AlfaPeople Global | Is your version of Dynamics 365 ready for VAT across multiple countries?
The digitalization of VAT regulations and the growing complexity of international trade are placing new demands on ERP systems. Many mid-sized companies use Dynamics 365 today – but not all realize that the system version and configuration are critical when managing VAT across multiple countries.
Not sure if your version supports future requirements? Read on to understand the difference between the classic and modern tax engine in Dynamics 365.
1. A growing need: VAT across multiple countries
More companies are operating across borders – through exports, remote warehouses, subsidiaries, or 3PL (third-party logistics) providers. At the same time, authorities are tightening requirements:
- VAT registration in countries where goods are physically stored or sold
- Mandatory electronic reporting and documentation
- Increased scrutiny of VAT collection and deduction rights
According to Avalara’s report, The Future of Tax Management: 2024 and Beyond, more than 60% of tax authorities globally will require digital documentation and local compliance by 2025. This places new demands on ERP systems – and requires far more than a basic setup.
2. Dynamics 365: What depends on version and setup?
Many companies still use older versions, such as AX 2012, or newer versions like Dynamics 365 Finance and Operations and Dynamics 365 Business Central, but with a traditional VAT setup.
“We often see companies using Dynamics 365 without leveraging Advance Tax Calculation. They still have an AX-style setup, which is not scalable internationally,” says Claus Andersen, Senior Presales Architect at AlfaPeople.
There is a significant difference between:
- AX 2012: Limited functionality requires manual adjustments
- Dynamics 365 Finance / Dynamics 365 Business Central (classic setup): Functional, but without matrix-based or advanced logic
Dynamics 365 with Advance Tax Calculation: Flexible, automated, and suitable for multiple markets and regulations
3. Three differences between the old and new tax engine
Matrix-based setup vs. static logic
The new engine allows configuration based on combinations – country, product, customer type, delivery location – all managed in a structured matrix. The classic setup relies on fixed relationships that quickly become difficult to maintain.
Multiple VAT numbers per customer and vendor
In many countries, businesses have multiple VAT registrations. The modern setup supports this dynamically, which is essential for international trade, especially in scenarios like remote warehousing and drop shipping.
Built for scalability
With Advance Tax Calculation, you can manage new locations, VAT rules, and markets without creating workarounds or compromising efficiency. The setup is designed for growth.
4. When should you consider upgrading?
The short answer: when your VAT setup no longer matches the complexity of your business.
Typical warning signs:
- VAT handling requires manual effort and spreadsheets
- Uncertainty about VAT registrations abroad
- Lack of clarity on whether the ERP handles rules correctly
- Errors in EU sales lists or VAT reporting
- Difficulty scaling the setup as the business grows
“VAT follows the goods – not just the invoice. Your ERP must understand both the physical and tax flows,” explains Benita Christensen, VAT specialist at AlfaPeople.
5. Ready for the next step?
We help companies to:
- Map their current setup and processes
- Assess whether Advance Tax Calculation is relevant
- Design and implement a flexible VAT setup aligned with current and future business needs
