Richard Cornelisse

Author Archive

Transfer pricing: surviving the new tax world

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

Diagnose the current state and future objectives of your SSC plans

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

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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?

M&A integration

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

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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

Increase revenues or reduce costs and expenses, so that earnings are improved

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 21/01/2016 at 9:41 pm

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The rework and cover ups, the hours and days of wasted time in a company of people who constantly correct mistakes (unnecessary rework). The objective is to make the hidden factory visible (measure/calculate ROI) and as result returns precious time and money to the business.

It is about extra man-hours, additional costs due to rework (credit/debit notes) and retrospective corrections and/or disclosures. Example: how much rework is required before numbers received from finance systems can be used?

  • Does the process of preparing and compiling the client’s VAT return take more than 5 man days? (starting from the moment of VAT-data collection until the VAT return is approved and filed).
  • Are manual adjustments made to ERP figures before inclusion in VAT Returns?

Imagine how much you could save if the problem was completely eliminated.

Read more: Process improvement

Tax function effectiveness

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 13/01/2016 at 7:53 pm

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The global tax environment is in a state of fast change. A shift to indirect taxes represents the global trend and combat tax evasion and VAT fraud a high priority. Driving indirect tax management therefore becomes more and more important.

The key to success in the management is the ability to translate indirect tax knowledge into a workable business process.

Our aim is to share our expertise with you through the Global Indirect Tax Management website, to create and share current state benchmarking knowledge, to inspire and also challenge your department functions through offering modules that can be used to scope process gaps from an indirect tax perspective.

Global Indirect Tax Management website

Executive summary

Non routine or substantial transactions

Tax risk management

Tax transparency

Enhanced relationsships

Training

VAT automation

Measure the problem and determine why it exists

In Indirect Tax Automation, Indirect Tax Strategic Plan, Interim VAT management, Processes and Controls, SAP for VAT, Technology, Training, VAT automation on 13/01/2016 at 8:51 am

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Measure the magnitude of that problem, determine why the problem exists, and generate a set of solutions to ensure that the problem goes away.

When high risk indirect tax areas and lowest performing VAT processes – that have a direct impact on the company’s VAT objectives – have been identified, the next step is to measure the performance in term of effectiveness and efficiency of each of these processes

The first phase is therefore a zero measurement that identifies key indirect tax risks and worst performing processes that in the end should be improved. Identify the lowest performing indirect tax processes that have the most direct impact on the company’s business and tax objectives.

To assess and measure indirect tax performance:

Read more

Risk process

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Tax Risk and Control Matrix

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 08/01/2016 at 2:16 am

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In order to allocate resources to risk and cost saving areas that matter, we determine together the level of risk appetite of the company is accepting.

This facilitates prioritization in the deployment of resources. Having defined acceptable levels of risk leads to resources not having to spend time on further reducing risks that are already at an acceptable level.

Subsequently for the area of risks that exceed the company’s risk appetite we set up (automated or manual) controls. It is about clear responsibilities, effective systems, documented processes and risk based controls.

The ultimate objective of a TCF is to be in compliance with tax laws and reporting requirements and manage the risks that matter (risks that exceed the companies’ risk appetite). Such framework ensures that an organization has adequate control over its tax processes. A TCF can 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 effective 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 with respect to these risks.

Read more


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Tax Performance

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 06/01/2016 at 9:10 am

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What we offer

We combine technical knowledge with industry understanding and knowhow of technologically advanced tools and methodologies available in the market or developed by ourselves:

Businesses transparency strategy

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 11/12/2015 at 11:38 pm

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HM Revenue and Customs (HMRC) is committed to dealing with all customers fairly and efficiently while making sure that the correct tax is paid to the Exchequer. HMRCʹs Large Business Directorate manages the largest 2,000 or so businesses using a risk based approach. This is due to their size and complexity, the tax at stake, and the consequent risk they present to the Exchequer.

This measure seeks to encourage tax transparency and compliance across all large businesses. To achieve this, we are introducing the requirement for qualifying large businesses to publish their tax strategy in relation to UK taxation.

This legislation will includes details of the tax strategies required to be published by such large business together with details of where and when publication is required and details of penalties for non‐compliance.

General description of the measure

The measure will introduce a legislative requirement for all large businesses to publish an annual tax strategy, in so far as it relates to UK activities, approved by the Business’s Executive Board.

The strategy will cover 4 areas:

  • the approach of the UK group to risk management and governance arrangements in relation to UK taxation
  • the attitude of the group towards tax planning (so far as affecting UK taxation)
  • the level of risk in relation to UK taxation that the group is prepared to accept
  • the approach of the group towards its dealings with HM Revenue and Customs (HMRC)

Non-publication of an identifiable tax strategy or incomplete content based on the 4 areas outlined above could lead to a financial penalty. This penalty will be subject to the usual HMRC appeals process.

