VAT, GST, and similar regimes are easy to under-manage in a multi-jurisdiction group — and expensive to get wrong. A structured approach to indirect tax across borders.
Indirect taxes — VAT, GST, and their equivalents around the world — have a way of being under-managed in cross-border groups. They sit between functions, span jurisdictions, and rarely have a single clear owner. Yet they touch almost every transaction, move real cash, and carry meaningful penalties when handled poorly. For a group operating across Europe, the Gulf, and South Asia, indirect tax deserves far more attention than it usually gets.
This article sets out a structured approach.
Why indirect tax slips through the cracks
Indirect tax is easy to neglect for structural reasons. It is transactional rather than periodic, so it is embedded in systems and processes rather than reviewed in a year-end exercise. It spans jurisdictions, each with its own rules. And it often falls between the tax function, which may focus on direct tax, and the finance operations that actually process the transactions. The result is that no one owns the whole picture.
The cash and risk at stake
The stakes are higher than the low profile suggests:
- Indirect tax often moves more cash through the business than direct tax does, and inefficient handling ties up working capital
- Errors compound transaction by transaction, so a small systemic mistake becomes a large exposure over time
- Cross-border supplies, place-of-supply rules, and reverse-charge mechanisms are easy to misapply and a frequent source of assessments
- Recovery of input tax is often incomplete, leaving value on the table
Map the flows first
The foundation of good indirect-tax management is a clear map of the group's transaction flows — who supplies what, to whom, across which borders, and how each leg is treated for indirect tax. In many groups this map has never been drawn, and drawing it reveals both risks and opportunities that were previously invisible.
Get the systems right
Because indirect tax is transactional, it lives or dies in the systems. Tax determination, the correct treatment of cross-border supplies, and accurate reporting all depend on configuration that is frequently set up once and never revisited. As the business changes — new markets, new products, new structures — the configuration drifts out of line with reality.
A periodic review of how indirect tax is determined and recorded in the systems is one of the highest-return controls a group can put in place.
Manage across jurisdictions coherently
For a cross-border group, the goal is a coherent approach rather than a patchwork of local solutions. That means consistent principles for how supplies are treated, clear ownership of indirect tax across the group, and coordination between the tax function and finance operations so that the rules are actually applied where the transactions happen.
From afterthought to advantage
Managed well, indirect tax shifts from a source of leakage and risk to a source of advantage — released working capital, fuller input-tax recovery, fewer assessments, and the confidence to expand into new jurisdictions without nasty surprises. The change starts with a simple decision: to treat indirect tax as something to be owned and managed, not something that happens in the background.