Digital VAT/GST Administration System Implementation Overview Implementation of DTT solutions for digital VAT/GST administration can increase annual tax collection by up to 150% info@taxtech.digital www.taxtech.digital Executive Summary DTT recommends to implement the 3rd generation of the Digital VAT/GST/Sales Tax Administration (DVA) system, integrated with existing Tax Administration’s IT systems Expected Results Error-free collection of the VAT data. Buyers do not submit VAT invoices and use “golden record” of sellers' invoices to reduces administration burden and number of data entry errors Highly scalable automated VAT Administration process not dependent on the subjective judgement by taxpayers and tax officers Elimination of the tax gaps with identification of participants and beneficiaries in VAT evasion schemes Reduced Tax Administration’s time and resources otherwise required for performing manual control work and audits After 3-4 years following successful system launch, implementation of DVA solutions may increase annual tax collection by up to 150% 1. Implementation of the Base DVA solution: • Sellers on VAT regime compulsory submit electronic VAT-invoices to Tax Administration. • DVA system performs format-logic control and saves data in the secure Invoice Repository for further use. • Buyers on VAT regime get online access to the “golden record” of sellers' invoices, verify its correctness and can get VAT credits and refunds. Focus on the error-free collection of the VAT data, comparison of invoice data with tax return data and payment data, calculation and visualization of the simple tax gap 2. Implementation of the Advanced DVA solution: • Automatic detection of the complex Tax Gaps, VAT optimization chains, evasion participants, beneficiaries, and VAT taxpayer risk profiling. • Digital Taxpayer Communications with notifications for voluntary gap closure. • Automatic calculation of VAT payable; prefilled tax returns or automatic accruals with non-filing of returns. • Integration with Taxpayer Accounting Systems for automatic invoice submission. Focus on identifying complex tax gaps, optimization schemes, their participants and beneficiaries DVA Implementation Project’s Goals and Objectives Goals To prevent VAT taxpayers from submitting erroneous invoices and tax returns and to stop intentional VAT evasion To improve the efficiency and reduce costs of VAT administration To increase annual VAT/GST collection up to 150% Objectives Implementation of the Base DVA solution ensures accurate voluntary taxpayers’ compliance by: Preventing possible errors in submissions related to the fulfillment of VAT tax obligations Automatic comparison of invoice data with tax return data and payment data Automatic calculation and visualization of the simple tax gaps info@taxtech.digital www.taxtech.digital

1. Trusted Global Tax Gap Advisor &
Digital Solution Provider for Tax
Administrations
Digital VAT/GST Administration
System Implementation Overview
Implementation of DTT solutions for digital VAT/GST
administration can increase annual tax collection by up to
150%
info@taxtech.digital
www.taxtech.digital
10.2022

2. 2
Executive Summary
Error-free collection of the VAT data. Buyers do not submit VAT
invoices and use “golden record” of sellers' invoices to reduces
administration burden and number of data entry errors
Highly scalable automated VAT Administration process not dependent
on the subjective judgement by taxpayers and tax officers
Elimination of the tax gaps with identification of participants and
beneficiaries in VAT evasion schemes
Reduced Tax Administration’s time and resources otherwise required
for performing manual control work and audits
After 3-4 years following successful system launch, implementation of
DVA solutions may increase annual tax collection by up to 150%
Expected Results
DTT recommends to implement the 3rd generation of the
Digital VAT/GST/Sales Tax Administration (DVA) system,
integrated with existing Tax Administration’s IT systems
1. Implementation of the
Base DVA solution:
•Sellers on VAT regime compulsory submit
electronic VAT-invoices to Tax
Administration.
•DVA system performs format-logic control
and saves data in the secure Invoice
Repository for further use.
•Buyers on VAT regime get online access to
the “golden record” of sellers' invoices,
verify its correctness and can get VAT
credits and refunds.
2. Implementation of the
Advanced DVA solution:
•Automatic detection of the complex Tax
Gaps, VAT optimization chains, evasion
participants, beneficiaries, and VAT taxpayer
risk profiling.
•Digital Taxpayer Communications with
notifications for voluntary gap closure.
•Automatic calculation of VAT payable;
prefilled tax returns or automatic accruals
with non-filing of returns.
•Integration with Taxpayer Accounting
Systems for automatic invoice submission.
Focus on the error-free collection of
the VAT data, comparison of invoice
data with tax return data and
payment data, calculation and
visualization of the simple tax gap
Focus on identifying complex tax
gaps, optimization schemes, their
participants and beneficiaries

