Towards a new and definitive VAT system for the EU

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The Commission adopts new proposals for the most far-reaching VAT reform in the EU for a quarter of a century VAT is a major and growing source of revenue in the EU, raising over €1 trillion in 2015, corresponding to 7% of EU GDP. However, despite many reforms, the VAT system has been unable to keep pace with the challenges of today's global, digital and mobile economy. The current VAT system dates from 1993 and was intended to be a transitional system.

SAP end-to End solution for periodic SII files in Spain

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In Spain a new VAT reporting system will enter into force on the 1st of July 2017.

Mini One Stop Shop for VAT

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From 1 January 2015, telecommunications, broadcasting and electronic services are always taxed in the country where the customer belongs – regardless of whether the customer is a business or consumer – and regardless of whether the supplier is based in the EU or outside.

Shift from direct tax to indirect tax

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CFOs / Head of Tax apparently still focus more on direct tax than indirect tax. This is interesting as from a tax revenue perspective the current trend is a shift from direct tax to indirect tax by decreasing direct tax rates and increasing VAT/GST rates. Corporate income tax rates are continuing to fall in many countries.

Partnership between Key Group, SNI and ConVista

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A partnership is closed between the Key Group, SNI and the international operating SAP consultancy firm 'ConVista Consulting' with offices amongst others in Madrid and Barcelona. Key Group and SNI operate from Netherlands, Poland and Turkey.

e-Learning modules on VAT

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VAT eLearning programme developed by the European Commission consists of 12 individual courses. The eLearning modules on value added tax (VAT) aim at presenting the fundamental elements of the VAT Directive.

Criminal charges and jail time

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59 percent of respondents (53 percent in 2014) expect the personal liability of compliance officers to increase in 2015, with 15 percent expecting a significant increase. Compliance officers or its Executives at firms as diverse as Swinton Insurance, Bank Leumi, Bank of Tokyo-Mitsubishi, Brown Brothers Harriman and Deutsche Bank (DB: VAT fraud) having been fined, banned or jailed (or a combination).

SAP add-on for immediate Supply of Information (SII) in Spain

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SII (“Suministro Inmediato de Información”) in Spain is about changing the current VAT management system which has been in place for 30 years, introducing a new bookkeeping system for VAT on the AEAT online system, by providing all billing records virtually immediately. The new Immediate Supply of Information accelerates the gap between recording or booking invoices and the actual realisation of the underlying economic transaction. It is introduced because the current technological situation allows its implementation at this time, to improve both taxpayer assistance as taxation controls (e-tax audits).

Efficiency check French VAT System

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France faces important consolidation and indebtedness challenges. At the same time, the overall tax burden is one of the highest in the EU. There are strong economic arguments for having a simple VAT system, with a limited use of reduced rates. Finally, we suggest a number of ways to improve the efficiency of the VAT rate structure in France.

Avoid unnecessary VAT rework

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Hidden factory or hidden operation: the rework and cover ups, the hours and days of wasted time in a company of people who constantly correct mistakes . The objective is to make the hidden factory visible (measure/calculate ROI) and as result returns precious time and money to the business. It is about extra man-hours, additional costs due to rework (credit/debit notes) and retrospective corrections and/or disclosures. Example: how much rework is required before numbers received from finance systems can be used? 

In Spain on 1 July 2017: immediate supply of Information to tax authorities in force

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In Spain a new VAT reporting system will enter into force on the 1st of July 2017. The new Spanish requirements will have a huge impact on many (multi)nationals that run SAP.

Introducing a new VAT system

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On 16 June 2016, the Finance Ministers of the Gulf Cooperation Council (GCC) held an extraordinary meeting in Jeddah, Saudi Arabia on GCC Value Added Tax (VAT). GCC States - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates that make up GCC - will most likely introduce VAT on 1 Jan 2018 or by 1 Jan 2019 at the latest.

When expertise is needed upfront

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The tax function should ascertain proper implementation and determine the impact of changes in businesses, laws and regulations on implemented tax planning. Getting ahead of possible problems at the planning stage before they arise in practice is one critical way to make sure that the company reaps the benefits. When the business model changed as a result of the implementation of a centralized procurement model, this could create not only VAT risks, but commercial risks as well. 

