There’s no denying indirect tax can cause problems for many organisations. In fact, our research shows 73% of businesses find the rapid-changing of tax rules and rates complex. However, if you’re finding that indirect tax rules are already impeding progress in your existing markets, this is going to increasingly hold you back the more you expand into new markets. And that’s regrettable when one of the biggest opportunities for maximising growth is shown to be the digital focus on global expansion.          

Consider first how you can transform your existing tax department into a more robust indirect tax system. The need to respond to demands from tax authorities is only going to increase and they are going to want the information more and more quickly. You need to be confident that you can respond quickly to the numerous rules and rates which constantly need updating. So improve your processes, technology and data to enable you to be more efficient. Investigate how an automated indirect tax management solution could help you to better service your existing markets. Explore how it can make your transactions more frictionless, streamline your invoicing and facilitate payments. That way, you’ll be in a strong position when you decide you’re ready to move into new markets.

Don’t worry, you’re not alone. 54% of those surveyed say their business faces risks associated with the complexities of entering new markets and geographies, including indirect tax. 46% even describe indirect tax management and compliance as burdensome. However, if these issues are preventing you from expanding globally, you’re in danger of missing out. As online sales boom, there is a wide range of opportunities to trade globally and maximise your growth, provided you can master your indirect tax management.

So take action now to get prepared and tackle the issues before you really feel the effects. Consider whether your current system is able to handle the millions of tax rates and rules which constantly need updating. Start the transformation now and explore a more robust tax engine that will future proof your business against developments further down the line.

It sounds like your indirect tax approach is performing well in existing areas of the business. And the results of our survey are encouraging as it appears two thirds of businesses are mid-way through a financial transformation journey. But it is inevitably a work in progress. One that is worthwhile, as there are many opportunities for growth in digital channels and ecommerce. So don’t let financial issues such as indirect tax deter you from pursuing new markets and restrict your potential for growth.

With a robust tax engine in place, organisations like you, can forge ahead with their growth strategies without the worry of tax complexity or wondering which new rules are being brought into force around the world. Not only that they can ensure they are providing a seamless and frictionless experience for their transacting customer. So take steps now to consider how you can consolidate and streamline your tax technology.

Congratulations on taking advantage of the growth opportunities available to the business and managing the related indirect tax rules. You’re right though to be aware of potential risk in the future. The rules around indirect tax are forever changing. This could lead to your business being found to be non-compliant with VAT rules, especially if you are trading in new territories, or through new channels such as marketplaces.

So, review how robust your system will be in managing the complexities of indirect tax and keeping on top of the constant updates going forwards. How effectively will it perform in ensuring accuracy and efficiency while reducing risk and meeting the ongoing reporting requirements? It’s vital at this stage to build in enough checks to make sure your tax engine is future proof and will protect your global expansion.

You’re not alone. In our research, 41% of respondents are still using manual spreadsheets to manage indirect tax liabilities. As you've identified, however, the problem with using a manual process is the risk of human error and having to continually update your spreadsheets. This can be time consuming and will pose problems as more tax authorities introduce customer destination-based rules and insist on real-time reporting. In addition, if you’re using multiple methods, this will only add to the friction and complexity.

The advantage of an automated cloud-based system is that no matter how many rules you need to comply with, in whichever jurisdiction, you can be confident everything is updated and managed seamlessly. Additionally, you can leverage managed services to outsource your time-intensive administrative tasks and processes or transfer your tax liabilities to a third party. You can proceed safe in the knowledge that the full tax journey will be compliant from calculation to reporting to filing and payment.

It’s also important to recognise that as competition increases, ecommerce businesses will need to be underpinned by technology and automation not only to fulfil the indirect tax requirements but to provide a frictionless experience for the customer.

You’re in good company. Our research shows that 51% use the native tax tools in their ERP/finance systems to manage their indirect tax liabilities. However, 47% said they were increasingly finding its capability was too basic and impacting their ability to grow. ERP has often been the natural choice as it is the system of record and holds all the financial and transactional data. Where it falls down is that indirect tax is a transactional process so it needs a system which can be kept continually up to date and manage tax automatically.