3. 3
DVA Implementation Project’s Goals and Objectives
Goals Objectives
To prevent VAT taxpayers from submitting
erroneous invoices and tax returns and to
stop intentional VAT evasion
To improve the efficiency and reduce costs
of VAT administration
To increase annual VAT/GST collection up
to 150%
Implementation of the Base DVA solution ensures
accurate voluntary taxpayers’ compliance by:
Preventing possible errors in submissions related to the
fulfillment of VAT tax obligations
Automatic comparison of invoice data with tax return data
and payment data
Automatic calculation and visualization of the simple tax
gaps
The Advanced DVA solution can additionally:
Improve the efficiency of VAT administration by finding
complex tax gaps and ensuring the accuracy of VAT
deductions for B2B taxpayers in settlements of VAT returns
Ensure the enforcement of VAT legislation, as well as search
and prevention of deliberate VAT evasion

4. Digital VAT
Administration (DVA)
for B2B
Digital VAT
Administration (DVA)
for B2C
Simplified Digital VAT Administration (DVA) Architecture
4
Data from online
electronic cash
registers (OECRs)
VAT Taxpayers (B2B):
Manufacturers
Importers / Wholesalers
Retailers (offline and online)
VAT & Non-VAT Taxpayers (B2C):
Retailers (offline and online)
Private individuals
Standard Tax Invoices
(VAT Invoices)
Simplified Tax Invoices
(Fiscal Receipts)
Electronic VAT invoices
Pre-filled Electronic VAT
returns

5. 5
Differences in the Methods of the Tax Administration for
B2B and B2C Transactions
Business to Business (B2B) Business to Consumer (B2C)
VAT Taxpayer VAT Taxpayer
Legal entities and entrepreneurs applying general tax regimes
VAT Taxpayer Non-VAT Taxpayer
Retailers vs. private individuals or businesses applying simplified tax regimes
Focus on the administration of VAT
deductions, to ensure completeness
of accruals
Focus on ensuring the completeness
of revenue accounting via
recordkeeping of all invoices (fiscal
receipts)

6. Digital VAT
Administration (DVA)
for B2B
Digital VAT
Administration (DVA)
for B2C
Standard Tax Invoices
(VAT Invoices)
The Scope of the Proposed Solution
6
Simplified Tax Invoices
(Fiscal Receipts)
Electronic VAT invoices
Pre-filled Electronic VAT
returns
VAT Taxpayers (B2B):
Manufacturers
Importers / Wholesalers
Retailers (offline and online)
VAT & Non-VAT Taxpayers (B2C):
Retailers (offline and online)
Private individuals
1) Digital VAT
Administration for B2B
ensures error-free
collection of VAT
invoices, completeness
of accruals, and
minimization of the
simple tax gap
2) Tax Administration
can implement it later
with a focus on the
completeness of B2C
revenue accounting via
recordkeeping of all
VAT invoices (fiscal
receipts)
Core Tax Administration
Information System
(CTAIS)
Integration with: Registers of invoices, Personal Accounts,
Audits, Taxpayer communications, Web portals, Mobile app
Tax Portal
Open APIs Open APIs
Data from online
electronic cash
registers (OECRs)
Near Real-time
Transmission
Periodic
Transmission

7. Causes of the Indirect Tax Gap and Benefits of Digital VAT
Administration
7
Tax
Primary
Sectors
Tax Gap Causes 1 DTT’s Digital Tax Solutions 2 Potential Outcomes
VAT / GST /
Sales Tax
B2B
Overstated tax deductions
Adjustments
Digital VAT Administration for B2B
Growth of VAT and other indirect
tax collection up to 150%
VAT Tax Gap reduction by 5-10
times
B2C
(business-to-
consumers,
e.g., retail)
Understated income
Adjustments
Online Electronic Cash Registers
(OECRs) and Digital VAT
Administration for B2C
B2C (online
retail, cross-
border
commerce)
Offshore operations (non-
resident digital online platforms
and service providers)
Non-filing of tax returns
Digital Tax Administration for
Online Economy and Self-
Employed
[1] Source: DTT’s analysis and estimations
[2] For more details, please visit out site at: https://taxtech.digital/en/solutions/