SAP Solution para el Suministro Inmediato de Información (SII) en España

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La Agencia Tributaria implanta un nuevo sistema de gestión del IVA basado en el Suministro Inmediato de Información (SII). El denominado “IVA online” es un procedimiento de gestión telemática u online con la Agencia Tributaria (AEAT), mediante el cual las empresas tendrán que comunicar los registros de facturación (no las facturas) de forma electrónica. Con esta información, la AEAT irá configurando, en tiempo real, los distintos Libros de Registro.

Concrete measurable actions

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Setting realistic objectives is the starting point for any successful change effort. In order to increase indirect tax function effectiveness it is important to set S.M.A.R.T. objectives and define tasks: add to objective the word by ... as shown in below example. Break down larger tasks into smaller ones. 

VAT findings for benchmarking

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Benchmarking exercises against trends in the indirect tax market can be done via global surveys that capture info on tax function, attitudes and priorities. These surveys are useful as they give insight into what others are facing or have faced and how you could improve yourself.

España 1 de julio de 2017: Suministro Inmediato de Información a las autoridades (SII)

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A partir del 1 de julio de 2017, más de 62.000 empresas estarán obligadas a gestionar el IVA de forma electrónica. Se trata de un nuevo sistema electrónico para la declaración telemática de los libros de registro del IVA, que nace con el objetivo de agilizar el cumplimiento fiscal y las devoluciones de este impuesto.

VAT Control Framework

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While the rates for direct tax are decreasing everywhere across the world, the rates for indirect tax keep rising. With multinational companies we’re easily talking about amounts of over 5 billion euros of indirect tax flowing through the books. Yet according to big4 surveys, the control mechanisms for these numbers are still inadequate.

Creating XML SAF-T Structures directly in SAP ECC

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SNI SAF-T is a SAP add-on that runs over SAP ECC, is compatible with OECD standard and covers the steps of creation of necessary structures in XML format including E-submission with signature and encryption.

How to get ready in time for SII Spain

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Any SII Spain solution should be implemented on 1 July 2017 as the first mandatory submission is already 8 days later. There are rumours that submission deadline might be delayed but that is still a big uncertainty. The decision that you have to make is whether you accept non tax compliance in the worse case. If that is not acceptable you should buy the right solution and start implementing asap to be compliant in time.

Why and what needs to be done

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Even as the world is shrinking, businesses and their growth strategies are becoming more complicated. A schematic drawing of the functions of a typical multinational today might look like a Rube Goldberg contraption—a complex of moving parts that must connect one to another for tax, regulatory, and reporting purposes. 

SAP add-on for SAF-T Poland

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We can offer a SAP add-on solution for Poland (ABAP) at a fixed all inclusive fee. Fully integrated in SAP without an external interface or use of external software. All inclusive means implementation, training and 1 year of free support and maintenance for bug-fixes & legal updates.

From tax strategy to artificial intelligence to automating the tax adviser

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'Innovation' and 'Tax strategy' have my interest. In the UK the Executive has to sign off the company's tax strategy and publish. The strength of the UK approach is that the Executive has to take position and also has to keep its promise as a public statement is made.

Gain awareness and acceptance

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Create, protect and prove value and write a business case for investment to realize business objectives such as improve cash flow, reduce costs, improve tax processes and manage tax related risks.

'Brexit' is it already time to act

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Relax, the VAT law will probably not change in the next 2 years. The UK must first give the European Council notice of its intention to withdraw and a 'Brexit' agreement has to be negotiated.

PwC and GE deal: start of a new beginning?

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PwC has taken over the global tax function of GE (600 people):"We will also integrate GE’s tax technologies and end-to-end global processes into our own significant investments, allowing us to meet all of GE’s tax needs seamlessly. From compliance to deals to defense and controversies to sophisticated planning, our team will cover everything for GE while also providing that same expertise and access to tax technologies and process to other clients."

Publish your tax strategy: guidance

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Behaviours and behavioural change for large corporates in particular in the UK via publising a company's tax strategy. HMRC provides guidance.  