While an ERP system may currently be the most common method, a 3rd party specialist tax engine/software is considered to be more efficient in providing timely upgrades and ensuring you are compliant with the ever-changing rules. Make sure your plans to expand aren’t limited by an inadequate in-house software solution.

This is not uncommon. 52% of the respondents in our survey also use an in-house developed software system for managing cross border indirect tax liabilities. Yet although your system may have originally been well designed, it’s probably not set up to accommodate change easily. You might have had developers on the project to build the system but it’s unlikely they will be available to continue performing updates each time a new tax rule is brought in.

As a result, in-house systems carry risk as they may lack the capacity to incorporate the additional rules and rates required for today’s global online and digital sales scenarios. Making updates can be time-consuming and costly – even if you can keep track of the changes needed. And levels of internal expertise can be low, making it hard to be sure outcomes are correct. If errors aren’t spotted this can lead to non-compliance resulting in fines and penalties for your business.

Whereas with an automated tax system you have the peace of mind that it is being constantly updated to take account of the millions of effective tax rates and rules. That way, you can confidently expand your business operations around the world while knowing you’re maintaining compliance.

Well done! Only 51% of our respondents say they are using a specialist tax engine or third-party software even though this is the method that gets the best results within the sample. By having a clear picture of your current indirect tax liabilities, you can make informed business decisions and forge ahead with your expansion plans. You can have greater confidence when entering new markets, knowing that the system will have been kept updated in line with any new regulations and that your business is compliant.

It also means you can respond to the increasing requirements of tax authorities as you know you are reporting in real time. But check your current system is enabling you to do all that you need to meet the complexities of breaking into new markets. Does it help you manage domestic and foreign taxes within the same platform? Does it help you manage US sales tax and VAT/GST in one system? Does it harness the power of edge computing so that you can make tax calculations possible at any purchase location? Make sure your system has the right technological capabilities so that it’s not impeding your plans for growth.

Invoicing compliance is a common issue. 45% of all respondents feel that ensuring invoices are VAT compliant is one of the most complex areas of indirect tax management. This is complicated by the fact that different countries require different pieces of information on an invoice. So, if you’re unsure your existing cross-border invoicing meets regulations, just imagine how much more complex it is going to be when you move into new countries.

Some of the challenges you can face if your invoices are not correctly created include non-compliance, compliance complexity and recovery of VAT. You may not be aware that there can be up to six variables of the type of information your invoices must contain, from specific date format to VAT/GST registration number. There are also some interesting specific requirements, for example Serbia and Saudi Arabia require bilingual invoicing while India and Belarus insist that an invoice contains the signature of a senior authorised representative.                

The advantage of an automated system is that it will update all the rules automatically so that whatever market you’re trading in, you can be confident your invoices are accurate and compliant. It’s all done for you.

Being apprehensive about invoicing compliance when moving into new territories is perfectly understandable. In fact, 40% of respondents say ensuring their invoices comply with indirect tax rules has the biggest impact on their ability to trade globally without barriers.

Yet, if moving into new geographies and markets is where the opportunities for growth lie, it is imperative that businesses address the complexities of indirect tax management and are confident their invoices are compliant. Make sure you’re aware of the potential   variables of the type of information your invoices must contain, including specific date format, sequential numbering, tax amount and VAT/GST registration number. Take note of country specific requirements, for example Serbia and Saudi Arabia require bilingual invoicing while India and Belarus insist that an invoice contains the signature of a senior authorised representative.                
  
An automated system can remove the friction from invoicing and make it less burdensome, across jurisdictions worldwide. This leaves you free to focus on your expansion plans, knowing that the system is maintaining compliance through constant updates and reducing your audit risk. Don’t let your systems hold you back.

It’s great that you feel confident about the indirect tax rules for invoicing in the countries you operate in now. You’re also not alone in being unsure of the requirements when moving to new markets and territories. Our survey revealed that many businesses would benefit from an improved understanding of the detail involved in invoicing, especially as requirements differ so much from country to country. 

Although it’s encouraging that 63% rate their understanding of compliant invoicing as high, it needs to be matched with a robust system that reduces or eliminates human error. Remember, getting your invoicing wrong could result in non-compliance and being unable to recover the VAT. So given the complexity across various jurisdictions, consider investing in an automated specialist tax engine that will make the whole area of invoicing less burdensome and ensure you remain compliant in whatever territory you are operating in.