8. Transition to Gen3 of VAT/VAT Administration Systems
8
Paper or online document
exchange.
Taxpayers must submit
VAT returns in paper or
electronic forms
Primary and corrective
VAT invoices must be
presented during audits
Manual verification of
VAT invoices and returns
Generation 1
Registers of VAT
invoices are submitted
along with the tax returns
Registers of sales,
purchases, agency
operations, and
operations with VAT non-
payers
Manual verification of
VAT invoices and returns
Generation 2
Electronic VAT invoices
are compulsorily
submitted by ALL VAT
taxpayers instead of tax
returns and registers
A fully automated VAT
administration process
verifies gaps and VAT
payable and can use a
zero-return approach
Generation 3
VAT accrual and
extraction in the moment
of payment (cash
method):
The payment is divided
into the principal
amount and the VAT
amount
VAT is transferred to a
tax account.
Does not require tax
invoices and is virtually
fraud-proof
Generation 4
Transition to digital VAT administration
We propose implementation of the
Gen3 focusing on administration of
VAT deductions for B2B taxpayers
Tax Administration uses Gen1 or 2 with VAT
returns/registers forms filed by taxpayers and
partially verified during audits
As Is To Be
Implementation of Gen4
requires additional
discussion and preparation

9. 9
Alternative Approach
For faster results, Tax
Administrations using
2nd generation of the
VAT administration
system can supplement
it with additional data-
matching functional
blocks without the
collection of electronic
tax invoices
PRO
Faster time to market
No need to integrate taxpayer accounting/ERP
systems
The system uses the invoice registers (Input / Out-put
Tax Statements) that are already in place
CONTRA
The 2nd generation uses unverified taxpayers’ data
with unintentional and intentional errors
The unresolved burden for cleansing and correcting all
received data

10. Taxpayer submits VAT invoices or returns
via tax portal
1
5
3
7
2
8
4
6
Format and logical control
VAT rates control
Data aggregation, comparison and
calculation of gaps
Creation of electronic claims, if gaps
are discovered
Communication of the claim to the
taxpayer requesting justification or
correction
Taxpayer submits adjustments to VAT
returns or provides justification
If gaps/claims are closed and the
deadline for desk audit expires, the
system closes the audit with a
decision to refund the taxpayer, if
required
Fully Automated VAT Administration Process (Gen3 “To Be”)
10

11. Project’s 1st stage components (Base) Project’s 2nd stage components (Advanced) 11
Functional Architecture Components for Digital VAT/GST
Administration in B2B
VAT/GST Taxpayers
Registration
Submission and Collection
of Tax Invoices
Tax Invoices Matching
and Verification
Simple Tax Gap
Detection
Claims
Management
Tax Officer Workplace
Base Components
VAT/GST Relationship Tree
VAT/GST Chains Visualization
Complex Tax Gap Detection
Advanced Components
Taxpayer’s Portal & Tax Administration Information Systems
Taxpayer Digital Communication and Notification System
Invoice Repository
Visual
Interface
for
Taxpayers
Integration with External
and Internal Systems
1 2
1
1
1
1 2

12. The complete list of functional requirements should be created during the initial phase of the project's implementation. 12
Description of the Base DVA Solution
Registration of
VAT accounts by
taxpayers via
visual interface
integrated into
Tax Portal
Submission of
VAT invoices by
taxpayers
Management of
input VAT
invoices and
VAT tax base by
periods by
taxpayers
Receiving,
performing
format-logic
control and
secure storing of
tax invoices in
the Tax
Administration
Invoice
Repository
Simple Tax Gap
detection
Communication
with taxpayers
about found
errors and
discrepancies
(tax gaps)
Automatic VAT
accruals (tax
liabilities
calculation)
based on
primary and
corrective VAT
invoices data
Tax
Administration’s
Tax Officer
Workplace for
tax officials
working with
taxpayers' VAT
accounts
Digital
communication
between sellers
and buyers
regarding issued
tax invoices in
case of any
issues or
disputes.
The base DVA solution includes the following major functional capabilities*:

