VAT and cross-border contracts

It has long been recognised that global contracts and VAT are not a good fit with the commercial upside and economies of scale potentially being eroded by an irrecoverable VAT cost depending on the nature of the supply. Businesses are increasingly creating central procurement teams to drive efficiencies into organisations but there is still a mixed level of awareness of the impact VAT can have on the desired contractual structure. Raising awareness in relevant areas of the business is key – given worldwide standard VAT rates typically range between 10 and 20% it is not difficult to demonstrate how VAT (and customs duty) can erode margins significantly if not given careful consideration during the contract design and negotiation stage. In addition to being more cost-effective global contracts are often...