Change of a company's business model - Adapt to change in time

Page 3 of 4: Adapt to change in time

Page 3 of 4

Adapt to change in time

Determine the impact of such changes on the company's supply chain and/or location of its tax functions. This could result in new set-up of ERP system and invoicing, new contracts, pricing procedures, processes and controls. Critical success factors are:

Senior management support for change: 'Tax model should be based on business case and not vice versa'
Existence of a solid and compelling integrated business case for the structure
Sound, structured and proven design and implementation process driven by rigorous Project Management
Complete understanding of the facts, objectives, transaction flows, business process and legal structure
Early focus on integration with IT systems and operations
Early buy-in to the “transformation” by management and those groups affected ('Change Management')
Allocation of adequate resources by the company to manage and implement the project

Key considerations

Below the relevant work streams and an example of each to consider:

Corporate Income Tax - e.g. assess impact on local direct taxes
Transfer Pricing - e.g. amend current TP documentation to reflect change of CMRs to LRDs
VAT - e.g. different accounting rules for LRDs compared to Commissionaires may significantly impact current SAP logic
Customs - e.g. need to investigate impact of adjusted transfer prices to Customs valuation
Legal - e.g. terminate commissionaire agreement
Technology - e.g. implement LRD in SAP and be aware that full VAT AP and AR automation for also the most complex transactions, real-time access to numbers / blueprint of business model (integrated in SAP: data analytics) and automated VAT controls are all possible

The Importance of Data Access for Finance and Tax Functions

Both finance and tax departments need access to comprehensive data that illustrates how transactions are processed and how IT systems are organized. Data integrity becomes a significant operational risk when transactions booked in a particular country are not adequately evaluated for tax purposes.

There are instances where the financial data within the system fails to accurately represent the business model design, or changes are not effectively managed. Additionally, current processes often make it challenging to access the relevant tax data necessary for reporting to regulators, investors, and tax authorities in each business unit and country where the company operates.

Furthermore, the VAT work stream should be seamlessly integrated with technology initiatives and finance projects. This integration may pose challenges, as many projects related to system development and technological advancements often remain opaque to the tax function. This highlights the critical need for transparency and proactive communication across departments.

If the tax function does not align with initiatives that may impact VAT processes, it risks creating a VAT design that is inefficient and not ideally suited for the business's needs. Implementing effective alignment measures is essential to ensure a streamlined VAT process that meets regulatory requirements and supports the overall business objectives.