SAP activities and 'Brexit'

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The impact of ‘Brexit' - its VAT law change - is used to illustrate the SAP activities and resources needed when a company has to deal with a country setting change from UK to Non-EU.

Converting the sales middleman function from Commissionaire to LRD

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The objective is to bring commissionaire arrangements within the framework of dependent agency PE. Companies are converting commissionaire to LRD. Once a commercial and tax-efficient structure is determined— one that addresses both historical and potential risk - it is time to take the theory behind the structure into the realm of practice.

EU Taxation YouTube Channel

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For educational purposes the EU Taxation and Customs Union has opened a You Tube Channel that contains videos about key tax topics such as 'Tax in Schools', 'Fighting VAT fraud', 'Union Customs Code', 'How EU tax laws are made', 'Tax policy', 'VAT Action Plan', 'Anti Tax Avoidance Package' , etc.

SAF-T what is next ... Lithuania!

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In Europe SAF-T is now in force in Austria, France, Lithuania, Luxembourg and Poland. We understand that Germany, UK, Ireland, Norway and the Czech Republic are most likely next to introduce SAF-T. Lithuania is expanding its SAF-T. Starting October 1, 2016 all VAT-registered taxable persons, - including foreign companies registered for VAT - will be required to submit a SAF-T file in XML format to the LT Tax authorities on a monthly basis.

Brexit - changes in SAP: assess, redesign and test

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Although the EU VAT regime will remain in place until negotiations between the UK and the EU will be concluded, it is most likely that new UK VAT legislation will come into force in the spring of 2019. It seems you have enough time, but I highly recommend to anticipate on these law changes as soon as possible.

VAT function effectiveness

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A key business objective in today’s complex regulatory environment is the promotion of shareholder confidence in a company’s financial statements. Finance functions of major multinationals operate within a corporate culture that places increasing emphasis on the core values of trust and integrity. Within this culture the overriding strategic imperative of many CFOs is to manage their company’s financial reporting obligations and avoid reputational risk.

SAP and SAF-T Poland

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From 1st July 2016 onwards it is required to provide SAFT-PL files in XML format on request of the PL Tax authorities. 

Creating XML SAF-T Structures directly in SAP ECC

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SNI SAF-T is a SAP add-on that runs over SAP ECC, is compatible with OECD standard and covers the steps of creation of necessary structures in XML format including E-submission with signature and encryption.

Search engine for EU case law

613 01385144nThe European Case Law Identifier (ECLI) is a human readable and computer processable code that can – in principle – be assigned to every judicial decision from every national or European court. Its aim is to facilitate unequivocal citation of judgments and to improve cross-border accessibility of case law.

A SAP add-on to be able to cope with SAF-T and e-tax audits

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Tax authorities around the world want to receive more frequent and faster tax relevant data for e-audit purposes to analyse Corporate Income Tax (CIT) and VAT positions taken to combat VAT fraud and to determine whether actually a fair share is paid (Base Erosion and Profit Shifting: 'OECD's BEPS'). More countries will therefore move to data request to monitor and electronic audits (e-audits) taxpayers. SAP itself does not provide an E2E solution to meet these (new) legal requirements.

SAP - submitting close to real time data to tax authorities

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The Italian, Polish, Lithuanian and Spanish authorities passed a series of measures aimed at detecting and combating tax fraud. The aim is to get close to real-time information of company transactions, which will allow the tax authorities to perform a more efficient tax audit and reduce processing time. Companies face business challenges to implement these new requirements.

Transfer pricing and IT needs

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From a tax controversy perspective TP documentation is important and often results in conflicting priorities within the tax function (allocation of budget and tax resources). Better resource allocation and process improvement can be achieved via (semi)automated documentations, configure ERP systems to support TP needs or implement add-on or bolt-on tools. For example, in the area of data extraction and workflow management, entity charting, document storage, real time reporting, scenario planning and data interrogation.

SAF-T Poland per 1st July 2018 extended to taxpayers with more than 9 employees or 2 million EUR sales revenue

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Filing SAF-T will be mandatory for large taxpayers: employ more than 250 people or 50 million EUR sales revenue irrespective of whether they are established in Poland or not. Per 1st July 2018 this extended to taxpayers with more than 9 employees or 2 million EUR sales revenue. In order to be able to comply with the requirements and provide the XML file on request in time, tooling needs either to be developed or purchased. 

