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Protecting Your Business From VAT Fraud

Wednesday, 24th April, 2019

Protecting Your Business From Potential VAT Fraud

It is important for any business to be aware of the potential for implication in VAT fraud, which can occur without your business knowingly involving in such practices. 

DBASS recently assisted a client with this very problem and so would like to make you aware of the risks of participating in transactions which could be connected to VAT fraud and to highlight potential consequences should this occur.

Please be aware that Revenue expects every VAT registered business to assess the integrity of its supply chain and customers, as well as the goods involved in these transactions. 

The responsibility to carry out these checks is with your business.

Note:  You should be aware that you could lose your entitlement to a VAT input credit or you may be liable for Irish VAT on previously zero-rated intracommunity supplies where the related transactions are connected with fraud.

Risk Indicators:

Looking out for the following indicators could reduce your risk of becoming involved in VAT fraud.

  1. Supplier legitimacy
  2. Commercial viability of the transaction
  3. Viability of the goods/service as per supplier description
  4. Supplier able/willing to provide product/manufacturer’s identification numbers/ serial numbers?
  5. What warranty is available, in the event that goods are not as described?

Non Irish/EU Companies:

When carrying out transactions with non Irish/EU companies we recommend you follow 3 steps to avoid possible implication of vat fraud:

1.Create A File

At the beginning of your transaction create a new file to hold all of the information pertaining to the transaction and the company you will be dealing with.  Ensuring that you organise this information early in the process will assist your business greatly in the event you need to provide evidence to Revenue that you have followed the recommended steps.

2. Carry Out Due Diligence

When entering into business with an unknown party it is recommended that you carry out reasonable due diligence to establish the integrity of your customers/ suppliers and supplies.

This practise should be involved in on an on-going basis to ensure there is no change in the status of your supply chain and the suppliers, customers and goods within it.

Below are some examples of due diligence exercises:

  • Obtain copies of the Certificate of Incorporation, if applicable, and VAT registration certificates
  • Verify VAT registration details on the European Union website if the other party is based in another Member State. Further information on the VIES system is available on the Revenue website.
  • Obtain signed letters of introduction on headed paper.
  • Obtain some form of written and trade references and follow through on these to ensure they are genuine.
  •  Obtain credit checks and other background checks from an independent 3rd party.
  • Make personal contact with a senior officer of the prospective supplier and/or make a visit to their premises whenever possible
  • Obtain the prospective supplier’s bank details to check whether (a) payments made by you would be made to a 3rd party or (b) in the case of an import, the supplier and the bank share the same country of residence.

3. Obtain & Print(VAT Check)

Once you have obtained evidence of your VAT check, print this and save within your file with other details of the supplier/transaction in question.

See below a link to Revenue’s recommendations on protecting your business from becoming involved in VAT fraud.

https://www.revenue.ie/en/tax-professionals/tdm/value-added-tax/part09-obligations-accountable-persons/records/obligations-records-protect-your-business-from-vat-fraud.pdf

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Meath Office Berkeley House,
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Co. Meath.

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