Beyond the Spreadsheet: Rethinking European VAT Compliance

For many international tax teams, Excel is a familiar and practical way to manage VAT compliance. It’s flexible, easy to adapt and can be built around the specific requirements of each country.

We occasionally speak to companies which take this approach in multiple countries across Europe, Africa, Asia and South America. The tax team creates spreadsheets to replicate much of what a specialist VAT compliance solution does. The company asks a local VAT specialist in each country to support with how to map the data into the VAT return boxes of that jurisdiction, and to review how to identify data required to populate them. The process is well thought through. But it raises an important question: how can a tax department be confident that this type of solution remains correct when VAT requirements are constantly changing?

VAT compliance is not a one-time exercise

Mapping a VAT return today does not guarantee that the same mapping will be correct tomorrow. VAT rules change, VAT return forms are often revised meaning that reporting boxes get altered, new reporting requirements are introduced. A spreadsheet can be perfectly accurate when it is first created. The difficulty lies in keeping it that way.

If a VAT return form changes, who identifies the change? Who assesses what it means for the business? Who updates the spreadsheet and checks that the underlying data being mapped is still being treated correctly? For a tax department managing multiple jurisdictions, these questions can create a significant compliance risk.

Can You maintain the necessary VAT expertise in-house?

There is also a question around how VAT knowledge is managed within the business. A central VAT department may be responsible for countries where it has limited local VAT experience, relying on specialists within the team to provide guidance.

But what happens when those people leave, and this knowledge is lost, or when the person who originally designed the spreadsheet is no longer available to explain why certain mappings or calculations were used?

Over time, the company can become dependent not only on its spreadsheet, but on the people who understand how it works and why it was built that way. For businesses operating across multiple jurisdictions, this approach can become difficult to maintain.

Why a reliable VAT compliance tool is becoming ever more essential

A VAT compliance tool provides a more robust and sustainable approach to managing VAT compliance because rather than relying on spreadsheets or the knowledge of a small number of individuals within the business, it can instead embed consistent, repeatable rules and controls into the compliance process, helping to automate calculations, identify anomalies and maintain an auditable record of the approach taken. This reduces reliance on manual intervention and individual knowledge, while providing greater confidence that VAT obligations are being assessed and reported accurately and consistently over time. Furthermore, it means that VAT processes are documented, which is essential for good audit controls.

The end-of-the-month paradigm

If an invoice is not compliant, discovering the error weeks later during VAT return preparation can create unnecessary work and increase the risk of errors, not to mention under time presume in those jurisdictions with early filing deadlines.

A live SAP-based VAT compliance approach allows tax teams to review transactions as they are booked, identify potential VAT errors earlier and address issues while the underlying transaction is still easy to investigate. This moves VAT compliance from a periodic, end-of-month exercise towards continuous VAT control.

The increasing pressure of digital VAT reporting

This challenge is becoming more complex as VAT compliance becomes increasingly digital.

Tax authorities are demanding more information, often at transaction level, and businesses are facing new electronic reporting and real-time or near-real-time requirements. This means VAT compliance is becoming less about preparing a return at the end of the month and more about having the right controls in place throughout the reporting period.

If an invoice is incorrectly coded when it is posted in SAP, finding the problem weeks later during VAT return preparation can create unnecessary work and increase the risk of errors.

A live approach allows tax teams to work with VAT data as transactions are booked. Errors can be identified earlier, return data can be reviewed continuously and issues can be resolved before they become part of the final return.

Combining technology with VAT expertise

Technology is an important part of the solution, but technology alone is not enough. The underlying VAT logic needs to reflect the current rules and reporting requirements in each jurisdiction.

This is where working with a VAT specialist can make a fundamental difference. Instead of relying on an internal team to monitor every change and determine how it affects an independently developed spreadsheet, the tax expertise is built into the compliance solution itself.

At Meridian, we have decades of experience in European VAT compliance. Our specialists continually maintain Arco Compliance to reflect changes in European VAT legislation, return requirements and reporting obligations.

Because Arco Compliance works directly with live SAP data, tax teams can review transactions and identify potential VAT errors as they occur rather than waiting until the end of the reporting period.

Compliance you can trust

The goal of VAT technology should not simply be to make return preparation faster. It should give tax teams confidence that the process they rely on is accurate, controlled and kept up to date.

Building an Excel-based VAT process may be achievable. Maintaining that process across multiple countries, changing legislation and increasingly complex digital reporting requirements is considerably harder.

The real question for an international tax department is therefore not whether it can build its own VAT compliance solution. It is whether it can confidently maintain that solution as the VAT landscape changes.

With Arco Compliance, Meridian combines specialist VAT knowledge with live SAP data and technology designed specifically for VAT compliance. Rather than asking tax teams to monitor every change themselves, the solution is maintained by VAT specialists whose job is to stay on top of the evolving compliance landscape.

If you are interested in a demo to see how our tool could support you, please contact us via our website www.meridianglobalservices.com