Canto, a long-standing Digital Asset Management software company, had numerous goals when they first decided on Intacct:
- Make global consolidations easier and move away from spreadsheets
- Automate revenue recognition
With a significant portion of their operations were in Germany, this presented three challenges that required solutions:
1. The first is Germany has a legal requirement to keep accounting records in Germany. With the accounting data in the US, legally speaking, Germany does not have jurisdiction over the accounting records and the German Tax Authority needed to pre-approve the use of Intacct.
2. Electronic submission of financial statements. German corporations are required to publish their German GAAP financial statements on a government website, and must also submit them electronically to the German Tax Authority.
3. How to deal with Value Added Tax (VAT), the European version of sales tax
There are differences with how taxes are to be tracked in Europe and the United States. Canto charges VAT on sales invoices and credits the VAT paid to other vendors that have provided them services against their VAT liability. They must track value added tax on both the purchasing and sales sides.
Companies in Europe are required to collect sales taxes/VAT. The rules for VAT are applicable across all members of the European Union as compared to the United States where each state and localities have different sales tax. There are certain reporting requirements where companies need to report transactions that go from one European country to another. Canto needs to track the Tax Identification # of each customer and report the total amount of sales in a period to that customer.
Companies in Europe receive a credit for VAT that has been paid to other companies within the European Union. A simplified example, if a company sells a truck for $80k, then they are required to charge the customer $8K in VAT. In addition, that same company could pay their accounting firm for audit services of $50K and will be charged 5K in VAT. Net tax liability would be $3K paid to the German Tax Authority. In Europe, this is applicable to most supplies, services, rent, etc. All the VAT that others are charging can be credited against the liability of the VAT collected from their customers.
Canto is using a customization within Intacct to track VAT paid to other companies, while leveraging the standard sales tax functionality of Intacct on the sales side. This approach helps Canto meet stringent local tax requirements that require extensive reporting and documentation. The German Tax Authority is looking for accuracy, and Canto’s use of Intacct allows them to document precisely how much sales tax they owe.
Stay tuned for part 2 and 3 of this blog series next week!
Meet Hans at Advantage
Canto is clearly a forward thinking company that sought a SaaS solution to meet their global needs! You can meet Hans at our upcoming Intacct Advantage 2016 conference where you can be sure to gain knowledge and expertise from this Intacct expert.