Oops, I did it (again)
Everyone makes mistakes. Well, not us of course, but everyone else does…
This last sentence shows how many people think. It can be hard to admit that you make mistakes, because doing so feels like an attack on our self-worth. However, we probably also all have learned that people should learn from their mistakes. So that almost makes it mandatory to make them, right?
Researchers from the Clinical Psychophysiology Lab at Michigan State University found that people fall into one of two camps when it comes to mistakes: those who have a fixed mind-set (“Forget this; I’ll never be good at it”) and those who have a growth mind-set (“What a wake-up call! Let’s see what I did wrong, so I won’t do it again”).
Even without further knowledge of this study, it makes sense that the people who start over again and try to benefit from the experience they gained by trial and error are likely more successful in their lives and careers. Only if you repeat the same mistake over and over again, it’s probably not very smart.
Or, as Paulo Coelho once said: “When you repeat a mistake it is not a mistake anymore: it is a decision.”
Mistakes in VAT
In the world of VAT, mistakes happen all the time. But unlike forgetting your lunch or leaving your phone at home, VAT mistakes can be expensive, and sometimes even career-defining, and unfortunately, you can’t just put your VAT back in the fridge and try again tomorrow.
VAT is not only about filling in the right numbers on a VAT Return. Every transaction leading up to that return can be a potential minefield. Misclassifying a transaction, using an invalid VAT number, applying the wrong rate, or missing evidence of transport can all lead to adjustments, penalties, or loss of deduction rights.
Fortunately, the Court of Justice of the European Union (ECJ) has often recognized that people (and businesses) make mistakes. What matters is how those mistakes happen, and whether they are corrected in good faith. Here are some random examples of ECJ-cases where mistakes were made:
- In C-146/05, Collée, the taxpayer wrongly treated a domestic sale as an intra-Community supply. When he tried to correct it later, the authorities refused. The Court, however, ruled that purely formal mistakes should not automatically lead to the denial of VAT rights, provided there was no fraud or evasion. Substance over form. The taxpayer made a mistake but corrected this later. Just on time.
- In C-273/11, Mecsek-Gabona, on the other hand, the supplier failed to prove that goods actually left the country. The Court held that the exemption could not apply: good faith has limits. Diligence, documentation, and verification are not optional extras in VAT; they are the foundations. The taxpayer made a mistake in that he did not collect sufficient evidence of the transportation of the goods, and he did not check (sufficiently) if his customer actually existed and had received the goods.
- And in C-81/17, Zabrus Siret, the taxpayer tried to recover input VAT he had paid, but for an earlier period. We’ve all been there, realizing too late that the thing you “meant to fix later” is suddenly due yesterday. The tax authorities denied the recovery, arguing that the taxpayer made the mistake of claiming back the VAT in the wrong period. Luckily, the Court allowed correction of invoices and deduction rights, reaffirming that the VAT system should not penalize genuine mistakes that are corrected transparently.
So, yes: mistakes happen. But the difference between an error and a problem often lies in how well you understand your own VAT processes.
Avoiding VAT Mistakes: From Master Data to VAT Return
Submitting a VAT return is only the final step of the VAT process. Long before those numbers reach the tax authorities, dozens of other things must go right. Mistakes made earlier in the process, in master data, contracts, orders, logistics, or invoicing, will inevitably flow into your VAT return.
- Master Data – The foundation of compliance
It starts with the basics: your company’s master data. Your products, services, VAT registrations, customer and supplier details — these are the building blocks of every VAT decision your system makes. If a customer’s VAT number is wrong, or a product is classified incorrectly, even the most diligent accountant won’t catch every error later.
Think of master data as the DNA of your VAT system: if something goes wrong at that level, you might end up with a mutant return.
Tip: When implementing or changing an ERP or accounting system, always check how it handles VAT logic. Ensure each transaction type has its own tax code, and that the system layout supports different VAT treatments correctly.
- Contracts – The legal backbone
Contracts define not just prices and discounts but also delivery terms and VAT responsibilities. A missing or vague clause can easily lead to uncertainty about the VAT treatment later on. Remember: vague contracts make for great courtroom drama, but terrible VAT compliance.
For example, always specify whether prices are “exclusive of VAT,” define who arranges transport, and ensure both parties are clearly identified. Many VAT problems (and some ECJ cases) start with a poorly written contract.
- Orders & Deliveries – Facts over assumptions
The purchase or sales order stage combines contractual terms with operational data. The logistics department must ensure that the actual delivery matches the order, and that transport documents are properly stored. If goods are moving cross-border, make sure the evidence supports your VAT treatment. And remember: Incoterms can give an indication on the risks and responsibilities relating to the transportation of the goods, but for VAT it is (only) important to know who ‘orders and arranges’ the transportation. And that does not always match with the Incoterm used.
- Invoicing – Where mistakes become visible
Invoices are the visible face of your VAT compliance. They must accurately reflect the underlying transaction and meet all formal VAT requirements. Incorrect invoices can delay VAT recovery or trigger assessments. There are 12 minimum VAT invoicing requirements, so make sure that you catch them all.
Tip: Always cross-check your invoice data with delivery notes and contracts. If you bill centrally, ensure Shared Service Centres have access to local VAT rules and exceptions.
- VAT Reporting – The final test
By the time you reach the VAT return, you’re only summarizing everything that has already happened. Reconciliations between your general ledger, VAT accounts, and financial statements should be standard practice. Regular internal VAT audits can help detect inconsistencies early, before the tax authority does.
Because there’s nothing quite like a tax inspector discovering your “learning moments” before you do.
In the End: Learn, Don’t Repeat
Every company makes VAT mistakes at some point. What separates the compliant from the careless is whether they learn from those mistakes and build controls to prevent them in the future.
The best way to avoid VAT errors is to make VAT part of your organization’s DNA: from contract negotiation to invoice posting. Train people. Review systems. Ask questions.
So, if you ever find yourself saying, “Oops, I did it again,” make sure it’s just about karaoke night, and not your VAT return. Because while you can’t avoid all mistakes, you can make sure you don’t repeat them.
After all, in VAT as in life, the only real mistake is pretending you don’t make any.
