Richard Cornelisse

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B2C 2015: explanatory notes to new place of supply rules published

In EU development on 15/04/2014 at 8:05 am

The new place of supply rules

As of 1 January 2015, telecommunications, broadcasting or electronic services will be taxed in the country where the customer resides or is established, irrespective of whether that customer is a taxable VAT entrepreneur or a non-taxable person and irrespective of where the supplier itself is established. This particularly involves a change for services supplied to non-taxable persons (including consumers) by entrepreneurs established within the EU.

The objective of these explanatory notes is to provide a better understanding of legislation adopted at EU level and in this case principally Council Implementing Regulation (EU) No 1042/2013 of 7 October 2013 amending Implementing Regulation (EU) No 282/2011 as regards the place of supply of services.

Published almost nine months before the date on which the new rules for the place of supply of telecommunications, broadcasting and electronic services will start to apply which is 1 January 2015, the explanatory notes are expected to allow Member States and businesses to better prepare for and adapt to the upcoming changes in time and this in a more uniform way.

via GITM Forum: B2C 2015 VAT changes

Data Analytics on all VAT relevant data

In Indirect Tax Automation, Processes and Controls, Technology on 14/04/2014 at 10:22 pm

The benefits

  • All relevant VAT data separately stored in database in SAP (immediate available without any run-time issues)
  • Continuous Controls Monitoring for all stakeholders (data analytics)
  • Real time access to the company’s blue print
  • Determine impact of business change via simulation with real time data

Taxmarc™ Data Analytics is derived from Taxmarc™ Tax Engine. Therefore, risk domains are specifically salient. Knowledge for enabling fully automated VAT determination and building an integrated Tax Control Framework is crucial in data selection.

All VAT relevant data of all legal entities (at client level and not at company level) are gathered first in order to ensure the correct VAT determination and review whether overall VAT/GST control framework works still effective. Taxmarc™ Data Analytics is thus able to retrieve the company’s supply chain of all legal entities on the same SAP platform (company’s blue print).

Taxmarc-product overviewThis is externally done without the Taxmarc™ Tax Engine on the basis of a self-written SAP program (ABAP), so the data can be extracted from SAP in an uniform manner.

Within Taxmarc™ Tax Engine this Data Analysis tool is integrated in SAP self and queries, BW or an ABAP can be run. With this, problems regarding performance, format of reports and interpretation of data definitely belong to the past.

Integrated in SAP: fully automated VAT determination of AP and AR

In Indirect Tax Automation, Processes and Controls on 13/04/2014 at 11:26 am

Taxmarc-product overviewTaxmarc™ Tax Engine enables – without extra interface – a fully automated VAT determination of all sales and purchase transactions in SAP.

All VAT relevant data of all legal entities (at client level and not at company level) are gathered first in order to ensure the correct VAT determination with integrated tax control framework in SAP:

  • Identifies real time when certain transactions are not possible:
    • Improbable and atypical results are immediately visible
    • Automatically blocked or put in an emergency table
    • Blocked transactions can be released but are always logged for review via Taxmarc™ Tax Cockpit
  • Blocked transactions can instantly be corrected, so corrections afterwardscan be prevented:Real time during order creation:
    • No invoice corrections afterwards
    • Reduction of rework (hidden factory)
    • Future firefighting avoided
  • Optional: Intrastat Module

Taxmarc™ Tax Engine can be implemented in all recent versions of SAP (R/3 or ECC).

