Introduction to tax
Why tax matters for invoicing
Tax is an essential part of every sales and purchase transaction. It determines the correct financial treatment of invoices and directly impacts compliance, reporting, and cash flow.
- It affects all sales and purchases.
- It needs to be accurate to avoid compliance issues, disputes, or penalties.
- It is driven by data and tax rules, which can vary widely across countries and jurisdictions.
- It evolves constantly, requiring businesses to monitor and adapt to regulatory changes.
In today’s increasingly digital environment, ensuring that tax is applied correctly has become more important than ever. With e-invoicing and electronic reporting mandates spreading across regions, automated and reliable tax handling is no longer optional, it’s essential.
What is tax automation?
Tax automation refers to the use of software and APIs to handle tax determination, calculation, and validation without manual intervention. It can be understood in different ways:
- Process automation: replacing manual tax lookups and spreadsheet calculations with automated rules applied in real time.
- Compliance automation: ensuring that invoices meet country-specific tax and reporting obligations before they are exchanged with customers, vendors, or governments.
- Integration automation: embedding tax determination into financial workflows so that every transaction is automatically assigned the correct tax treatment.
In short, tax automation ensures that businesses can process transactions quickly, accurately, and in compliance with constantly changing rules.
Banqup Tax Service
The Banqup Tax Service is an independent tax calculation service designed to handle VAT and indirect tax in a reliable and automated way.
At its core, the Tax Service is and functions as a tax engine:
- You send transactional invoice data through the API, for any sales or purchase transaction.
- The Tax Service processes the data through a proprietary sequence of validated tax rules that are kept up to date for any changes in legislation.
- The outcome, the correct VAT treatment for the transaction, is sent back in real time.
Key use cases
The output determined by the Banqup Tax Service can be used in different ways:
- Tax calculation/determination: automatically calculate the VAT treatment of a transaction, based on its data.
- Tax validation: confirm accuracy of the tax that was already calculated on any sales or purchase invoice, before sending or processing it.
The Banqup Tax Service is and independent and standalone service: it does not rely on how invoices are created or exchanged. You simply send the data, and the engine sends back the tax.
Over time, the Banqup Tax Service will also be available as an integrated component of other Banqup products, but you can already use it today as a standalone API for tax automation.
Interaction with other apps and services
Although the Banqup Tax Service is a standalone service on Banqup, it will require interaction with other apps. The most important ones are configuration and countries. In the configuration app, the user will perform its tax configurations such as product mapping, tax code configuration and so on. Countries is a service on Banqup that holds all of the country level master data such as ISO codes, tax ID regex and also the country level tax data such as the rates. During the tax API call, the Tax Service may use the countries and configuration app.
Please note that the Tax Service may also interact with other apps such as connections in the business space where users can configure details of vendors and customers.