B2B Transactions and VAT Refund Settlement

B2B TRANSACTIONS AND VAT REFUND SETTLEMENTS

Why Are Merchants VAT Collectors?
VAT is typically applied to certain transactions for tangible goods that occur between a merchant
and a consumer. Merchants act as an agent of the government, and collect VAT from the
consumer and remit payment to the proper taxing authority. Merchants are involuntarily
conscripted by the taxing authorities, with no benefit afforded to the merchant to fulfill the role
of a tax collector. In this role states require merchants to tax goods and services at the prescribed
rates, segregate VAT funds into a separate account, file a tax return, and pay all collected funds
by a certain date. By shifting this responsibility, states put merchants completely at risk, due to
potential incorrect and/or late filings and payments. Penalties for infractions can be severe and
negatively affect the bottom line of the merchant’s business. In the worst-case scenario, these
infractions may result in confiscation and closure of the merchant’s business as well as criminal
prosecution.

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A value-added tax (VAT) is a consumption tax that is levied on a product repeatedly at every point
of sale at which value has been added. That is, the tax is added when a raw materials producer sells
a product to a factory, when the factory sells the finished product to a wholesaler, when the
wholesaler sells it on to a retailer, and, finally, when the retailer sells it to the consumer who will
use it.
Ultimately, the retail consumer pays the VAT. The buyer in each earlier stage of the product's
production is reimbursed for the VAT by the subsequent buyer in the chain. VAT is commonly used
in European countries. The U.S. does not utilize a VAT system.
This cumbersome remittance method creates the weakest link in the chain between the collection
of taxes and payment to the states. It is clear that the segregation of VAT funds and the payment
to the state should NOT be the responsibility of the merchant. With the use of MobiVAT
technology, states now have the ability to directly cut out the middle man, the merchant, from the
collection process. By limiting the merchant’s role to booking and receiving the VAT from the
consumer, and then removing the merchant’s requirement to remit payment to the states will
increase revenue and compliance, the will let business owners focus on growing their businesses.

B2B Transactions and VAT Refund Settlements –

VAT IS NOT A BUSINESS TAX.
One of the MobiVAT core innovations of SPLIT VAT
GATEWAY is to remove the need of VAT return.
companies that are willing to comply to Electronic
Invoicing System and using the SPLIT VAT GATEWAY
system don’t need to perform a VAT return if output
VAT has been captured and paid to their respective tax
revenue authority (TRA) while at same time the input
VAT has been also captured and paid; the offsetting is
automatically done by SPLIT VAT GATEWAY platform,
thus removing the need for the taxpayer to re-file VAT
returns.
The lack of predefined and automated mechanisms to trace and account for the input and
output VAT in real-time through a complex chain of products circulation from production through
goods importation and retailers to the end consumers have resultantly created heavier burdens in
catering for the needed resources involved in VAT refund process.
These resources include huge cost in auditing time, repayment of merchant output VAT, human
resources, and the offsetting mechanism of accounting for summation and differences of input and
output VAT at the time of official VAT collection period. MobiVAT has therefore added a refund
traceability and payment feature to add more value and eliminate the afore-mentioned

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problematic process. The models of VAT payment have been drawn from a consideration of
whether a taxpayer can consistently afford revenue remittance of collected VAT.

Using MobiVAT Real-Time collection, fraud can be greatly reduced,

administrative costs slashed and revenues collected with much greater
efficiency. In the VAT collection proposed: massive work in collecting, adding up,
remembering, paying, paying too early > reclaim, paying too late > penalties, VAT
auditing etc.

Tomorrow: sellers and buyers alike do not have to even know about VAT – it
will be all automated in the payment process.

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