The additional advantages

  • Fully automated VAT determination of outgoing invoices (AR) on the basis of 30 parameters instead of the 4-8 parameters in standard SAP;
  • Automated VAT determination of incoming invoices (AP) based on purchase orders and actual vendor invoices;
  • Fully automated VAT determination of chain transactions in SAP with the assurance that the VAT code on sales transactions always correspond to the VAT code on purchase transaction;
  • Integrated Tax Control Framework which ensures that transactions that fail to comply with fiscal requirements are automatically blocked. Blocked transactions can be released but are always logged for review;
  • Time-stamped tax code structure: no new tax codes are required when VAT/GST rates are changed;
  • Taxmarc™ prevents that time-consuming manual processes outside of the system are necessary;
  • Taxmarc is fully table-driven and there is no “hard-coding” of tax rules, which results in easy maintenance;
  • Integrated VAT number validation in SAP
  • Taxmarc™ Tax Cockpit
  • SAP – IMG: All VAT technical configurations and set-up options are grouped together in the standard SAP IMG
  • Data analysis tool
    • All relevant VAT data separately stored in database in SAP (immediate available without any run-time issues)
    • Continuous Controls Monitoring for all stakeholders (data analytics)
    • Real time access to the company’s blue print
    • Determine impact of business change via simulation with real time data

Overview of Taxmarc™ Engine features

Flyer Taxmarc™ Basis includes compare of features of Taxmarc™ Tax Engine, Taxmarc™ Basic and Taxmarc™ Add-on

 

VAT eLearning course – European Commission

In EU development on 12/04/2014 at 10:12 am

An eLearning course has been developed by the European Commission under the Fiscalis 2013 Programme to help tax officials in EU countries and others with a particular interest in value added tax (VAT) get a good basic knowledge of EU Directive 2006/112/EC, known as ‘the VAT Directive’.

The training has been prepared by the Commission’s Taxation and Customs Union Directorate General in close collaboration with expert taxation officials and is freely available for download.

The course is available in the following languages: EN, BG, NL, EL, HU, LV, PL, SL, ES, SV, MK, IT.

About the electronic training course

This course aims at presenting the fundamental elements of the VAT Directive. It has an EU-wide perspective and does not explain national variations or derogations. By the end of the course the learner should have a good understanding of the basic principles of the EC VAT directive.

The course contains six hours of training and consists of fourteen units as follows:

  • Introduction
  • Context
  • Legal framework
  • Scope
  • Territory
  • Taxable persons
  • Transactions
  • Place of taxable transactions
  • Chargeable event and taxable amount
  • Rates
  • Exemptions
  • Right to deduct
  • Obligations
  • Final assessment

How to Start and Use the Course?

  1. First, extract the zip-file to a folder of your choice on your computer
  2. Read the ‘Quick Start Guide’ document
  3. This document will provide you with all the necessary information
  4. Install the course to your system as specified in the Quick Start Guide document or ask your system administrator to do so
  5. Open the course and follow the instructions within the course

via VAT eLearning course – European commission.

OECD to set out global guidelines on VAT | Economia

In EU development, Indirect Tax Automation, Indirect Tax Strategic Plan on 12/04/2014 at 8:39 am

The Organisation for Economic Co-Operation and Development OECD is to set out its new global standard for international VAT at a global forum in Japan next week

The guidelines will be presented to representatives from over 80 tax authorities at the second meeting of the OECD Global Forum on VAT in Tokyo on the 17 – 18 April, before being officially released on the 18th. “Value Added Tax is a key source of revenue for more than 150 countries worldwide, but the uncoordinated application of national VATs to international trade remains problematic,” the OECD said in a statement.

It said, “Governments are losing out on tax revenues due to under-taxation, while the risk of double taxation poses increasing obstacles to international trade, particularly in the booming international services trade.”

The guidelines are designed to advise of standards on key aspects of international VAT design. They will be based around the principles of neutrality from VAT for businesses both domestically and in an international context, and on ensuring that VAT on international transactions will only be imposed once, on destination.

The new guidelines are the latest in a series of reforms and announcements set out by the organisation to address the issue of international tax and tax avoidance.

In July last year it introduced sweeping tax reforms to stop multinational organisations abusing outdated tax rules.

In February, a global consultation on transfer pricing was launched, with the power to fundamentally change how taxpayers report their international activities.

Ellie Clayton

via OECD to set out global guidelines on VAT | Economia.

