VAT Control Framework: Transitioning from Concept to Implementation - KGT's Key Components of a Tax Policy

Page 6 of 8: KGT's Key Components of a Tax Policy

KGT's Key Components of a Tax Policy

The following are essential building blocks for an effective tax policy:

1. Tax Function Objectives: Clearly defined goals for the tax function.
2. Risk Profile and VAT Risk Tolerance Parameters: An assessment of the company’s willingness to accept certain tax risks.
3. Approach to Tax Risk: Guidelines on how the company manages and mitigates tax risks.
4. Relationship with Tax Authorities: Establishing a framework for engagement and communication.
5. Scope of Taxes Covered: A list of taxes that fall under the policy’s purview.
6. Entities in Scope: Identification of the entities to which the policy applies.
7. Roles and Responsibilities: Clear delineation of duties for those involved in tax-related matters.
8. Tax Resources (Internal/External): Identification of available resources and their allocation.
9. Tax Strategies by Role and Tax Type: Specific strategies tied to different roles or types of taxation.
10. Mandatory Pre-Engagement Situations: Instances where prior consultation with tax departments is required.