, interest, or audit exposure. This is why expert oversight remains essential, even in a world where AI can automate much of the heavy lifting.

Types of AI and Automation: VAT Workflows v’s AI Agents

 AI comes in many forms, and understanding it’s strengths and limitations is critical for VAT compliance.

Automated VAT Determination and VAT Compliance solutions consists of workflows which are rule-based and structured, and of predictable systems where rules are defined by VAT experts and applied consistently. They ensure:

  • Correct and predictable outcomes for VAT compliance-critical tasks
  • Auditability and defensible VAT positions
  • Integration with human review for exceptions and complex scenarios

AI agents, by contrast, are designed for exploration, research, or synthesis. They excel in areas where flexibility matters more than predictability, such as:

  • Navigating large volumes of unstructured information
  • Supporting internal knowledge discovery
  • Drafting initial versions of reports or explanations for human review

Consequently, AI agents are not suitable for tasks requiring identical outcomes, such as VAT determination, VAT rate calculation, VAT return preparation, or any process feeding directly into VAT compliance.

Even small variations in these areas can create real risk. Identifying the right and wrong applications is essential to leveraging AI most effectively.

Where AI Adds Real Value

When applied correctly, automation can significantly improve efficiency in VAT compliance:

  • Processing high volumes of transactions quickly
  • Applying standard VAT rules consistently
  • Flagging anomalies and exceptions
  • Producing VAT return forms ready for submission or in certain cases direct submission with the VAT authorities (e.g. MTD filings)
  • Reducing manual errors

Rule-based VAT workflows allow VAT teams to focus on high-value judgment work rather than repetitive tasks, while maintaining audit readiness and defensibility.

A Smarter, Expert-Driven Approach

The most effective VAT compliance frameworks combine rule-based AI workflows with expert-designed logic and human oversight. Predictable, high-volume tasks are handled efficiently by automation, while rules are defined and continuously refined by VAT experts to ensure accuracy and defensibility. Human review remains essential for exceptions, complex cases, and evolving legislation, providing the professional judgment AI alone cannot replicate.

That is why Meridian’s ARCO VAT Determination and ARCO Compliance solutions will be a critical end-to-end automation tools for VAT teams. Built by VAT experts, for VAT teams. It ensures every VAT rule, exception, and scenario is accurate, consistent, and defensible based on decades of VAT expertise.

Looking Ahead

AI will without doubt continue to reshape VAT compliance, but accuracy, accountability, and expert judgment remain irreplaceable. The future is not AI replacing VAT teams but AI will amplify their expertise, making VAT teams faster, smarter, and more effective than ever.

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