Add-on: standard SAP solution for simpler business models

In Indirect Tax Automation, Indirect Tax Strategic Plan, Processes and Controls on 11/04/2014 at 10:05 pm

Taxmarc-product overviewTaxmarc™ Add-on: a standard SAP solution with limited adjustments to resolve some standard SAP gaps and improvement of the overall VAT determination.

Taxmarc™ Add-On is a preferred option when an integrated VAT solution:

  1. should have a low impact on the company’s SAP set up, and
  2. is cost efficient, and
  3. is flexible for adding new features later on, and
  4. is based on proven technology and architecture.

Taxmarc™ Add-on is based on standard SAP VAT determination logic and functionality. Based on the select options it might be delivered with a standard design for VAT conditions, access sequences, tax codes, tax sensitive master data and logic for the determination of customer VAT registration number.

For ‘simple’ business models (AB scenario’s) this standard SAP functionality can be used.

However when business models are more complex, standard SAP VAT functionality is insufficient – due to the company’s business model, organizational structures and/or VAT requirements – to manage the correct VAT treatment additional Taxmarc™ Add-on features are implemented. These add-on’s are built on the proven Taxmarc™ platform and upgrade to the full Taxmarc™ Tax Engine is possible at a later stage.

Additional Taxmarc™ Add-on features could be implemented for the following type of scenarios:

  • standard triangulation,
  • cross border inter-company,
  • electronic invoices via EDI/iDoc

Taxmarc™ Add-on does not have an integrated Tax Control Framework like Taxmarc™ Tax Engine or Taxmarc™ Basic. That means that in addition manual controls and processes or automated VAT tools need to be set up to manage risks properly. To support our clients Taxmarc™ has developed a normative VAT Control Framework that can be used for realizing this aim.

Our add-on solutions have a proven track record as these are all part of functionality of our Taxmarc™ Tax Engine. This engine has been implemented by many multinationals with great client satisfactions.

Flyer Taxmarc™ Add-on includes compare of features of Taxmarc™ Tax Engine, Taxmarc™ Basic and Taxmarc™ Add-on

Taxmarc™ Sponsor of Global Indirect Tax Management

Higher up on the agenda of the CFO

In Audit Defense, Business Strategy, Indirect Tax Automation, Indirect Tax Strategic Plan, Processes and Controls, Technology, Uncategorized on 04/04/2014 at 6:10 pm

Our_Key_Focus-418px-1

Dutch version

While direct tax rates are decreasing everywhere across the world, the rates for indirect tax keep rising. For an average multinational company, a small mistake can make the different between profit and loss.

Despite these significant risks, the control mechanisms for indirect tax remain insufficient.

This conclusion followed from various surveys conducted by the Big4. A multinational company has amounts of over five billion euros of indirect tax flowing through the books and an error of one percent affects the earning per share.

The Global benchmark study on VAT/GST 2013 of KPMG, inter alia, indicates that the majority of multinationals still haven’t developed an effective VAT-management. Thus, control on indirect tax is rather neglected.

Comparable Big4-surveys conclude that due to technological innovations, the Tax Authorities become increasingly better at performing their audit task. The chances for companies of receiving additional tax assessments and fines from the Tax Authorities in the near future increase by the day.

Noteworthy is that companies hardly respond.

CFOs give low priority to indirect tax in deciding over budgets for internal control. Indirect tax traditionally receives less attention and times of crisis most likely won’t change this pattern.

The most important reason for this lack of attention is that VAT is managed completely differently than direct tax. With regard to the control of tax risks, the CFO, incited by the Head of Tax, usually solely focuses on direct tax.

It is often unclear how this can be changed and how indirect tax risks can be moved higher up on the agenda of the CFO. The Head of Tax to whom is reported obtains its information on direct tax mainly from corporate finance and to a lesser extent from within the organization, while that is precisely where indirect tax is administered.

Therefore, it is to him not visible on a daily basis how vulnerable the control on indirect tax actually is. Improvement in collaboration can result in VAT risks being brought more into the spotlight of the CFO.