13. VAT Invoice Collection and Verification with “Golden”
Invoice Records (Base Solution)
13
Buyer
3. Accesses
“golden record”
to report input
VAT for refund
Seller
2. Submits eVAT
invoice to DVA
with output VAT
to pay
VAT Return = Output - Input
Output VAT
to pay
Input VAT
to refund
“Golden” Invoice Record
They are equal since only
Sellers submit
DVA Front-end for Taxpayers
Integrated into Tax Portal
Registering / de-registering VAT accounts
Registering tax invoices, working with invoice
baskets by periods, and managing the tax base
Digital communication between buyers and
sellers about issues/disagreements
Both the buyer and the
seller must use a single
"golden" invoice record to
enable automatic tax
return pre-filling or
calculation of VAT to be
paid by the Tax
Administration
The goal is to eliminate
simple VAT gaps:
The gap between the
Input VAT and the
Output VAT
The gap between the
tax return and tax
invoices
2 3
1
4 4
5
Secure Invoice
Repository
e-Notifications about
errors and violations
5
Tax Returns
Tax Payments
Tax Portal

14. 14
Visual Interface for VAT Taxpayers, Integrated in the Tax
Reporting Portal
The system will provide a digital services to VAT
taxpayers via Visual Interface, integrated in the Tax
Portal, including:
VAT accounts
re/de-
registration
Submission of
electronic VAT
invoices
Management of
invoices and
the tax base
Communications
with Tax
Administration e.g.,
receiving
notifications and
correction claims on
errors and
discrepancies (tax
gaps)
Submission of
rectifications
Pre-filling of
returns with
VAT details and
submission of
returns
Verification of
status updates for
receipt of VAT
invoices by Tax
Administration,
processing status,
refunds, etc.

15. Description of the Advanced DVA Solution
The complete list of functional requirements should be created during the initial phase of the project's implementation. 15
The advanced DVA solution adds the following major functional components*:
Detection of Complex VAT Gaps and
violations
> Visualization of VAT flows (VAT Relationship
Tree)
> Visualization of VAT Chains with detected
technical companies, terminal companies, and
beneficiaries
> VAT Taxpayer Risk Profiling
VAT Administration Performance
Management via KPIs, Dashboards
and Reporting
APIs for the Integration with Taxpayer
Accounting Systems for Automated
VAT Invoices Submission

16. Taxpayer Digital
Communication System
Tax Gap Detection System
Invoice Collection and Verification System
with the Invoice Repository
The Process of the Digital Administration of the Simple VAT
Gap (General Approach)
16
Collection of Tax
Invoices
Collection, verification,
processing, and storage of
electronic VAT invoices and
returns.
Visual graphic user
interfaces for taxpayers and
APIs for integration with
their accounting systems
Invoice aggregation
and storing
Aggregation of taxpayer's
invoices by taxation
methods, considering
advance payments and
import transactions
Secure storage of invoices
in the Tax Repository
Data Matching
Match seller’s and buyer’s
invoices, returns, and tax
payments data
Determine a simple tax gap
between each pair of buyer
and seller
If the tax gap is found–
issue a correction claim
Electronic
communication
system
Informing taxpayers about
errors by submitting claims
to close the tax gap
Collecting corrective tax
invoices, amended tax
returns, or justifications
For the digital administration of the simple VAT gap, it is necessary to build and automate the following process

17. Key Elements of the Digital Administration of the Complex
VAT Gap
17
Taxpayer Risk Model
Answers does the taxpayer’s
entity conduct real activities,
or is it used for VAT evasion?
Builds taxpayer’s risk profile:
sales, tax payments,
employees, property,
violations, etc.
Visualization of VAT
Optimization Chains
Build a graph (tree) showing
links between VAT taxpayers,
their status, and calculated
gaps.
Visualization of VAT flows
and VAT chains’ participants.
Detection of VAT
Optimization Beneficiaries
VAT chains analysis tool
Automatic detection of
technical and terminal
companies, VAT evasion
beneficiaries
Building the evidence base
and opening the case for VAT
refunds deprivation

