In Indirect Tax Strategic Plan on 03/02/2016 at 12:29 am
Yesterday’s TP world
- During design, implemention and maintenance of the company’s business model in most cases the company’s ERP system is not configured in such a way that relevant intercompany transactional data can be automatically generated or specific high risk intercompany transactions can be monitored realtime.
- Often TP work is a manual process from data gathering through analysis and beyond.
- Many multinationals still save documents on the hard drives of local computers and / or local servers without central access.
- TP process owners have to use MS Word/ Excel and possible SharePoint if there is a central data storage.
- Spreadsheets are usually found at critical points in the audit trail and are often designed by non-specialists with no system expertise. There is most likely no dedicated IT support to the tax function.
- Working with complex Excel sheets that contain (TP specific homegrown) formulas is risky as for the effectiveness of a control framework you have to rely on work performance and accuracy of your SMEs and preventive and detective controls to manage (e.g. operational) risks.
- Manual processes due to human error increases tax risk – data is manipulated outside the system and need tax controls to properly manage – but causes also workforce inefficiencies as getting access to the relevant transactional data is a cumbersome and time consuming exercise.
- TP adjustments are in the rule done at Year End as a lump sum. Only sophisticated companies have a periodical forecasting process and conduct price adjustments to avoid substantial Year End adjustments.
- TP planning, implementation and periodical assessment(s) are normally done on a profit and not on a transactional basis (consolidated versus individual).
- The inherent risk is in practice often that what has initially designed and contractually agreed is not in line (anymore) with the (current) factual reality. The financial data could disclose what is really occurring from a business model perspective.
For example, more local risks could for example exist due to (new) services, supply of goods, sales support, amount of employees and their skill set / roles.
The new tax world: anticipate what users would want
- Many countries are implementing the BEPS recommendation, i.e. master- and local file and CBC reporting due to the new regulations. These regulations will heavily increase the TP compliance work, but will also highlight bugs and errors which were not visible before.
- Twelve countries have currently implemented CbCR on the BEPS-recommended date (1/1/2016): Australia, Belgium, France, Ireland, Italy, Japan, Mexico, the Netherlands, Poland, South-Africa, Spain and the United Kingdom. [time stamp February 2, 2016]
- Canada, China, Denmark, Estonia, Finland, Germany, Greece, Luxembourg, New-Zealand, Norway, Russia, South-Korea and the United States have taken implementation steps but not yet formaly introduced. [time stamp February 2, 2016]
- Read more
In Indirect Tax Automation, Indirect Tax Strategic Plan, Interim VAT management, Processes and Controls, SAP add on, SAP for VAT, Technology, Training, VAT automation on 28/01/2016 at 6:08 pm
The goal is to make sure that the outsourced VAT processes and functions are transferred and continue operating as effectively and efficiently as possible.
That means determining whether the current processes operate satisfactorily as is or need to be improved, factoring in any potential or existing differences and taking into account the complexity of the existing processes and the variations between these processes in each of the business units to be supported by the SSC.
As you begin to diagnose the current state and future objectives of your SSC plans, some of the questions that can help you determine the impact of VAT prior to migration.
- Do we have sufficient insight into current VAT processes including all manual adjustments, workarounds and internal quality assurances processes?
- Are the processes specific and well-documented and are they adequate to the new environment?
- Do we understand the scope of personnel changes that may occur as we migrate to the SSC?
- Have we captured all the relevant knowledge from personnel who may decide to leave the organization?
- Are we retaining access to and information about existing manual processes and procedures and offline solutions?
- To what extent do current processes depend on local VAT expertise and technology?
- How much will be lost in the event of a transfer to SSC?
- To what extent are different processes required from one jurisdiction to another?
- Who has final responsibility for the VAT compliance process at present and who will own it upon transfer to the SSC model?
- Where are the essential process controls being carried out?
- How does the SSC model deal with local VAT risks in terms of internal communication and coordination?
Read more: The intersection of VAT and shared service centers?
In Indirect Tax Automation, Indirect Tax Strategic Plan, Interim VAT management, Processes and Controls, SAP add on, SAP for VAT, Technology, Training, VAT automation on 25/01/2016 at 8:16 am
Once a commercial and tax-efficient structure is determined—one that addresses both historical and potential risk—it is time to take the theory behind the structure into the realm of practice.
- Who is taking care of filing VAT registrations?
- When should you apply for VAT registration, since average lead times in jurisdictions can be several months?
- Who is responsible for maintaining a structure and making sure the business is acting in accordance with the model?
- How is this communicated throughout the organization?
- How will ongoing monitoring be handled?
Most ERP systems, including SAP, Oracle, JD Edwards, and Peoplesoft, are equipped with some form or forms of VAT functionality. However, they typically still require significant configuration and may need to be customized to deal properly with indirect taxes.
They will also need to be updated and tested to reflect new contracts and billing flows. Ownership of these tasks must be determined and communicated up front, so that the ERP system can accurately issue invoices from day one.
Read more: Implementation, Integration, Impact, Interim solutions and workarounds, invoicing in the interim