Page 4 of 8: Designing and Implementing a Tax Policy
A well-structured tax policy should articulate the company's overall tax strategy and objectives while providing a framework to promote best practices and governance procedures. It must clearly delineate the roles and responsibilities of the tax function, other corporate departments, and various corporate entities.
To ensure a unified understanding of the company’s VAT risk appetite and acceptable VAT planning practices, the tax policy should be broadly disseminated across both the tax team and the wider business. This roll-out may involve hosting workshops, conference calls, and training sessions that engage stakeholders from tax, finance, legal, business operations, and other relevant areas.
Unlike the more centralized approach often associated with income taxes, the responsibilities and key drivers for managing indirect taxes can be distributed throughout the organization. This includes not only the tax department but also various other departments, such as finance, information technology, supply chain management, logistics, and human resources. Promoting collaboration among these diverse functions is essential for effective tax risk management and the successful application of the new policy.
The tax policy is the highest in the tax hierarchy - signed off by senior management - and sets the internal tax rules and tax behavior: the dos-and-don'ts of employees regarding tax.