Managing risk relating to Flash Titles

5 years 10 months ago - 5 years 10 months ago #33 by rico
See Section Limited Risk Distributor" Or „Commissionaire” ?

The company’s principal bears - contractually - from a business deal perspective the major risks (business responsibility). Principals are in the main rule still owner of the goods when these are sent to customers. For corporate tax reasons, such principals have their residence in low tax countries.Tollers are manufacturers that produce on behalf of other parties (e.g. the principal). The toller receives as consideration a tolling fee.

Agents (the actual commissionaires) only act as intermediaries to the customers. The principal pays these agent a commission fee. In a strip-buy-sell model not an agent but a reseller (LRD) is part of the supply. The difference is that a resellers becomes owner of the goods.


Tax technical risk analysis about e.g. "Flash Titles And Transfer Of Economic Ownership" is recommended prior to implementation. If ownership is assumed in the supply chain, but denied afterwards by the authorities, the consequences are huge, both from a tax and commercial risk perspective.

From a 'Audit Defense' strategy this should have been managed proactively via a risk register as in a worst case scenario the impact will exceed the company's risk appetite. To manage such risks often an external opinion letter is asked for external sign off purposes (e.g. via Big4 or a law firm). It is objective evidence that the inherent risks fall under the current legislation (still) within the treshold of the indirect tax policy of the company (e.g. more likely than not).

Have you managed these risks also when you operate such a business model?

Richard Cornelisse

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