The following is a guest post from Michael Bernard, chief tax officer at Vertex. Opinions are the author’s own.
While U.S. boardrooms celebrate potential domestic tax relief — such as a sustained lower corporate tax rate and provisions that encourage U.S. domestic manufacturing — CFOs eyeing international expansion must confront fast-moving digital tax rules. Governments around the world are advancing e-invoicing mandates, updating value-added tax frameworks and implementing “economic nexus” rules that impose tax obligations based solely on sales volume — even without a physical presence.
Considering these nuances, integrating VAT and digital tax initiatives into global growth strategies is non-negotiable. Failure to stay ahead of these requirements can expose a company to penalties, interest fees and reputational risk, all of which undermine revenue and competitive positioning. To navigate these complexities, here are five practical imperatives for U.S. businesses venturing into global markets.
1. Establish local VAT expertise or competent outsourcing
Unlike the U.S. system — where tax compliance often varies by county, city and district — Europe’s VAT framework is governed by centralized European Union directives, albeit with significant country-level nuances. For businesses looking to expand abroad, having localized knowledge is critical due to differing requirements across jurisdictions. In practice, organizations can choose between:
- Building an in-country team: Hiring dedicated talent on the ground who understands registration thresholds, invoicing formats and filing deadlines in each market. These employees bring first-hand familiarity, because they know the local language, evolving policy interpretations and audit practices.
- Outsourcing specialized accounting firms: Engaging a reputable partner that can manage cross-border VAT obligations across multiple countries. This option may be more cost-effective for companies scaling into several jurisdictions simultaneously, provided the firm has a proven track record of timely filings and can navigate government portals.
Either approach carries some risks: In-house teams require ongoing training as regulations evolve, while external partners are dependent on receiving accurate data in a timely manner. In both cases, incorporating VAT initiatives into global growth strategies is an imperative that warrants dedicated resources and board-level visibility.
2. Ensure proper data flow for outsourced VAT compliance
When outsourcing VAT compliance, finance teams must maintain robust internal processes to supply detailed, timely and accurate transactional data. Whether data originates from a U.S. headquarters or a European liaison, the outsourced provider relies on:
- Comprehensive data: Information like item descriptions, net values, VAT rates, customer location and supply chain flows.
- Timely data transfers: Meeting cutoff dates for monthly or quarterly returns, especially in jurisdictions with narrow filing windows.
- Data quality controls: Reconciling enterprise resource planning records with local invoices to avoid discrepancies that can trigger audits.
Even the most capable external partner cannot fulfill VAT obligations if it lacks the requisite data. CFOs should make sure that finance, tax and IT teams collaborate to establish a clear data-ownership model and deploy automated pipelines where possible.
Alarmingly, only about half of global finance teams currently automate core processes and automate indirect‐tax workflows. This leaves many organizations vulnerable to manual errors and compliance gaps when managing multi‐jurisdictional VAT filings. Without the right data infrastructure and ownership, an organization could be exposed to potential risks and penalties that can quickly erode margins.
3. Be aware of “Wayfair style” economic nexus laws in the EU
In 2018, the U.S. Supreme Court’s Wayfair decision upended sales tax obligations for remote sellers. European countries have since followed suit by adopting “economic nexus” thresholds for VAT. In effect, selling into a country even without a local office or warehouse can create a registration obligation if you breach its sales threshold. As a result:
- Non-resident companies may need VAT registration: Even without facilities in-country, companies surpassing a specified annual turnover must register for VAT.
- Multiple jurisdictions may apply different thresholds: France, Spain, Germany and Poland, for example, each set their own registration ceilings and reporting formats.
- Digital services and e-commerce are in high focus: Web-based subscription models or online marketplaces attract heightened scrutiny, as they can generate sales justifying local VAT obligations.
CFOs should conduct a “what-if” economic nexus assessment before entering or scaling into each market. This includes modeling projected revenues against local thresholds and flagging potential exposure. Companies must assess where their digital or remote operations could give rise to registration requirements, as delayed or missed registration can prompt backdated assessments and interest fees.
4. Prepare for non-uniform reporting requirements across countries
Although the EU’s VAT system is underpinned by overarching directives, the execution of reporting obligations remains highly fragmented. For example:
- Data basics may be similar, but details vary: Virtually every European jurisdiction requires invoice data fields, such as product classification, destination country, net value and VAT rate applied. However, each country enforces its own unique scheme, business rules or format (exemplified below).
- Country-specific requirements can change: Italy may mandate the inclusion of Intrastat codes (an eight-digit code used to clarify goods) or digital signatures on invoices, whereas Poland expects unique invoice numbering sequences and supplementary summary declarations.
- Reporting formats differ: Some countries still accept Extensible Markup Language for standard tax audit file submissions, while others have moved to proprietary e-invoicing formats for real-time updates.
A recent Vertex survey found 82% of U.S. companies said e-invoicing improved overall financial health, boosting data accuracy and international competitiveness, but only if they tailored their systems to each market’s specs. A one-size-fits-all approach will invariably lead to gaps.
Finance teams need to map out the specific requirements for each jurisdiction and create parallel reporting pipelines or customize ERP outputs to ensure compliance. Failure to meet requirements multinationally could result in penalties and interest fees, among other factors affecting revenue and competitive positioning. To address this challenge, organizations should centralize compliance platforms that support multi-jurisdictional template libraries, reducing manual intervention and error rates.
5. Get ready for a staged rollout of mandatory e-invoicing
The EU’s ViDA (VAT in Digital Age) package has ushered in a transition toward mandatory e-invoicing, but implementation will be phased out over several years. According to recent EU announcements, some member states will enforce e-invoicing requirements as early as January 2026, with others following in June 2026 or January 2027. To prepare, companies must:
- Plan a staged implementation strategy: Identify which countries fall in the first wave (e.g., Italy, France) versus subsequent waves (e.g., Spain, Poland), and prioritize system upgrades accordingly.
- Confirm systems are flexible and scalable: Legacy ERP platforms may lack native e-invoicing modules. CFOs should evaluate add-on solutions or cloud platforms that can accommodate changing formats and real-time invoice reporting.
- Coordinate cross-functionality: Finance, tax, IT and treasury teams must synchronize efforts to align with local portal integrations, digital signature requirements and archiving mandates.
A piecemeal approach risks noncompliance and missed deadlines. Approaching planning in stages provides time to identify which countries will come online and when, thereby ensuring teams have sufficient time to test, train and validate processes before mandatory go-live dates.
Ultimately, CFOs steering U.S. businesses into global markets will need to engage in proactive strategic planning to meet the convergence of digital tax policies. Domestic tax relief may free up cash, but digital-VAT rules abroad can quickly consume margin if ignored. CFOs and their teams can demonstrate initiative by elevating VAT compliance from a back-office activity to a board-level priority — one that intersects with technology, data governance and broader operational strategy.
At a time when over 80 countries are raising VAT rates annually and new e-invoicing mandates spring up overnight, the only path to sustaining both profitability and reputation in a global market hinges on integrating digital tax readiness into your strategic playbook.
