Improving data quality and ensuring VAT compliance with Deloitte’s PartnerScan solution

Based on the relevant legislation and the established practice of the tax authorities, the proper supervision of our business partners is a priority and should be part of daily operations. Having in mind that inadequate due diligence of our domestic partners may prevent the deduction of the input VAT, the regular supervision of our business partners requires a deeper awareness from the companies. Furthermore, in case of a large number of business partners, having accurate and up-to-date master data also supports the internal process efficiency and ensures the daily business continuance.

In line with the above, Deloitte Hungary developed an automated and reliable technology solution for the verification of both EU and domestic business partners’ data and for further VAT related risk analysis regarding the domestic partners. 

EUPartnerScan

EUPartnerScan enables companies to gain control over their EU partners’ data by constantly monitoring the respective tax numbers in the VIES database, based on which EUPartnerScan establishes a retrievable track record from the results of daily queries including the required identification numbers provided by the Tax Authority. 

Additionally, EUPartnerScan is useful for risk-management purposes for companies (including SSCs) as well. Although companies operating in shared service model mainly perform supply of services to EU and third countries, it is still recommended to determine whether the EU business partner’s VAT number is valid at the time of supply from a Hungarian VAT perspective, as a prerequisite of VAT exemption. 

PartnerScan

PartnerScan performs a complete and automated screening of domestic business partners from a VAT perspective, using a technology solution that checks the uploaded business partners against a best practice set of criteria defined by the Hungarian Tax Authority and Deloitte’s tax litigation team.

In this context, PartnerScan performs 18 VAT related checks that can be run automatically real-time or on a scheduled basis to ensure the expected due diligence. Such control procedures can be run ad-hoc manually or even completely automatically as an integrated part of the companies’ ERP systems
and business administration. Event-based integrated partner control solution is
usually considered as the future solution for partner control while any business event (modification of master data, placing an order, registering an invoice, etc.) within the ERP processes can automatically trigger respective partner verification and risk analysis.  

For domestic partners, in addition to the above, it would also be possible to customize the set of business criteria and incorporate other aspects of checks using publicly available databases of the Tax Authority and company registers and to determine risk classifications in order to avoid potential risks related to the right to tax deduction.

Deloitte Hungary has a dedicated tax technology team which can help in the introduction of the functionalities of the PartnerScan and EUPartnerScan or in other tax technology developments, should you need further information please reach us out.