Perhaps the most peculiar – given the alarm bells rang by the tax consultants in the benchmark studies – is that the accountants rarely point out the significant risks and insufficiently inspect the indirect tax position.

The reason is that tax consultants of the Big4 predominantly work with their own clients, with their own revenue targets and with a higher rate structure.

Moreover, the accountants apply competitive rates that allow for little room for expensive internal working hours spent on control of indirect tax. This means that the CFO cannot readily assume that all knowledge is shared within the walls of the big accountancy and tax consultancy firms.

The CFO thus receives insufficient signals promoting higher priority for indirect tax both from inside and outside the organization.

How can this impasse be broken?

The internal and external stakeholders are all chains in the process and if one isn’t cooperating, change will be difficult to be created.

A first step would be accountants reading the surveys of their own firms, acknowledging the risks and discussing these with the CFO. Optimally, control of indirect tax should be included as a standard part of internal audit, ór the position should be taken not to include it.

If control is necessary, all products and methods of the respective tax consultancy should be deployed in order to assure quality. This reaches the CFO and can subsequently through ‘top down’ influences result in new instructions for internal audit and/or Head of Tax.

Following this path, the indirect tax function can gain the mandate, resources and budget required for proper execution of its functions. It is then up to the indirect tax function to improve the collaboration with the Head of Tax.

By Richard Cornelisse

Validation process of VAT numbers in SAP

In Audit Defense, Indirect Tax Automation, Processes and Controls, Technology on 01/04/2014 at 6:12 pm

Taxmarc-product overviewAn important control measure in terms of material indirect tax is checking whether the 0% rate is correctly being applied.

A prerequisite for the application of the 0% rate for cross-border transactions within the European Union is a valid VAT number of the client. The valid VAT number must also be mentioned on the invoice.

Adequate monitoring of this is crucial to eliminating risks as much as possible.

Validation process of VAT numbers in SAP

In native SAP is it possible to check the syntax – the format of the VAT number, including the number of positions. However, it is not possible to check whether the VAT number is valid. To this end, the European Commission has provided an online database, VAT Information Exchange System (VIES) for the validation of VAT.

Standard SAP does not have an interface with the VIES database. In practice, it appears that 5 to 25 percent of the VAT numbers is incorrect or invalid. The KEY Group checked the VAT numbers through a data analysis for a client:

TABEL VIES

The number of erroneous VAT numbers is close to 25%. From a VAT perspective this implies material risks that exceed every risk tolerance (0 percent, client acceptance with regard to preventing VAT fraud).

Taxmarc™’s solution for validation of VAT numbers

Taxmarc™ can automatically check the VAT numbers when a VAT number is added to the customer master data. A real time link to VIES is made to validate the entered VAT number. The client can choose to treat the result of the VIES validation as:

  • An “error”: it is not possible to enter invalid VAT numbers in the customer master data or
  • A “warning”: invalid VAT numbers can be entered but are reported separately: check with the customer and/or correct. VAT numbers can expire or change due to changes in the legal structure of customers.

It is therefore important to periodically check the validity of the VAT numbers. In Taxmarc™ it is also possible to periodically carry out these controls as detective controls within the Tax Control Framework.

This can be done in a fully automated process.

Standard Audit File for Tax solution

In Audit Defense, Business Strategy, EU development, Indirect Tax Automation, Indirect Tax Strategic Plan, Processes and Controls, Technology on 31/03/2014 at 11:43 pm

The SAF-T standard, originally created by the OECD, is intended to give tax authorities easy access to the relevant data in an easily readable format. This leads to much more efficient and effective tax inspections

The SAF-T standard, originally created by the OECD, is intended to give tax authorities easy access to the relevant data in an easily readable format. This leads to much more efficient and effective tax inspections.

The OECD’s Committee on Fiscal Affairs (CFA) developed a set of guidance on business accounting system data requirements for tax audit purposes, and associated practical implementation issues for software developers.

