Richard Cornelisse

Author Archive

BEPS TP and CbC reporting: EY Survey  / Keith Brockman

In Indirect Tax Strategic Plan on 02/09/2015 at 1:16 pm

EY’s survey of nearly 100 jurisdictions provides timely insight into unilateral activities and required legislative efforts to implement OECD BEPS Actions 8-10, transfer pricing guidelines, and Action13, transfer pricing documentation / country-by-country (CbC) reporting.

A link to the survey

Key observations:

  • OECD TP Guidelines:
  • 7 countries (including the UK) to adopt the changes without need for legislative/administrative action
  • 54 countries refer to OECD TP Guidelines by tax authorities/courts for interpretation, but are not binding
  • 21 countries refer to OECD TP Guidelines in domestic legislation
  • TP Guidelines are meant to be an extension of the Commentary to the arm’s length principle in Article 9; if the revised Guidelines go beyond such rules a change in existing treaties will be required for implementation, although the multilateral instrument in development under Action 15 may remedy this
  • Tax authorities have used BEPS initiatives for leverage in Australia, Spain, Hungary, New Zealand, Finland, Indonesia, France and India
  • TP and CbC documentation may be provided as an exchange of information if they are “foreseeably relevant”
  • Legislative action will be required in most countries with current TP legislation to implement Master / Local File requirements
  • Most countries will require a change in law for CbC reporting; 38 countries are/will have such implementation legislation, 49 countries are not yet known, while only 11 countries are not expected to implement in the short/medium term
  • CbC information will be widely exchanged via exchange of information articles in double-tax treaties, tax information exchange agreements or Article 6 of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (and the corresponding Multilateral Competent Authority Agreement)

The survey is a “must read” for interested parties that will be affected by OECD Actions 8-10 and 13; it magnifies the imperative of collecting such information timely and is not dependent on which countries adopt certain provisions the first year (as information will be exchanged quickly around the world regardless of which jurisdiction the parent entity resides in).

Source: BEPS TP & CbC reporting: EY Survey ‹ Keith Brockman – Reader — WordPress.com

Commission modernises EU customs procedures

In Indirect Tax Strategic Plan on 29/08/2015 at 7:28 pm

The European Commission has adopted today a legal act to create a simpler, more modern and integrated EU customs system to support cross-border trade and provide for more EU-wide cooperation in customs matters.

It builds on the Union Customs Code adopted in 2013, which sets out detailed rules for twenty-first century customs processes.

Customs services play a central role in policing the EU’s external borders and in facilitating trade.

The customs union is the operational arm of much of the EU’s commercial policy measures. In addition, a growing range of government agencies call on customs to enforce their policies at the border.

EU customs handle 16% of world trade, or over two billion tonnes of goods a year with a value of EUR 3,400 billion. Pierre Moscovici, EU Commissioner for Economic and Financial Affairs, Taxation and Customs, said: “A modern and cost-effective customs system facilitates international trade and is conducive to growth.

It also plays a vital role in defending the safety and security of European citizens and in protecting Member States’ interests.”

The Commission has been working for several years on a major overhaul of customs rules in the EU. The basic regulations were changed in 2013. Detailed acts must subsequently be adopted so that the new rules can be applied as of 1 May 2016.

Today’s decision takes the form of a delegated act. This kind of legal act, introduced by the Treaty of Lisbon in 2010, gives the Commission power to adopt the technical, non-essential elements of an existing legislation, in this case of the Union Customs Code.

The act adopted today covers a wide area of customs activity, including:

  • Simplifications of the customs procedure inward processing which allows the processing of non-Union goods without payment of import duty and other charges to support creation of added value in the EU;
  • Clearer rules to ensure equal treatment of economic operators in the EU;
  • Wide-ranging provisions which will allow customs decisions and authorisations to be valid across the EU in the future;
  • Establishing common data requirements as the basis for new IT systems linking Member States’ customs administrations to ensure a seamless exchange of information;
  • Improvements in risk management to reinforce the fight against trade in illicit and prohibited goods, terrorism and other criminal activities.