Excellent! You’re in a strong position to be able to trade globally and to grow. 
Given the complexity and the ever-changing nature of international indirect tax rules, however, you’re right to only feel relatively confident about your invoicing as you expand into new territories. Do you understand the precise requirements relating to reverse charge rules for B2B transformations or the indicative foreign exchange rates on tax amounts in each territory you’re operating? It can seem like a minefield. But that should not deter you from pursuing your growth plans. 

Bear in mind a state-of-the-art automated indirect tax management system can give you total confidence. New systems are supported by content databases which include millions of data-driven effective tax rules for thousands of jurisdictions worldwide. You may need a system that has specific expertise with online sellers. Check the credentials of your tax engine provider to ensure they have the right experience with agile businesses. This will enable you to trade globally while minimising risk and maintaining compliance. That’s true peace of mind.

Many businesses like you have highlighted they find ever-changing tax rules and rates highly complex. We understand it can be difficult enough trying to remain compliant in your existing territories, so indirect tax management poses a considerable barrier to expanding globally.

You’re right to concentrate on improving your current tax department first. 44% of respondents are concerned about the possibility of more indirect tax changes being introduced as a result of COVID 19. This would only increase the difficulty of keeping on top of shifting rates and rules. In addition, it could add to the technical difficulties and costs associated with updating internal systems accurately, often at short notice.

But growth is crucial to success. 59% of respondents say they see global expansion into new markets through digital channels as one of the biggest opportunities to maximise business growth in 2022. This means if your competitors have big growth ambitions, standing still is not an option. You need to protect your market share and be prepared to sell more widely if you want to grow your share globally. 

As a first step, audit your current indirect tax operations. Are you following best practice? Think about the quality of the customer journey for your existing customers and how tax determination might impact this. Our research reveals that 51% of businesses recognise that their largely ’manual’ indirect tax processes will soon become unsustainable. Fix your system by taking advantage of a robust automated tax technology that can effectively manage existing territories and future proof your business growth allowing you take advantage of opportunities in new markets.

It’s great that you feel confident you’re compliant with current tax rules in your existing markets. 

And many businesses, like yourselves, find the constantly changing tax rules and rates deter them from following their growth ambitions. In fact, 48% say the expanding global VAT/sales tax rules are getting more difficult to comply with. 

When asked which specific indirect tax issues impact their ability to grow, 51% of respondents cite the following: increasing challenges around VAT/sales calculations and charging at digital point of sale; the difficulty in ensuring registration with all tax authorities; and untenable manual tax processes. 

It’s regrettable these issues are impeding progress, as 67% of respondents say they have seen the number of countries they sell in grow over the last two years and only 2% have seen a decrease.  

One area that gives cause for concern are the complex US state sales tax rules, mentioned by 43% of our respondents. Rules for marketplaces trading around the world who must pay indirect tax on imports and cross border transactions can also be highly involved.     

Build on your confidence in existing markets; put the right systems in place now to make sure you can be among those trading successfully across wider geographies. It could be the right time to start investigating a 3rd party tax engine to handle the complexity of the rules so you can get on with growing your business

It’s great to hear you’re forging ahead in new territories. 45% of our respondents agree with you that changing tax rules and rates is one of the most complex aspects of indirect tax management in a global growth environment. The rapid rate of change and the number of variations across many jurisdictions can make it extremely challenging. The US state sales tax rules are particularly complex, with every state making their own sales tax decisions (regarding rates, liabilities, product categories, reporting and filing).

Global expansion into new markets through digital channels is highlighted by 59% of respondents as being a particularly productive opportunity. This inevitably involves a huge amount of diversification as digital sales evolve, which only adds to the complexity, but if your indirect tax system can respond to the changing rules effectively, it’s an area worth pursuing.

As you’re keen to grow and are already making progress, don’t let tax rules impede your expansion. Take steps now to adjust your tax approach for maximum impact. Investing in a robust tax engine that can deal with the growing complexity can be seen as a growth opportunity. Tax obstacles are only likely to become more pressing for everyone as they continue to expand, so if you can upgrade your system to a more efficient system, you’ll be in a prime position to take advantage of any opportunities for new business.

