5 Tips to Get Started with Advance Tax Calculation in Dynamics 365

Advance Tax Calculation in Dynamics 365 is Microsoft’s answer to increasing demands for international VAT handling. With more complex trading structures, stricter reporting requirements, and the need for efficient financial management, advanced VAT configuration is becoming essential, especially for companies operating across borders.
But how do you get started? In this article, we share five practical and proven tips based on insights from AlfaPeople experts and industry best practices.

1. Determine whether you are VAT-registered in multiple countries

The first and most important question: Are you VAT-registered outside your home country?
If the answer is yes – or even maybe – it makes sense to start working with Advance Tax Calculation. This is where the functionality adds value by ensuring the correct VAT is automatically applied based on the shipping locations.

“The first thing I always ask customers is: Are you VAT-registered in multiple countries? Because that determines how we need to configure the system,” says Claus Andersen, Senior Enterprise Architect at AlfaPeople.

2. Map your company’s purchase and sales flows

The next step is to understand the actual movements within your business – both physical and digital. Where are goods produced, stored, and shipped from? Where are your customers located? Is there a difference between billing and delivery addresses?

By mapping these flows, you can:

• Identify where VAT handling may fail
• Clarify where and when “VAT follows the goods” requires system support
• Assess the need for local VAT registrations and reporting

This step is especially important if your business uses cross-border fulfillment, works with 3PL providers, or stores goods in multiple EU countries.

3. Check whether customers and vendors have multiple VAT numbers

Advance Tax Calculation supports scenarios in which both customers and vendors have multiple VAT numbers depending on where they operate. If not configured correctly, you risk:

• Incorrect VAT amounts on invoices
• Missing or incorrect reporting
• Increased manual corrections and errors

A typical example is a customer registered in both Germany and Poland receiving goods from different warehouses. The system must automatically select the correct VAT number and apply the appropriate rates.

4. Use the system actively – let it do the work

Dynamics 365 is not just an accounting system – it’s an ERP platform designed to support complex business operations. However, this requires active use of its features and investment in proper setup and understanding.

Advance Tax Calculation enables:

• Matrix-based VAT logic configuration
• Integration with EU sales lists and electronic reporting
• Simplified VAT handling in complex transactions

“The system can do much more than many realize – but it requires a clear overview and proper setup,” emphasizes Benita Christensen, Finance Consultant at AlfaPeople.

5. Move from manual routines to digital reporting

Many companies still rely on manual spreadsheets, credit notes, and VAT reconciliations that take hours every month. This is where Advance Tax Calculation makes the biggest impact:

• Fewer reporting errors
• Time savings in the finance department
• Faster access to updated reports and compliance data

It’s no longer just a “nice to have” – it’s becoming a necessity. Authorities across the EU and globally are increasing requirements for digital and accurate reporting, and Microsoft continues to evolve the system to meet these demands.

Get started – without doing it alone

Getting started with a new VAT setup can seem overwhelming – but it doesn’t have to be. With the right guidance and understanding of your business, much of the process can be automated and simplified.
Contact us for an informal discussion if you want to learn how to get started with Advance Tax Calculation – and what benefits it can bring to your business.