18. Detection of the Complex VAT Gap
18
Buyer
Reported input
VAT for deduction
3rd Seller in the
Chain
Did not reported
output VAT for
accrual
1st Seller in the
Chain
Reported output
VAT for accrual
2nd Seller in the
Chain
Reported output
VAT for accrual
Output
VAT for
accrual
Input
VAT for
refund
Output
VAT for
accrual
Input
VAT for
refund
Due to the absence of direct transactions between the 3rd seller
and the buyer, this VAT gap is difficult to spot
VAT Optimization Chain
Terminal
company
Technical
company
Technical
company
Primary objective is to find the taxpayer who benefits from the
VAT optimization and to match him with the seller in the chain
with the simple VAT gap
Simple VAT gap
Complex VAT gap

19. The tool helps to:
Identify VAT fraud schemes in
manual and automatic mode
Matching counterparties in the
complex VAT optimization
chains
Trace VAT transactions from
the simple tax gap to the
beneficiary
Build a taxpayer’s risk profile
for further analysis
Taxpayers Relationship Tree for the Administration of
Complex VAT Gaps

20. 20
Taxpayer Digital Communication (TDC) System
The Taxpayer Digital Communication system
manages notifications and simplification of tax
administration for taxpayers.
Effective communication system has a
significant and positive influence
on taxpayer compliance.
TDC should support:
Secure Messaging
Chat
Outbound Notification
Integrations with the Tax Portal
and Auditor's Workplace
TDC enables the automatic processing of
violations based on the identified tax gap
Registering a
violation in
compliance via
identified VAT gap
Informing a
taxpayer about the
identified violation
Inviting a taxpayer
to remedy
violations
voluntarily by
correcting data
The process is
fully automated
and does not
involve a tax
officers

21. 21
Integration with Tax Administration’s IT infrastructure
DVA system components should be integrated with
the existing Tax Administration Information System
and the Tax Portal.
It is necessary to support at least the following
integration points:
Integration with the taxpayers' authorization and
authentication system on the Tax Portal.
Integration with the authorization and authentication
system of tax employees.
Integration with the register of taxpayers to check the
status of the VAT taxpayer and build risk profiles with
access to registration, accounting, and other data
about taxpayers.
The complete list of integration requirements and
methods should be developed during the initial
phase of the project's implementation.
Advanced DVA
Components
Base DVA Components
Tax Administration Information Systems
Tax Portal
Taxpayers’ Authorization and
Authentication
Internal Authorization and
Authentication

22. 22
Integration with Taxpayer Accounting Systems
Integration with Taxpayer Accounting
Systems is essential to ease reporting and
minimize the number of errors
DVA solution provides support for several
integration methods:
The complete list of integration
requirements should be created
during the initial phase of the
project's implementation
REST APIs to seamlessly upload
data and carry out filing
operations from taxpayers’ ERP
systems
01
Taxpayers can fill out the
interface on the tax portal or
import data via connectors or
via personalized Excel-based
templates
02
Support for automated
scheduled uploads of
documents using secure batch
file transfer protocols
03

23. The Roadmap for Implementing the Digital VAT
Administration System
23
Stage Duration1 Objectives & Key Results
1. “As is” analysis and
development of the Digital
VAT Administration
concept and solution
requirements
1-2 Qs
(1 quarter= 3 business
months)
2. Development and
implementation of the Base
solution
2-4 Qs for fine-tuning and
integration
4 Qs for pilot operations
Going live after 6-8 Qs
3. Development and
implementation of the
Advanced solution
Start after 6-8 Qs
2-4 Qs for fine-tuning and
integration
4 Qs for pilot operation
Going live after 12-14 Qs
Analysis results and
recommendations
Functional, integration
and API requirements,
user interfaces
Non-functional, security
and infrastructure
requirements
Integration with
manufacturers of
accounting
systems.
Deployment of
pilot sites
Fine-tuning and
integration of the
Base DVA
solution
Conducting a
pilot project (test
operations)
Launch into live
operations
Fine-tuning and
integration of the
Advanced DVA
solution
Refining and
integration of the
module for
automatic
identification of
optimization
beneficiaries
Conducting test
operations
Launch into live
operations
[1] The following estimation is based on ideal conditions projected into the future. Changes in business conditions, requirements, and other influencing factors may change the current estimate.
Actual duration of implementation project to be defined depending on the regulation, customer requirements and other factors.