Fantastic. It sounds like you’re well on track to maximising opportunities for expansion.

With 67% of respondents seeing the number of countries they sell in grow over the last two years and only 2% seeing a decrease, it’s clear that businesses like yours that can diversify sales geographically will have a competitive edge. In addition, 51% have increased their focus on digital sales channels/e-commerce to maximise their growth opportunities. And 46% are selling more through third parties, such as marketplaces, which are subject to their own set of complex rules.
   
It’s encouraging to see in the context of all this expansion, 59% of respondents say they had a very good to expert level of understanding of the changing tax rules and rates.

However, as we’ve seen, tax rules are forever changing as diversification increases and the tax landscape becomes more complex. Digital sales channels are evolving at speed with more and more complex rules being added. So how confident are you that your system will be able to keep up with the pace of change as you grow? How do you future-proof your system so that you can be sure you’re compliant no matter where you’re trading?

There have been many practical implications for businesses since the updates to the EU’s e-commerce VAT rules in July 2021. With all remote sales to consumers now being taxable for VAT in the country of destination where the consumer resides rather than where the supplier was based, customer location determination has become a critical factor.

This means it’s essential that you’re able to determine customer location accurately to apply the VAT rates and rules applicable to the customer’s member state. When there are 27 member states plus the UK, each with their own rules, this can become complicated. That’s not counting all the rules introduced by the other countries around the world, including the different states in the US.

What’s more, determining your customer’s location can be challenging for digital sales, when you’re not shipping goods to a physical address. You’ll need to consider what data to capture and what to do if different pieces of data conflict. The address on a customer’s credit card, for example, may not match their IP address location.

An added complication is that establishing customer location for digital sales must be done in real time and may require extra information. You may also need to be able to do currency conversions at the point of accepting payment and be able to perform several conversions simultaneously.
    
Our research confirms businesses find this complicated with 51% saying the increasing need to perform VAT/sales calculations and charging at the digital point of sale is greatly impacting their ability to grow with confidence.

Nonetheless, customer location determination is a requirement which is not going to go away. So, make sure you put in place a robust system to enable you to gather all the relevant information on your customers. That way you can be confident you’re applying the correct rates and rules on each sale and that you are compliant. You will then be able to think about expanding sales into new territories with confidence.

It’s good you’ve got the essentials right in your core markets. Our research shows 41% of businesses generally find customer location determination at the point-of-sale complex. Now that EU VAT ecommerce rules have been updated so that the VAT liability has shifted to the customers’ place of residence rather than where the supplier is based, determining customer location has become critical. That’s especially true for businesses like you, keen to explore wider opportunities.

It’s not always easy, however, to find your customer’s permanent address when you’re not shipping goods to a physical address. The general rule is that there must be two pieces of non-conflicting evidence that points to the location of the customer. To handle this with confidence you need the right technology to help manage what data to capture and robust logic for what to do when pieces of data conflict, such as the address on a customer’s credit card not matching their IP address location. You also need to be able to establish customer location in real time and carry out currency conversions at the point of accepting payment.    

While you may have introduced the ability to determine customer location in your existing markets, you may be finding it more daunting when wanting to expand. Considering there are 27 member states plus the UK, each with their own rules, it can be quite challenging to have the right information at hand to be able to apply the correct VAT/GST rate. You may also, be selling Internationally outside of the EU, where each country has different rules, as well as selling within the US where nearly every state has adopted its own set of indirect tax rules.     
  
Given the amount of complexity involved, we’ve found many businesses need help with customer location determination. While some may have tried to use a manual system, it soon becomes transparent that as they try to expand and the volume of international transactions increases, the task becomes overwhelming. Remember, you want the checkout process to be as seamless as possible for the customer as well.                    

If you’re ready to break into new territories but feel your existing system would let you down, start exploring how third-party tax engines can make the job less burdensome.

It’s encouraging that you feel your current indirect tax system is performing adequately in determining customer location and enabling you to be compliant. You’re right, however, to be cautious at asking too much of it as you scale.

