Page 3 of 4: Preparing IT Systems for E-Audits
Both finance and tax authorities may require access to IT systems and data analysis tools that demonstrate how transactions are processed and how IT systems are structured. As a result, data integrity is becoming a critical risk factor, particularly when transactions are recorded in a specific country without adequate evaluation for tax purposes.
There is also a risk that the financial data in the system may not accurately reflect the business model or that changes within the organization are not properly managed. Proactively addressing these concerns can help ensure a more seamless audit process and mitigate potential risks.
With advancements in technology, tax authorities are becoming increasingly proficient in conducting tax audits. As a result, the likelihood of tax authorities issuing additional assessments and penalties has risen significantly, especially as they become more adept at detecting errors in VAT. Organizations must remain vigilant, as the risk of non-compliance grows with the evolving capabilities of tax enforcement agencies.
From a risk management perspective, the requirement for mandatory data filing warrants careful consideration. Submitting the SAF-T file obligates taxpayers to provide specific data to tax authorities every month, which can have significant implications for compliance. As a best practice, companies should conduct a comprehensive risk assessment to identify potential worst-case scenarios before submitting information to the authorities. Additionally, it is essential to retain copies of all provided information for documentation purposes.
What steps should a company take if it encounters issues such as data glitches, input errors, empty fields, unclear descriptions, or apparent inconsistencies? Being proactive in addressing these challenges is crucial to minimizing tax risks and ensuring compliance.
E-invoicing plays a pivotal role in improving VAT compliance by ensuring that essential information is captured accurately and consistently in invoices. Recognizing its benefits, many countries have integrated e-invoicing systems into their tax compliance strategies to enhance accuracy and combat fraud effectively.
In several jurisdictions, e-invoicing is tied to real-time VAT reporting, necessitating that invoices be submitted to tax authorities immediately upon issuance. This capability enables tax authorities to closely monitor transactions and verify that VAT is correctly collected and remitted, fostering greater transparency and accountability in the tax system.