VAT should be considered in every aspect of the migration process, from concept through completion and beyond. Managing by design — looking at any process or transaction from end to end and factoring in all the requirements and controls essential to designing and optimizing a compliant VAT process.
Migration to a new jurisdiction will inevitably involve dealing with VAT. For some migrating corporations it may mean having to deal with VAT for the first time although probably for most, VAT will be a familiar concept albeit with variations from the ‘old’ jurisdiction.
Assessing the VAT treatment of the migration itself and the subsequent activities in the new jurisdiction is a necessary workstream that should run parallel with other disciplines/workstreams, primary because VAT is a transaction tax affecting both costs and revenue, and there will invariably be many transactions happening to achieve the migration and the on-going activities.
Misunderstanding or not recognizing the VAT implications of the migration and subsequent activities in the new jurisdiction could result in an unwelcome and unexpected cost. However, the change of a business model can not only create VAT risks, but as well commercial risks such as logistics problems in getting goods into a country and delays and hold off of shipments resulting in disruption of daily business.
Some root causes: the company forgot to register for VAT or procurement forgot to agree with supplier who was importing the goods.
What should be considered for VAT purposes in order to ensure that the migration will take place in the most effective manner from a VAT perspective? It is very much a question of assessing the VAT position of the entities affected by the migration as it is currently and determining whether the future position will be better, neutral or negative. If it is the latter, determine whether and how the VAT cost may be mitigated.