SAP add on for ‘VAT Smartform PDF’ in Poland

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In Poland a specific extra local requirement applies. As of 1 January 2017 taxpayers making transactions with EU members will be required to submit mandatory the declaration in electronic format. The aim is earlier identification of possible abuse. The summarized amount per VAT registration number for the sales of goods, acquisition of good and services need to be reported separately to the authorities in PDF. Companies face business challenges to implement these new requirements.

Spreadsheets and VAT Compliance

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With human error added into the equation, some defects are going to occur. If the tax function only has MS Excel to perform data transformation to make the data tax ready, the volume of procedures and controls will have to be significantly greater. The problem is that in Excel altered data can lose its audit trail back to its source: mismatches with a companies ERP system. A point of attention as ERP data is the source of truth by the tax authorities (e.g. e-audits such as SAF-T).

VAT Fraud and liabilities

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59 percent of respondents (53 percent in 2014) expect the personal liability of compliance officers to increase in 2015, with 15 percent expecting a significant increase. Compliance officers or its Executives at firms as diverse as Swinton Insurance, Bank Leumi, Bank of Tokyo-Mitsubishi, Brown Brothers Harriman and Deutsche Bank (DB: VAT fraud) having been fined, banned or jailed (or a combination).

A Tax Magazine specific about Tax Assurance

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Vakblad Tax Assurance describes all interdisciplinary aspects of national and international developments regarding tax risk management, business and tax environment, tax and business operations and monitoring and testing. An integrated tax function is valid only if one has knowledge of and experience with commercial, financial and fiscal strategic thinking, soft controls, the (im)possibilties of processes and protocols, ICT, compliance, 'monitoring and testing' and change management.

Exceeds auditor's materiality

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Tax assurance will become more and more important and included mandatory in the scope of work of an auditor. The company's reputation is at stake and substantial amounts are involved.  The current trend is a shift from direct tax to indirect tax by decreasing direct tax rates and increasing VAT/GST rates. Corporate income tax rates are continuing to fall in many countries. At multinational companies we’re easily talking about amounts of over 5 billion euros of indirect tax flowing through the books.

Best in class data analysis for VAT

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Tax Authorities, due to technological innovations, have become increasingly better in executing their tax audit. The probability that the Tax Authorities will issue additional assessments and penalties in the near future because errors in indirect tax are detected, increases by the day. Analytics could also increase a company's efficiency and gain strategic insight. What is needed for best in class data analysis for VAT?

Tax relevant data for TP and VAT, the 'Why', 'What' and 'How'

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Tax moral is shifting. More often what is (still) legally allowed may not automatically be accepted by the public opinion. Reputational damage is imminent. Both on direct and indirect taxation the tax authorities have set their priorities. The tax authorities not only want to receive more tax data, but also faster and more often.

Fair tax and transparency

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Revenue losses from BEPS are conservatively estimated at USD 100-240 billion annually , or anywhere from 4-10% of global corporate income tax (CIT) revenues. The tax authorities or external auditors will investigate the parameters of a company's tax strategy.

Incorrect VAT numbers in SAP

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It is possible to check the syntax – the format of the VAT number, including the number of positions. However, it is not possible to check whether the VAT number is valid. To this end, the European Commission has provided an online database, VAT Information Exchange System (VIES) for the validation of VAT numbers. We checked VAT numbers during a data analysis exercise. In practice, it appears that 5 to 25 percent of the existing VAT numbers in the customers and/or vendor master data were incorrect or invalid.

The auditor is not (yet) a risk analyst

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The external auditor’s task is only to provide an opinion whether the annual accounts provide a true and fair representation of the company's affairs. He or she is not asked to provide a statement regarding the accuracy or the acceptability of the submitted return for corporate tax, income tax, VAT, etc.

Enablers of the tax function

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For a tax function to produce timely deliverables and satisfying the requirements of the board and other stakeholders, the effectiveness of tax department’s 'governance', 'operation' and 'infrastructure' are essential enablers. This article sets out the business challenges and areas of improvement for these enablers.

