Most topics that have been discussed on this website revolve around one central component: data. In order to function optimally, it is essential that the tax function gains timely access to the relevant tax data. The data is not only essential for tax returns but also for instance for analyses, pre-audits and tax planning.
Material tax risks arise when the tax terms under which a business model is supposed to operate are contradicted by its own financial and source data. For instance, the financial data might suddenly reveal new services, new goods transactions, different sales support functions and/or activities.
Also consider the situation in which what is taken as a fact in a closed tax ruling, might then subsequently not correspond with the data that is (electronically) periodically provided to the tax authorities.
In addition, one should consider that tax risks arise when submitted data from an ERP systems contradicts facts stated in a ruling. The tax authorities receive increasingly more data over the years. The taxpayer thus leaves a considerable audit trail.
Tax authorities will demand increasingly earlier access to all relevant tax data since this enables efficient, effective and (almost) real-time audits. Real-time data provision already prevails with respect to VAT.
The starting point should be considering what data is to be provided to the tax authorities and which in-house tax discipline will be affected.It is essential that the tax function does a risk analysis before the data is provided to the tax services. This sounds obvious but does not yet sufficiently happen in practice.
The focus of Finance and IT is in practice on meeting the deadline of submitting the data as set by the tax authorities.
Often, the application of the ‘audit defense protocol’ is lacking, which would have been done in case of a traditional audit. In this protocol, the occurrence of unforeseen risks is first internally assessed and evaluated, before submitting the requested documentation to the tax authorities.
Subsequently, a copy of the document is made and archived. Currently, this process is often omitted when data is submitted electronically, even though not only a data audit trail is left, but there are also multiple data requests which can eventually be analyzed in connection with each other.
The Key Group can assist via data analytics/sampling to assess whether any tax risks are present in data (to be) submitted to the tax authorities and remediate SAP VAT setup and/or any VAT processes when that is the root cause.
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The next SAF-T wave
The following countries might be in the next wave: Germany, UK, Ireland and the Czech Republic. The Netherlands and Belgium are experimenting with another electronic format called “Transaction Network Analysis”, TNA is an overall European Commission initiative and 8 other countries have already joined.
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SAP add-on solutions for SAF-T
- A cost-efficient way to submit SAF-T files and perform risk management
- eInvoicing requirements in Hungary per July 1, 2018
- SAP add-on for SAF-T Poland
- SAP and SAF-T PL
- Mandatory e-audit files
- SAP - submitting close to real-time data to tax authorities
- SAF-T what is next ... Lithuania!
- Italy - Quarterly informative report VAT invoices data
- SAP end-to End solution for periodic SII files in Spain
- A scalable SAP solution for countries implementing SAF-T
- Norway introduces SAF-T to improve tax inspections
- Integrated SAP solution for SAF-T
Written by Richard Cornelisse
Richard advises multinational businesses in improving the efficiency and effectiveness of their Indirect Tax Function and Tax Control Framework.
He started his career as a manager at Arthur Andersen and then became a partner in EY where I led the indirect tax performance team for Netherlands and Belgium. Currently, he is a senior managing director of KEY Group.
Richard has over 20 years’ experience advising clients on international VAT issues. He is specialized in the tax aspects of financial transformations, shared service center migration, and post-merger integration work. Richard is also somewhat of a mentor, giving back to the profession. If you are interested in conversation and discussion, please feel free to contact him.