Manage risks of trading companies

Indirect taxes (notably VAT) have been identified as an area of risk for trading companies. For instance, trading companies may be involved in complex supply chains that have indirect tax consequences (e.g., VAT registration obligation, and input VAT credits refunded after months/years by the local authorities).

Indirect taxes (notably VAT) are a well-known risk area for trading companies. The practice shows that trading companies may be involved in complex supply chains with indirect tax consequences (e.g. VAT registration obligation, input VAT credit refunded after months/years by the local Authorities).

Apart from the usual way of doing business, more and more oil&gas trading companies conclude physical deals via “Platts eWindow”, for example. When concluding a deal using the platform, the level of information that would allow for determining the correct indirect tax treatment is generally poor. It is only at a later stage (sometimes too late) that the relevant information is made available. It is therefore extremely difficult to anticipate the consequences of a particular deal. Although zero risk does not exist in the trading world, it is nevertheless important that traders as well as operators are well prepared.

Traders / operators may effectively manage the indirect tax risk by:

Being aware of indirect tax consequences
Implementing a framework with clear guidelines (e.g., countries / trades that may need to be avoided for lack of VAT numbers)
Using simplified but comprehensive decision-tree models to identify potential indirect tax consequences
Maintaining a list of rules available for each country to allow for trades with limited indirect tax risks (e.g., VAT warehouse, limited fiscal representation)
Providing for robust clauses in contracts
Having several VAT numbers in place that traders can use

Such set of measures allow traders/operators to appreciate the pitfalls in regard to indirect tax on deals they are contemplating by urging them to be more proactive.

Switzerland - Manage risks of trading companies’ indirect tax exposure