Full VAT automation of AP and AR

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If the aim of your organization is full VAT automation of AP and AR, it is important to have a clear understanding of your material risks at hand, and your lowest performing processes in order to define the functional specifications for a solution.

Italy - Quarterly informative report VAT invoices data

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The Italian authorities passed a series of measures aimed at detecting and combating tax fraud: "Quarterly informative report VAT invoices data". The aim is to get close to real-time information of company transactions, which will allow the tax authorities to perform a more efficient tax audit and reduce processing time. Companies face business challenges to implement these new requirements.

VAT determination of AP invoices

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The purchase order (PO) and the vendor invoice are the VAT relevant data sources used to determine the VAT treatment of incoming invoices. However, the vendor invoice data is in general not available in SAP. In order to automate the VAT determination, it is essential that external information is added in an easy and intelligent way.

Innovation and tax audits

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Tax authorities, due to technological innovations, have become increasingly better in executing their tax audit. The probability that the Tax Authorities will issue additional assessments and penalties in the near future because errors in indirect tax are detected, increases by the day. An increase of e-filing of returns but as well of e-audit capabilities. Technology will result in effective tax data collection and efficient and effective tax audits. The OECD has issued in May 2005 a guidance note on the development of Standard Audit File –Tax (SAF-T) and recommends the use of SAF-T as a means of exporting accurate tax accounting data to tax authorities in such way that can it can be analyzed easily. Mandatory data filing gives food for thought.

KEY Staffing and SNI specialised in 'SAP Outsourcing and Recruitment Services'

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Besides developing and implementing SAP certified add-ons for multinationals, we are also well known for our 'SAP Outsourcing and Recruitment Services' support. Thanks to our own SAP projects and SAP product developments we truly understand and have experienced ourselves the importance of the right SAP skillset at the right time.

Intrastat reporting and SAP

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The Intrastat reporting is one of the most complicated reports. Intrastat reports are primarily based on the Sales and Distribution and the Materials Management modules as movement of goods data are the starting point for the Intrastat reports. It is not like VAT reporting based on the Financial accounting module. The biggest challenge with SAP Intrastat reporting is related to the completeness and correctness of the relevant Intrastat transactions. 

Verify SAP VAT configuration

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Verify VAT configuration A SAP review should highlight where the VAT configuration could be improved or if additional control measures should be added to the business’s Tax Control Framework. Such review can also identify where errors occurs and there are increased risks allowing a more focused data analysis to take place. After the quantification and evaluation of the risks and errors, these are assigned a risk profile for further testing of risk tolerance.

Being ready for GCC VAT introduction when operating SAP

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The Governments of the Gulf Cooperation Council (GCC) - Bahrain, Kuwait, Oman, Qatar (status unknown due to GCC politics/friction), Saudi Arabia and the United Arab Emirates that make up GCC - are committed to form a common framework for the introduction of value added tax (VAT) in the region. In order to achieve conformity within the GCC, it is anticipated that the six member states will all aim for implementation of VAT during the period commencing 1 January 2018 or by the end of 2018.

Add new talent and competencies

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Technical tax expertise has become more a basic skill from the adviser’s perspective. Data analytics, IT and accounting capabilities as well the soft skills of the adviser are—and will become—the key differentiator. Due to all of the technological developments, this is already part of our present and future. Technical tax advice must be implemented in systems, processes and controls.

Roadmap to implement VAT in SAP

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For nearly every company, the accuracy and efficiency of local VAT compliance is completely dependent on the functionality of the underlying SAP system. Any incorrect set-up of the basic VAT configuration of their SAP systems can severely impact it’s processing. Operational errors in a system that is used to manage VAT compliance can also lead to substantial financial risks.

A cost efficient way to submit SAF-T files and perform risk management

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A SAF-T SAP add-on solution developed together by ‘Tax Assurance and certified SAP add-on specialists’ is now available for Poland, Lithuania and Norway and is scalable. The SAP add-on is extendable to other countries that uses the OECD framework as the basis for SAF-T reports.

When is standard SAP (in)sufficient?

