The 4th IOTA Task Team output developed in 2011 is now available online. This 82-pages report has been created within the IOTA Area Group "Prevention and Detection of VAT Fraud" and covers validation of VAT refund claims topic.

The aim of any VAT system is to be an efficient process for financing the expenses of the state. One of the characteristics of a VAT system is the right for VAT registered entities to deduct input VAT from output VAT. The entity then either files a VAT return that shows VAT is to be paid to the state budget or that excess input VAT should be refunded to them. The refund will be made either directly or allocated to a VAT account that will be settled following later VAT periods. This basic feature of the VAT system carries a risk for VAT.

Combined with the risk of fraud is the challenge of handling a substantial number of VAT returns received each VAT period within a short period of time by the tax administration. At the same time the selection of risky VAT entities is based on a VAT return with limited information.

The tax administrations in the IOTA region pay out billions of Euro in VAT refund claims per year. The validation of these claims is a preoccupation of all tax administrations, especially to identify those that are authentic and entitled opposed to those that are unlawful or even fraudulent. As a consequence, tax administrations try to develop systems and procedures to detect those refund claims that are not due and prevent the repayment of VAT. During recent years there have been fraud cases where VAT refund claims have been used in the fraud scheme.

The IOTA Area Group “Prevention and Detection of VAT Fraud” decided at its meeting in September 2008 in Bern, Switzerland, to establish a Task Team to compare the administrative practices and validation processes surrounding VAT refunds in the IOTA region with view to increasing the effectiveness of the monitoring of VAT refunds and the prevention of related VAT frauds. All IOTA Member administrations were asked to respond to a Questionnaire issued by the Task Team in September 2009.

This report examines what information is requested on the VAT returns and the experiences of tax administrations as to how useful this information is; what other kinds of information taxpayers are obliged to provide along with their VAT return; ways the VAT returns and attachments can be submitted. It also concerns information on VAT settlement by taxpayers; formalities of the VAT refund validation process and evaluation of VAT refund process.

Particular thanks for the work carried out must go to Mr. Theo Cornelissen from the Netherlands who chaired the Task Team, as well as to the other task team members: Mr. Mincho Muskurov from Bulgaria, Mr. Erik Andersen from Denmark, Ms. Guri E. Stange Lysted from Norway, Mr. Mateusz Grynicz from Poland, Ms. Sandra Luzia Assunção Rocha from Portugal and Mr. Jean-Luc Wichoud from Switzerland who compiled the report.

Report is available only for the registered users of the website here.