30% of respondents in our research cite customer location determination at point of sale as one of the issues they thought would have the biggest impact on being able to trade globally. It’s a complex issue.

Finding your customer’s permanent address when you’re not shipping goods to a physical address is not always easy. You need the right technology to help you decide what data to capture and what to do if different pieces of data conflict, such as the address on a customer’s credit card not matching their IP location. You also need to be able to establish customer location in real time and carry out currency conversions at the point of accepting payment.

While you may already be doing this without a problem, it can be a big jump to suddenly be handling thousands of transactions and validating customer location determinations in many different jurisdictions. How risk proof would your system really be globally? And is it ready for the increasing number of countries introducing customer location determination?

With over 40 countries introducing the digital VAT/GST laws and more countries implementing new rules, you need to be confident that you have a robust tax engine that can accurately handle customer location determination in real time across many different jurisdictions. Not only could it end up reducing your internal costs in terms of indirect tax management, but it will free you up to expand and achieve your growth targets.

An encouraging 58% of respondents cite customer location determination as one of the areas where they possess a high level of understanding. So, it appears a good number of businesses have grasped the importance of validating their customer’s place of residence.

However, understanding an issue and the ability to manage it and future proofing your business to handle it are two different things. As you will have experienced, indirect tax rules are constantly changing, so it’s crucial that you stay alert to any new requirements. Your system needs to be constantly updated to ensure you remain compliant.

You may want to check what steps your provider has in place to ensure that your system keeps ahead of any changes to tax regulations and environments across the globe, and that they work locally with tax specialists in-country to be aware of any changes or new country requirements. To maintain compliance and reduce risk, make sure your system includes real-time customer location determination logic that robustly handles evidence conflict, to ensure your transactions are always compliant.

If you’re confident that you have a robust tax engine in place that can take care of customer location determination and keep the business compliant, this will free you up to pursue more strategic global objectives.

It may be that you’re happy with that and think that your role should be focused purely on indirect tax management process and compliance. It’s certainly a complex area and one that is important to get right.

However, you are in the minority. Our research shows that 83% of tax/finance professionals are becoming increasingly involved in growth conversations and plans. Ecommerce businesses are recognising that indirect tax is a growth enabler and so strategies for tax and growth in the business need to be aligned.

Consider whether you want to remain focused on indirect tax management and compliance. Are you doing it out of necessity or choice? What manual and time intensive tasks could be replaced giving you more time to consult the business on how tax could impact growth? Think about how you could get involved in more strategic decisions and bring your expertise to planning for the future of the business. This could also be a great career step!

It’s important to bring your functional tax expertise to the table as your organisation grows. 54% of respondents say they face risks associated with indirect tax due to the complexities of entering new markets and geographies so make sure your tax department is up to speed with the numerous indirect tax rules. That way you can be confident the business will remain compliant as it diversifies. Take note that 46% of respondents highlight that resource gaps, due to an increased workload for the existing team, could cause added risk. This may lead you to start investigating how you can replace some of the more burdensome time-consuming tasks with an automated system.

It may be worth considering whether it’s time to step up from a purely functional and reactive involvement to one where you can advise and contribute to the future growth plans of the business.

You’re in the majority. 73% of respondents say they’re always involved in conversations to grow the business and strongly influence decisions. It’s good news that there has been a gradual realisation in many organisations that because the tax landscape is constantly changing, tax needs to be part of the growth strategy now, not an afterthought. What’s Important, of course, is that these conversations and consultations are backed up by the ability to deliver.

It’s likely you have robust systems in place but making sure they are future proofed and adequate for changing needs is crucial. Keep up to date with what new solutions are available. All have different specialisms, so explore which would be right for your particular industry and circumstances as you scale.

You’re well ahead of the curve! It sounds like you’re doing everything right. 83% of our survey respondents also say that as a tax/finance professional they are becoming increasingly involved in growth conversations and plans. This is a welcome development but make sure you continue to keep up to date with what systems are available on the market.

Futureproof your tax engine so that as the financial landscape becomes more complex, it can handle it. And don’t forget your indirect tax management solution always needs to act as an enabler of growth not an inhibitor.