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If full ‘VAT automation of Accounts Receivable (AR) and Accounts Payable (AP)’ and ‘being in control’ are important objectives of your organization, it is important to understand what exactly makes Standard SAP not functioning optimal from an indirect tax perspective. Only then it is possible to validate whether a company’s objectives can be achieved via upgrading Standard SAP functionality and/or implementing an external tax engine.

How does VAT actually work

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The Value Added Tax, or VAT, in the European Union is a general, broadly based consumption tax assessed on the value added to goods and services. It applies more or less to all goods and services that are bought and sold for use or consumption in the Community.

Strategic partner alliance

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SNI and KEY Group have formed a strategic partnership to leverage the synergies between KEY Group's tax and SAP services and SNI’s SAP add-on solutions. The partnership positions the KEY Group as a preferred partner of SNI.

Manage reputational tax risks

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Reputational risk is a key element in tax risk management as it is it not only considers individual tax risk but also sees how tax risk may influence the positions in other areas, negatively or positively.

High level: EU VAT system

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A high level overview is provided of the EU VAT system: what is subject to VAT and the right and methods of VAT recoverability. It includes also a comparison with the US Sales and Use Taxes system.

Integrated SAP solution for SAF-T

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Besides recently Poland, SAF-T is introduced now also for Lithuania and Norway. A fully integrated solution in SAP without an external interface or use of external software is available for Lithuania, Poland and Norway. Other countries will follow. This integrated SAP solution is developed together with a certified Global SAP Application Partner.

Statistical sampling: quantify tax risks

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In order to quickly gain insight into the level of tax risks (i.e. calculation of the potential assessment), statistical sampling can be used. By selecting a few elements (euros), the reliability of the composition of tax items can be determined to a high degree of certainty, and on the basis of identified errors in the sample, the exact amount of additional tax assessment can be calculated.

VAT neutrality has to be earned

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Often the question is asked what risk management even has to do with VAT/GST. The reasoning behind this question is that VAT/GST is typically cost neutral for most businesses: “a cash in and cash out” scenario. However, every indirect tax function knows that deductible input VAT and liable output VAT have to be managed separately to avoid substantial VAT assessments, penalties and interest payments. It is a risky business to monitor only the balance between output VAT and input VAT. Neutrality can only be achieved – better is the word ‘earned’ – if certain formal and material requirements are met.

A scalable SAP solution for countries implementing SAF-T

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The SAP add-on is extendable to countries that uses the OECD framework as the basis for SAF-T reports. Note that countries might have their own specific local requirements but in case the basic required data are covered in the OECD framework it could be managed with country specific variants. You can compare it with the EU VAT requirements: EU Directive as framework with some country specific rules based on the options in the EU Directive.

Approaches and models

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A Tax Strategy should cover all taxes and all key business locations and should be aligned to the overall business strategy. A tax strategy document should also include guidelines as to acceptable planning, which is then further detailed in a Tax Planning Policy. 

Manage audits and disputes

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Tax audits could be very time consuming and have a huge impact on resources or external advisors. Be therefore prepared and minimize the risk that extensive resources have to be allocated when a audit is held. A transparent relationship with tax authorities might resolve any disputes faster.

Norway introduces SAF-T to improve tax inspections

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Norway is introducing SAF-T reporting for corporate entities, either resident or with physical presence in Norway (VAT registered businesses). From 1st January 2017 onwards it is required to provide SAFT-NO files in XML format on request of the Norwegian Tax authorities.

The ways to measure VAT performance

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When high risk indirect tax areas and lowest performing VAT processes - that have a direct impact on the company's VAT objectives - have been identified, the next step is to measure the performance in term of effectiveness and efficiency of each of these processes. Measure the magnitude of that problem, determine why the problem exists, and generate a set of solutions to ensure that the problem goes away.

Design an indirect tax strategic plan

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A relevant indirect tax strategy—correctly implemented—will allow the new business to function effectively from go-live, from both a tax and commercial perspective, so that it can move inventory, generate sales and invoices, face fewer disputes with non-paying customers, remain tax compliant, and integrate the business on time and on budget.