24. Project’s Implementation Timeline1
[1] The following estimation is based on ideal conditions projected for the future. Changes in business conditions, requirements, and other influencing factors may change the current estimate. The
actual duration of the implementation project is to be defined depending on the regulation, customer requirements, and other factors.
24
Live operation of the Base solution
After 6-8 quarters
Live operation of the Advanced solution
After 12-14 quarters
Live operation of the automatic identification of
VAT evasion beneficiaries for VAT chains
After 18-24 quarters

25. About Us
Digital Tax Technologies (DTT) is an international expert in
tax gap minimization, a trusted digital transformation advisor
& solution provider for national tax administrations.
We help tax administrations around the world to reduce the
tax gap, improve tax revenue collection and reduce the share
of the shadow economy.
Our mission is to increase global fiscal transparency,
improve tax compliance and administration, and ensure fair
competition and welfare.
Our team consists of experts with experience in digital tax
administration advisory and implementation in various
European, CIS, Middle East, and African countries.
25
info@taxtech.digital
www.taxtech.digital

26. Definitions of the VAT Tax Gap
Source: World Bank, IRS 26
Total
True
Tax
Gross Tax Gap
Net Tax Gap
Enforced and
Other
Late Payments
Voluntary Tax
Payments
Complex VAT Gap
Chains of more than two sellers and buyers involved in
the VAT evasion scheme
Taxes Legally Owed Taxes Collected
Vs.
Buyer
Reported
input VAT
for refund
Seller
Reported
output VAT
for accrual
Input
VAT for
refund
Output
VAT for
accrual
Simple VAT Gap
The gap between the Input VAT and the Output VAT
The gap between the tax return and tax invoices
Must be Equal
Simple VAT Gap
Tax Gap

27. 27
Principal Methods of VAT Fraud
Fraudsters can reduce the
amount of VAT payable by:
Submitting a claim for
deductions for fictitious
transactions
Inflating the cost of real
transactions
Not reporting transactions
Not paying tax
Participants in the VAT Fraud Schemes
Beneficiary
Individual taxpayer who gains from the
VAT optimization
Terminal (or
terminal company)
Seller at the tail end of the chain
where there is a simple tax gap
and VAT disappears
Technical
companies
Taxpayers in the VAT evasion chain

28. Examples of the
User’s
Interfaces
The following examples are
intended for information
purposes only and are
subject to change according
to the final requirements
incorporated into the system
implementation contract.

29. VAT Account Registration
Taxpayer logs in the Tax Portal
and can request VAT Account
Registration if required

30. VAT Status Registration
Taxpayer can register
VAT status by filling this
form in the personal
cabinet, integrated into
the Tax Portal

31. Taxpayer’s Profile and Notification Settings
31

32. Registered VAT Account Balance Summary
32
VAT account balance
summary by tax
periods

33. Output/Input Tax Invoices Summary

34. New Tax Invoice Registration
The taxpayer may create
a new VAT invoice

35. Input tax / Output tax Invoices
For input tax invoices
buyer can import seller’s
invoice by known ID
number

36. VAT Returns Summary by Periods
36

37. Tax Return Registration

38. Declined Tax Return
The DVA system automatically
analyzes submitted VAT returns and
can reject them if any mistakes are
discovered

39. Tax Officer Workplace – Summary Dashboard
39

40. Tax Gap Warnings
40

41. Tax Gap Warning Details
41

42. VAT Return and the Simple VAT Gap
42
VAT taxpayer (Legal Entity)
Purchase of goods and services
Sale of goods and services
Input VAT
Output VAT
VAT Declaration
Input VAT Output VAT
Tax
Administration
Output VAT is transferred to the budget
Input VAT is refunded or offset to the taxpayer
Verifies the
declaration, decides
on reimbursement
Buyer
Claimed VAT
for refund
Seller
Did not
reflect VAT
for accrual
Simple VAT Gap

43. Trusted Global Tax Gap Advisor &
Digital Solution Provider for Tax
Administrations
© 2022 Digital Tax Technologies LLC. All rights reserved.
The information herein is for informational purposes only and represents the current view of DTT LLC as of the date of this presentation. Because DTT LLC must
respond to changing market conditions, it should not be interpreted to be a commitment on the part of DTT LLC, and DTT LLC cannot guarantee the accuracy of any
information provided after the date of this presentation.
DTT LLC MAKES NO WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.