Hiding won’t help. Let’s fix your taxes

A Voluntary Disclosure Agreement is a type of “relief program” that permits businesses to reduce their tax exposure following specific requirements mandated by the jurisdiction. It should be emphasized that not all countries have adopted the VDA concept regarding tax negligence.

The scope of the positive side of the tax compliance VDA benefits varies from country to country. However, there are some aligned concepts, such as reduced or eliminated penalties for owed tax and the introduction of a limited look-back period comparing the regular one that will be triggered under the mandated audit. 

If the agreement with the respective tax authority has been reached, the applicant can expect tax penalty reduction through VDA relief program.

Let’s broadly review the tax/legal requirements concerning adherence to the VDA program within a specific country. We will probably encounter some differences regarding the documentation that should be provided to the respective tax officials to negotiate the potential agreement of VDA.

Considering that we are an advisory and accounting firm specializing in cross-border e-commerce trade, we have gathered a lot of practical knowledge about taxes in all world regions. We have negotiated VDAs with tax officials from the US, EU, Australia, and others. We are prepared to help you out.

The Sales and Use Tax threshold rules in the US are very complex for out-of-state sellers. As it is known, there isn’t a Federal Sales Tax Rate. The remote seller should also know that each state has different rules regarding economic nexus thresholds. Reaching the threshold, simply put, means that remote sellers should register for sales tax in the respective state. However, he could be unaware of this requirement for different reasons. The positive thing is that the remote seller can adhere to the Revenue Authority state and local tax VDA services, depending on the jurisdiction and the department responsible for evaluating the case.

If the remote seller hasn’t fraudulently operated and tried to deceive the collection authority, there shouldn’t be many difficulties in reaching an agreement for economic nexus VDA services that the respective tax department could offer for this seller. 

The look-back period for sales tax in many states depends on the respective state’s statutory prescription periods. It should be noted that the VDA will limit the revenue authority assessment compared to the audit, which will probably cause the business’s operations to be scrutinized since the first transaction in the respective state.

VDAs may involve various types of taxes, such as sales and use taxes, income taxes, and other national and regional tax liabilities.

Most of the time, VDAs have confidentiality provisions to protect the disclosed business information.

In many cases, VDAs protect against criminal prosecution for non-compliance issues.

The time required to conduct a VDA varies depending on the complexity of the issues and the speed of responses from both the business and the authority involved.

It is crucial to reveal all known issues during the VDA process. If more problems arise later, they might need to be treated separately, and the terms of the VDA may not apply.