Strategies, approaches and models

Activities

Strategic objectives per role

All corporate departments are well-informed and/or have the availability of a VAT work instruction, so it is clear when to consult the indirect tax department.

• To ensure that a company complies with indirect tax laws
• Filing of all required indirect tax reporting, including preparation of proper support files:
  • Reduce unanticipated risks
  • Avoiding penalties for late filing
  • Review indirect tax assessments:
  • Ascertaining that appropriate action is taken before the deadline passes
  • Apply proper cash management
• Tax audits:
  • Optimize the tax audit process 
  • Limit the duration of tax audits
• Assist and support local operating companies:
  • Ensure that local operating companies benefit from the skills and expertise of the Indirect Tax function

• To set clear, accessible and workable policies, standards, manuals and guidelines endorsing the company's culture
• To ensure that group companies act consistently globally and benefit from best practices applied by other group companies.
• To create and raise awareness on indirect tax policies, indirect tax risks and changes in laws & regulations

Proactively anticipate on changes in the business and outside the business and successfully communicate these changes to the concerning departments. Furthermore look after a correct implementation of these changes.

• To ensure that the Company’s indirect tax position is properly reflected in its indirect tax provision
• Perform consolidation of indirect tax position in the financial statements and quarterly reporting of the group:
  • Centralize the activity with indirect tax department at corporate level from a governance perspective
  • Maintain an adequate and reliable view on indirect tax provisioning
  • Assist and support local operating companies on indirect tax accounting:
  • Ensure that local operating companies benefit from the skills and expertise of indirect tax function

• To ensure that the tax position is properly reflected indirect tax provision
• Ascertaining proper IT support for ensuring efficient, timely and reliable reporting
• The degree of automation of the end-to-end indirect tax process 
• The percentage of VAT/GST posting errors (AR and AP) 
• VAT/GST invoicing errors (e.g., percentage of invoices returned by suppliers) 
• The cost of producing an invoice 

Roles and responsibilities have been determined who deals with the tax authorities during an audit (announcement) and tax authorities questions and procedures “how to act” (e.g. never provide documents without first making copies) have been documented and rolled out.

• Tax controversy considerations and requirements are built into the preparation of the indirect tax return and those responsible for indirect tax controversy review indirect tax returns to verify indirect tax positions are properly disclosed, presented and documented.
• There is a process for managing indirect tax positions and documentation
• Documentation is updated throughout the life cycle of an indirect tax position
• Workflow/document management tool supports the process
• The indirect tax function seeks proactively to engage with tax authorities and tax policymakers on a global basis to establish strong relationships in all jurisdictions in which the business operates
• Developing a winning strategy to support an indirect tax position requires having clear insight about your tax policies and execution, how the tax authorities conduct their examination, anticipate next moves, etc.
• Standard global processes exist for indirect tax inquiries and litigation with supporting documentation stored in a central repository

• The number and number of penalties paid on VAT/GST assessments 
• The number of unanticipated audit challenges/assessments from the tax authorities 
• Limit the number of tax questions and duration of tax audits 
• The cost of audit defense (internal and external) 

Identify, recommend and successfully implement indirect tax projects that assist in achieving the objectives of the indirect tax department part of the business objectives.

• To optimize company’s indirect tax position
• Initiate and develop group indirect tax planning:
  • Build a competitive and healthy (international) indirect tax group structure
  • Be proactive and responsive to turn business developments into tax opportunities
• Assist and support Business on indirect tax planning:
  • Ensure that Business benefits from the skills and expertise of the Indirect Tax function
  • Ensure that businesses do not limit the flexibility of others

• To ascertain proper implementation and impact of changes in business, laws and regulations on implemented tax planning
• To ensure minimizing cash tax effects and maximizing tax opportunities considering the group operations and structure in case of mergers & acquisitions and divestitures
• The amount of VAT/GST under management in key jurisdictions 
• Monthly/quarterly VAT/GST working capital requirements 
• Number of days between docking and learning customs 

Ensure identification, select and manage tax risks as a basis for indirect tax management and reporting, ascertain that unacceptable but existing tax risks are identified and that clear, timely communication on tax status, tax activities and tax risks takes place.

• Appoint a strategic business resource for the maintenance of a comprehensive Tax Control Framework and mitigating areas of Indirect tax exposures
• To ongoing maintain its master, a tax control framework:
  • Ensuring that unacceptable indirect tax risks will be prevented
  • Ensuring that unacceptable indirect tax risks will be identified
  • Ensuring that identified indirect tax risks will be managed and mitigated
  • Representation of company towards authorities and regulators, and lobby groups
  • Appoint a strategic resource for representation and lobbying to protect and serve the interests and culture of the company
• Initiate and participate in:
  • Domestic and international industry groups and conferences
  • Domestic and international tax groups and conferences

• How do you communicate risks?
• How do you want indirect tax to be viewed by management?
• How do you think it is viewed?

Couple of questions for internal audit to get started

Is the indirect tax strategy defined and aligned with companies’ business objectives?

Are material indirect tax risk areas defined? (e.g. indirect tax risk matrix)

Are roles and responsibilities for managing these risks explicitly assigned?

Are assessed risks documented in a risk register, monitored and communicated to senior management?

Does the risk register contain the following labels: number, name of the risk, risk definition, cause for the risk to occur, risk category and the risk owner?

Are the internal controls that mitigate these risks explicitly documented?

Are the responsibilities for executing and monitoring the internal controls assigned? 

Are there regular meetings to discuss the status of risks and internal controls and define actions?

Has a strategy been defined for managing the relationship with tax authorities? Have the responsibilities been assigned for the different geographic regions?