Publishing your tax strategy

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Certain businesses have to publish their tax strategy and be able to demonstrate how the tax strategy is being applied in practice. The strategy should set out the business’ attitude to tax risk, its appetite for tax planning and its approach to its relationship with HMRC. Although it applies to the UK, being consistent across jurisdictions is important as these obligations might be a global tax trend.

Mandatory e-audit files

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Tax authorities, due to technological innovations, have become increasingly better in executing their tax audit. The probability that the Tax Authorities will issue additional assessments and penalties in the near future because errors in indirect tax are detected, increases by the day. The SAF-T standard, originally created by the OECD, is intended to give tax authorities easy access to the relevant data in an easily readable format. This leads to much more efficient and effective tax inspections.

Manage business model change

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There is one common denominator that is too often missing from the strategic or planning elements of a business model change — indirect tax. But do these taxes get the attention they need, especially in light of increasingly complicated and globalized business models?

What is considered tax avoidance

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"Tax avoidance is an attempt to exploit legislation to gain a tax advantage that was never intended. This often involves artificial transactions that serve little or no purpose other than to produce a tax advantage. But tax avoidance is not the same as tax planning, which involves applying tax legislation in the way it was intended - for example saving in an ISA (Individual Savings Account) where you don't pay tax on the interest."

Higher on the CFO's agenda

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The importance of indirect tax has increased over the last couple of years. While the rates for direct tax, corporate income tax, are decreasing, the rates for indirect tax keep rising. Time for Richard Cornelisse, editor of Global Indirect Tax Management, to act on that: ‘At multinational companies we’re easily talking about amounts of over 5 billion euros of indirect tax flowing through the books. Yet according to big4 surveys, the related control mechanisms are still inadequate. Not only can an error in the accounts lead to major additional tax assessments and substantial penalties, with amounts like these, it can be devastating for the reputation of a listed company.’

VAT and shared service centers

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Take a Shared Service Center. In the past local country teams were handling VAT matters and its department who had been there for a long period of time, had access to talented staff, and were well trained and also employee turnover was low. Under a Finance transformation all of their responsibilities are often moved to a far away location and new process owners who do not know the company's historical background and employee turn over is high. The local staff are often made redundant. Can you predict the risks?

Identify the lowest performing process

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The indirect tax objective is to make sure that VAT processes and controls operate as effectively and efficiently as possible. That means determining whether the current processes operate satisfactorily 'as is' or need to be improved, factoring in any potential or existing differences and taking into account the complexity of the existing processes and the variations between these processes in each of the business units to be supported.

Business case for investments

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It is essential that the tax function has an excellent relationships with the business, senior management, finance and IT as a mutual understanding of the impact of the company's tax challenges and the potential solutions should exist to realize that investment budgets are actually made available. 

Migration to new jurisdictions

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From a Tax Control Framework perspective, for setting up risk based controls, the more unusual the transactions, the greater the tax risks. Migration to a new jurisdiction will most likely involve dealing with VAT. For some migrating corporations it may mean having to deal with VAT for the first time although probably for most, VAT will be a familiar concept with some variations from the ‘old’ jurisdiction. 

BEPS and banking and insurance

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28 july 2016 - BEPS action 4 - discussion draft on approaches to address beps involving interest in the banking and insurance sectors. The report on Action 4, Limiting Base Erosion Involving Interest Deductions and Other Financial Payments, establishes a common approach to tackling BEPS involving interest, but highlights a number of factors which suggest that a difference approach may be needed to address risks posed by entities in the banking and insurance sectors.

Fully VAT compliant realistic?

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Managing risk is about making decisions at all levels of an organization, to limit the effect and likelihood of threats happening and to increase the effect and likelihood of opportunities. Setting realistic objectives is the starting point for any successful change effort. In order to increase indirect tax function effectiveness it is important to set SMART objectives. 

M&A integration and indirect tax

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With indirect taxes intertwining through the day- to-day operations of a company—raising sales invoices, moving inventory, paying suppliers, collecting cash—indirect tax risk can have a distinct and domino-like effect on the commerciality of an organization. The impact can increase exponentially in the event of a merger or acquisition. But do these taxes and tax planning opportunities get the attention they need, especially in light of increasingly complicated and globalized business models?