- How is a Business Control Framework related to a Tax Control Framework
- VAT Control Framework
- VAT Control Framework: Transitioning from Concept to Implementation
- 'Governance', 'operation' and 'infrastructure'
- A straightforward breakdown of Sarbanes-Oxley Act
- The Transforming Role of the CFO in Tax Management
- The Vital Role of CPA in Ensuring VAT Compliance and Assurance
- Investors' Expectations Regarding Taxes: Navigating Uncertainty and Strategic Planning
- Challenges of Using Spreadsheets for VAT Compliance
- VAT Under Management: An Overview
- Statistical sampling: quantification of tax risks
- Data analysis
- SAP review
VAT control framework
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There are a couple of elements that need to be considered to determine the materiality of VAT risks. Using absolute amounts is the way a business controls framework sets up a risk-based approach. However, this is not sufficient as a VAT control framework is not only about paying the right amount of tax but also nowadays about avoiding risks that impact the reputation of the company.
A Tax Control Framework (TCF) is an internal control instrument specifically aimed at the tax function within a company and an integral component of a company’s business control framework, which is different for every organization. It is a system (process) to identify, mitigate, control and report tax risks.
The objective of a TCF is to be in compliance with tax laws and reporting requirements and manage the risks that exceed the companies' risk appetite. A TCF should prevent tax errors, identify opportunities in a timely manner, and perform correct filings at the right moment.
A company's VAT control framework system is adequate if it provides insight into where material VAT risks may arise in the company (awareness), while the degree of risk tolerance is established internally and where appropriate control measures are taken regarding these risks.
A review should take place of the categories of VAT risk the company is facing as well as the likelihood of occurrence, its potential impact and mitigation measures. Review the company's risk appetite and risk tolerance and the way in which risks are measured.
Sufficient internal communication
A TCF requires a clear understanding of the companies' material risk areas, the company's tax policy derived from business objectives, the VAT processes and risk-based control measures (hard and soft controls) and the roles and responsibilities of the indirect tax department and its shadow tax function.
- Internal control is a process. It’s a means to an end, not an end in itself. Internal control is affected by people. It’s not merely policy manuals and forms, but people at every level of an organization.
- Internal control can be expected to provide only reasonable assurance, not absolute assurance, to an entity’s management and board.
- Internal control is geared to the achievement of objectives in one or more separate but overlapping categories.
From: The Institute of Internal Auditors, Does Your Control System Pass the COSO Test, March 1998, Issue 2
A tax control framework consists of
- Strong tax governance with an agreed tax strategy that is in line with wider business objectives an in-depth understanding of where the key risks lie within the business, including indirect and wage tax
- Effective and efficient controls in place to mitigate identified risks
- A clearly defined communications strategy for managing tax internally and externally
- Ongoing monitoring activities and improvement efforts
- Ensure strong governance, including the implementation of strict guidelines.