The set of guidance was prepared by a task group consisting of representatives of national revenue authorities, the Business Applications Software Developers Association (BASDA), accounting bodies, and other interested parties.

The standard, originally created by the OECD, is intended to give tax auditors easy access to the relevant data in an easily readable format. This leads to much more efficient and effective tax inspections

The aims of the guidance are to simplify tax compliance and tax audit requirements as they relate to information required for tax purposes from business and accounting systems.

This guidance should encourage voluntary compliance by businesses that will also add to profitability by encouraging better internal control procedures. The guidance should also help promote compliance with new legislation on accounting standards such as Sarbanes Oxley and IFRS (International Financial Reporting Standards).

The application of standards through software development also provides both public and private auditors with a reference point. The legal requirements of the file are in line with the obligation of using certified billing and logistic software that prevent changes on documents already issued.

Submit on mandatory basis billing data and logistic information on a monthly basis

The Standard Audit File for Tax Purposes (SAF-T) became obligatory for entities with head office or a permanent establishment liable to Corporate Income Tax in Portugal in 2008, with the objective of making  tax inspection more efficient and reducing the effort.

The latest development is the introduction of a new obligation in 2013: Taxpayers now have to submit billing data and logistic information on a monthly basis. This is what causes problems for many companies: The amount of data is large, and the extraction too complicated for a monthly submission of SAF-T files.

SAF-T: a global trend

Besides Portugal similar obligations exist already in Austria, Canada France, (voluntary basis), Luxembourg and Singapore. In Belgium, Croatia, Finland, Germany, Lithuania, Malta, Spain, Slovak Republic, Slovenia, and UK discussions on SAF-T are already taking place.

Countries like Sweden and Netherlands have their own e-audit file standard. Somehow related to SAF-T is the new mandatory electronic Tax Balance sheet requirement in Germany. From January 1, 2014 it is mandatory to send Tax Balances electronically. See also our eBilanz-Cockpit for Germany: our integrated SAP solution

SAP’s own solution

Not flexible, response time to change low and impact on IT resources to implement

It is possible to use standard SAP for creating the required report but as you might know it is a very complicated change in SAP (more than 100 OSS notes) that will require a lot of IT resources. SAP own solution is in practice often not considered flexible enough when it relates to response time on new law changes when new or additional requirements are issued. That means that any solution should have the followings benefits to contribute value:

  • Cycle time re changes in short periode of time (e.g. one week including testing)
  • Reduction in needed IT resources
  • Reduced impact on ERP system and test cycles
  • Establish effective workforce

KEY Group’s ERP independent SAF-T solution

ERP system independent solution when multiple legacy systems are used

Based on OECD requirement we developed a solution that can combine data from different sources (i.e. SAP, Oracle and Sabrix).

This solution is beneficial in case multiple legacy systems and can be easy tailored to country specific requirements.

It runs automatically within either ACL or Access and manual intervention is no longer needed as it is a fully automated process without data manipulation. The output will be a correct SAFT-XML. SAFT 1 SAFT 12

Integrated SAP solution: for SAP users only

In development Standard Audit File Cockpit for SAP

Cockpit1ERP independent SAF-T solution is used as prototype to develop an easy-to-use and lean SAF-T cockpit solution for SAP with country specific flexibility. This solution is currently built in SAP and will be able to generate automatically based on the specific country’s legal requirements (e.g. every month and output) the mandatory SAF T files that need to be reported to the tax authorities.

Besides that – as legal requirements might differentiate – our solution will have the necessary flexibilities. The solution focuses on master data and transaction data in SAP, extracts the required data from several tables and is flexible enough to allow country- or company-specific adaptations (customizing).

The output is an XML-file with all relevant data as required by the SAF-T standard or an MS Excel / Access file that can easily be converted into XML. That makes roll out to other countries an efficient and effective process.

Therefore, a user-friendly solution for creating the monthly SAF-T files would be of great added value if the objective of the organization is an effective workforce and prefer in SAP automated processes with no manual intervention.

