Consequences of not submitting a VAT/GST return on digital services

As a business selling digital products, timely submission of VAT/GST returns is crucial for staying compliant with tax regulations. Missing the deadline for filing returns can lead to serious consequences, including financial penalties and reputational damage. Here’s what you need to know about the risks of failing to submit your VAT/GST return on time.

Penalties and fines for late submissions

If you miss the deadline for submitting a digital services VAT/GST return, the relevant tax authority may impose late filing and payment penalties and fines. These penalties can vary by country but are often calculated as a percentage of the tax due. The longer the delay, the higher the penalty can become.

In some jurisdictions, penalties can accumulate daily, meaning that even a short delay can significantly increase the amount you owe. Fines may also be charged as a flat fee for each missed return. Leniency should not be expected, even if you have valid reasons for the delay, as it is entirely at the discretion of the tax authority to grant any exceptions.

Interest on overdue payments

In addition to penalties, tax authorities often charge interest on overdue tax payments. This interest is applied to the outstanding VAT/GST amount, and similar to penalties, it can quickly accumulate if the return remains unfiled for an extended period.

Reputational and legal risks

Failure to submit your VAT/GST return for digital services can also have wider implications for your business. Tax authorities now use data from various sources, such as credit card companies and payment providers, to monitor digital businesses, making it easier to detect non-compliance.

Repeated failure to file returns or remit tax could result in legal action, which could tarnish your business's reputation. In extreme cases, your business may face an audit, and continued non-compliance may even lead to business registration revocation or legal consequences.

Avoiding penalties with proactive management

To avoid penalties, fines, and legal consequences, it’s essential to manage your VAT/GST return submissions effectively. Missing the deadline for submitting your returns can have severe financial and legal consequences for your business. Penalties, interest charges, and reputational damage are all risks you want to avoid. The Taxually app can help you stay on top of your filing obligations. You will view all your upcoming deadlines in one place and thus ensure all returns are submitted on time, helping you avoid any potential late submission penalties.