Tax & Compliance · 02
How tax is determined
The heart of indirect tax — and the hardest part to get right at scale.
The one idea
The correct treatment is not fixed — it depends on the specifics of each transaction. Determination is answering a short set of questions for every line, and the answers set the rate, the rule, and whether tax even applies.
Get one input wrong and the tax is wrong — on that document, and on every report built from it.
The questions behind every line
What is sold
Goods or a service, and which category — that sets standard, reduced, zero-rated or exempt.
From where → to where
Ship-from and ship-to countries decide whose rules apply and whether it's domestic, intra-EU, or an export.
Who are the parties
Business or consumer, VAT-registered or not, and where — this drives reverse charge and zero-rating.
How it moves
Who arranges transport, the Incoterms, and whether it's part of a chain — which can shift where tax is due.
What comes out
A tax code, a rate, and — ideally — the reasoning: why this treatment, from these inputs. The reasoning is what makes an answer auditable instead of just a number.
Why it's hard
- Combinatorial explosion — thousands of valid combinations across countries, products and parties.
- Rules keep moving — rates, thresholds and place-of-supply rules change constantly.
- Garbage in, wrong tax out — determination is only as good as the master data behind it.