Part of getting ready for VAT is sharing the business decisions and changes that have been made during VAT implementation – particularly those which affect existing practices and relationships with vendors, customers and other stakeholders.
Proactive communication and discussions with stakeholders can smooth the transition process from pre- to post-VAT, minimise disputes and mitigate the risk of different parties taking different VAT positions on the same transactions.
Communications we would typically expect during a VAT implementation include:
- Customers. Customers want to know if you intend to adjust your pricing, and when. For supplies made under existing contracts that span VAT’s implementation, customers want to know whether transitional rules apply and whether – and how – the final price will be affected. Business customers want to know whether – and when – you are going to issue the tax invoices they need to recover incurred VAT. During GST implementation in Malaysia, we saw some businesses use VAT as an opportunity to build goodwill by indicating that they would not increase prices by any more than the tax rate, or by encouraging consumers to accelerate purchasing decisions for non-perishable items prior to VAT going live to minimise costs
- Vendors. Recipients’ details need to be shown on vendors’ tax invoices to be valid. VAT generally is only recoverable in the tax period in which you are invoiced so getting tax invoices with incorrect details may impact your ability to recover incurred VAT. Once VAT-registered, businesses should share their VAT registration number and ensure suppliers’ tax invoices are correct, accurate and complete.
- Internal stakeholders. Do all the different parts of your business know about the policy and procedural changes and systems upgrades that are being made? For example, can your sales teams respond effectively to customer questions about VAT? Does your procurement team know how to review a tax invoice? Do your staff know how to fill out amended employee reimbursement forms?
Making changes is only ever half the story. Any VAT changes need to be communicated internally across the business as well. The more complicated and distributed your business, the more challenging this is likely to be. We have seen businesses add VAT updates as a standing agenda item in weekly meetings. We have seen businesses create internal VAT FAQ sheets which are continually updated and shared across teams and functions. We have seen businesses engage VAT advisers to conduct VAT training that has been specifically tailored to ensure internal changes are understood and followed. We have also seen businesses that have ignored the VAT change management process – and the unfortunate effect this tends to have.
To understand how you can make this change management process a success, speak to one of Keypoint’s VAT specialists today.