Full ERP Integration

  • The SAF-Cockpit is fully integrated into SAP®, all SAF-relevant data is directly extracted out of SAP-tables and is brought into the required SAF reports
  • Only one single transaction easily guides users to the creation of the reports
  • No interfaces or external data 
manipulations required
  • Full integration of SAP security 
features (e.g. roles, change logs)

Cockpit2 Via Standard Audit File for Tax solution.

Taxmarc™: Intrastat Module in SAP

In Audit Defense, EU development, Indirect Tax Automation, Indirect Tax Strategic Plan, Processes and Controls on 31/03/2014 at 9:41 am

Taxmarc™ Tax Engine fully automates not only the VAT handling of incoming and outgoing invoices but checks real time each individual with its integrated Tax Control Framework and any errors are blocked or allocated to an emergency table.

Launch of Taxmarc™ Intrastat Module for SAP

Taxmarc-product overviewToday, we launch our Taxmarc™ Intrastat Module: a fully automated SAP solution with integrated controls that uses standard SAP without external interface. The biggest issue with SAP Intrastat reporting is related to the completeness and correctness of the relevant Intrastat transactions. 

In standard SAP Intrastat there are transaction selected that should not have been selected (correctness) and there are transaction not selected that should have been selected (completeness). Manual corrections are time consuming and sometimes not possible.

See also below an extraction of a SAP note:

Cause and prerequisites: certain constellations of trangular deals cannot be modelled in the standard system.

Intrastat reports are increasingly becoming a useful tool for the tax authorities to evaluate the risk of VAT frauds, a topic high on the priority list of European Commission and local governments.

Many countries, notably Germany and Belgium, look to reconcile companies’ VAT returns to their Intrastat filings to identify inconsistencies in their VAT compliance.

Mismatches between VAT returns and Intrastat reports have the current focus of tax authorities and could trigger an audit. In practice reconciliation efforts afterwards are time consuming and in practice often not possible due to lack of audit trail.

To design an optimum process it is mandatory to link SAP’s VAT return with Intrastat requirements and transport the results to SAP Intrastat templates. Taxmarc™ module has established this alignment. That is the strength of Taxmarc™ and what is lacking in standard SAP.

It is not only about ‘being compliant’ to EU rules and regulations, but workforce efficiency and reduction of future costs as well. For example hard savings could be realized as this module avoids manual intervention, but also future audit costs could be reduced substantially.

This Intrastat module has been implemented and tested by a listed Multinational and a client reference is thus available. So whilst fines for non-compliance of Intrastat are very low, companies should therefore ensure they are fully up-to-date on their reporting.

Intrastat background

Each Member State of the European Union compiles its own external trade figures, in other words statistics on its cross-border movements of goods. A distinction is made between trade of goods between EU Member States (Intrastat), on the one hand, and trade with countries that do not belong to the European Union, on the other, (Extrastat).

The transactions between EU Member States are called “intra-Community purchases and deliveries” as regards to the value added tax code, and are labelled “arrivals” and “dispatches” for statistical purposes. The names “imports” and “exports” remain used for movements with third party countries, as well as for describing external trade in general.

The entry into force, on 1 January 1993, of the Single European Market opened up internal borders and abolished customs formalities. However, statistical obligations remain in place.

Intrastat is the monthly filing regime for companies sending (dispatches) and receiving (arrivals) goods across EU member countries’ national borders. It enables countries to monitor intra-community supplies and general trade.

All those subject to VAT have to complete a declaration themselves, regarding their intra-Community trade, unless this does not exceed a threshold calculated on an annual basis. This is the Intrastat declaration. This declaration includes all data regarding goods arriving from other Member States and goods being sent to other Member States.

It is important to note that if a business fails to submit the Intrastat reports within the legal time period, administrative or legal sanctions may be imposed.

459296 sap note triangular deals and intrastat

Via Intrastat Module in SAP

By Richard Cornelisse

Director Strategy Taxmarc™

E-mail: richard.cornelisse@taxmarc.com

 

 

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