Tax strategy

Tax strategy means:

  1.  a group tax strategy
  2. a sub-group tax strategy
  3. a company tax strategy or
  4. a partnership tax strategy.

Contents of a group tax strategy

A group tax strategy required to be published must set out:

  • the approach of the UK group to risk management and governance arrangements in relation to UK taxation,
  • the attitude of the group towards tax planning (so far as affecting UK taxation),
  • the level of risk in relation to UK taxation that the group is prepared to accept, and the approach of the group towards its dealings with HMRC.

The company publishing information as a group tax strategy must make clear (in a way that is accessible to anyone accessing it online) that the company regards its publication as complying with the duty to publish a group tax strategy in the current financial year.

Penalty for non-compliance

The head of the UK group is liable to a penalty of £7,500 if there is a failure to publish a group tax strategy for the group that meets the legal requirements or there is a failure to comply. And is liable to a further penalty of £7,500 at the end of each subsequent month in which no such group tax strategy is published.

Who is likely to be affected

Around 2,000 largest businesses in the UK.

Policy objective

The publication of tax strategies will ensure greater transparency around a business’s approach to tax to HMRC, shareholders and consumers. And board level oversight of those strategies will embed tax strategy in existing corporate governance processes. Taken together this should drive behaviour change around tax planning and therefore enhance tax compliance.

Proposed revisions

Legislation will be introduced in the Finance Bill 2016 to require qualifying large businesses or qualifying groups to publish a tax strategy, in relation to UK taxation, on the internet.

The legislation sets out the content required for inclusion in the tax strategy.

The strategy will need to remain accessible until the next update to the strategy, typically on an annual basis. A penalty may be chargeable either for the non-publication of a tax strategy or if the information contained within the published strategy does not meet the requirements of the legislation.

UK taxation

In relation to a tax strategy required by this Schedule to be published for a UK group, UK sub-group, company or partnership, means

any of the following (so far as affecting that group, sub-group, company or ­ partnership) ­

  1. income tax,
  2. corporation tax, including any amount assessable or chargeable as if it were corporation tax or treated as if it were corporation tax,
  3. value added tax,
  4. amounts for which the company is accountable under PAYE regulations,
  5. diverted profits tax,
  6. insurance premium tax,
  7. annual tax on enveloped dwellings,
  8. stamp duty land tax,
  9. stamp duty reserve tax,
  10. petroleum revenue tax;
  11. customs duties,
  12. excise duties,
  13. national insurance contributions.

Monitoring and evaluation

This measure will form part of HMRCs business risk review processes and implementation and impact will be measured within the internal governance and risk management processes within Large Business Directorate.

Indirect tax professionals on a temporary basis

In Indirect Tax Automation, Indirect Tax Strategic Plan, Interim VAT management, Processes and Controls, SAP for VAT, Technology, Training, VAT automation on 11/12/2015 at 6:34 pm

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A senior team with additional experience and talent

There could be various reasons why more senior level support is needed:

  • The company faces strategic, operational or IT challenges and needs to adapt fast
  • The indirect tax function is temporary not available (maternity leave, faces conflicting priorities, etc.)

What we offer

  • Our team is highly experienced having held senior indirect tax posts within the Big 4 and industry
  • As tax experts we also speak the language of the business and IT and no translation is needed
  • We are open to discuss resourcing options, including taking part of the current tax team on a sub-contract or temporary basis if this is helpful.

Bring in our senior VAT/IT team

  • Proven industry and consultancy leaders: highly experienced having held senior indirect tax posts within the Big 4 and industry
  • Substantial experience of working in both the EU member states and in countries outside the EU and managing international teams on multi-jurisdictional projects
  • Strong technical tax and IT expertise
  • Proven project and change management (soft) skills

What we were asked to do

  • To run a project
  • To run an effective tax team with the practical knowledge and fresh perspective to help quickly plan and then implement a comprehensive and sustainable plan
  • To support in recruiting our replacements (global head of indirect tax, VAT manager) to realize that a client builds up its own department. We then gradually will leave our roles and support the new tax function in the transition to become successful
  • Depending on the agreed scope our senior team is or could be supported by experienced and motivated professionals with backgrounds as accountants and tax advisers within the Big 4 and industry and knowhow and tooling of our alliance partners.

We have therefore also the capacity to provide the services you require and sufficient flexibility should that need grow or reduce over time.

For more detailed information: Interim VAT Management

Interim management services

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