The delegated act will now be considered by the European Parliament and the Council. In accordance with Article 290 TFEU, both can raise their objections within two months.

This period of scrutiny can be extended by a further two months.

Background

The EU customs union has provided a stable foundation for economic integration and growth in Europe for over four decades.Customs legislation is decided at EU level while the implementation of that legislation falls primarily on the Member States. Efficient customs administrations are essential to ensure a level playing field for traders in different Member States and to police the EU’s external borders.

In 2012, the Commission outlined a course of action for a more robust and unified customs union by 2020 in its Communication on the State of the Customs Union. The Communication provided for a reform of its legal framework as well as a vast shift towards digitisation.

The Union Customs Code (UCC) which came into force in 2013 enables customs to focus more on trade facilitation as well as on security, safety and the enforcement of intellectual property rights. It also improves cooperation between customs authorities and other services.

Today’s delegated act builds on this by setting out the details of the rules which will apply as from 1 May 2016. It will be supplemented by an additional implementing act, which is being submitted to Member States at the same time and will set out procedural details. The implementing act will be voted by the Customs Code Committee composed of representatives from Member States.

The Commission consulted extensively with Member States and trade interest groups to prepare the delegated act. The act was adopted well ahead of the 1 May 2016 deadline to allow stakeholders to adapt.

For more information

Video: One minute in the life of the EU Customs Union

Source: European Commission – PRESS RELEASES – Press release – Commission modernises EU customs procedures

Fall VAT conferences in the U.S. | Value Added Tax Blog

In Indirect Tax Strategic Plan on 24/08/2015 at 4:30 pm

The Big 4 accounting firms each have their own global VAT seminars in the U.S. – I am not aware of any happening soon, and these meetings are typically closed to the public. However, there are three conferences and a webinar over the next few months that I am speaking at which may trigger your interest:

Institute of Professionals in Taxation – VAT Symposium: September 30 – October 2, Indian Wells, CA

The IPT VAT conference is the only independent VAT conference in the U.S. It serves a broad range of VAT content: from the basics to more advanced sessions, case studies and “VAT around the world”-type update seminars. I have attended (and taught at) the previous two conferences, and I was impressed by the level of the speakers. If you have no or very limited VAT knowledge, this is the conference to attend. Attendees are not shy to ask basic questions and I found that the conference rooms are better set up to invite discussion than the Big 4 conferences.

Attendance is limited to IPT members or companies that have IPT members. If you don’t meet this requirement, but would like to attend, let me know and I will see what I can do.

The conference website is here: (click here – the link is too long to fit this column)

The U.S. Department of Commerce – Commercial Service: October 8 – Knoxville, TN

The U.S. government got hold of me – in a good way! I am working with the Knoxville U.S. Export Assistance Center to talk about VAT at an October 8 event in Knoxville, TN. If you are interested in learning more about export and overseas trade, please come and join the event. Rob Leach (Robert.Leach@trade.gov) is coordinating and will be able to share more details.

Vertex Exchange: October 25-28, Orlando, FL

I am a 6 year veteran speaking at these Vertex conferences. Although I am teaching only VAT, the conference content is predominantly sales tax and (unsurprisingly) tax systems implementations. Like the IPT conference, this is a great opportunity to discuss, hang out and where appropriate commiserate with like-minded tax specialists – the Vertex Exchange is particularly highly rated in the networking area.

The conference website is here: http://www1.vertexinc.com/exchange-us/

More?

These three are on my list of this year’s speaking engagements – October will be a busy month! I will update whenever I hear of other VAT conferences or meetings here in the States.

There is also a Bloomberg BNA webinar on “VAT for U.S. Companies” on September 24. See here for the details: http://www.bna.com/value-added-tax-m17179933772/. This will be an hour of basic VAT training. Check in with me please before you register if you plan on attending.

Of course, outside of these opportunities I would be happy to discuss any VAT challenge with you, share slides or otherwise provide VAT support. Email me (mark@us-vat.com) if you need me.

Mark Houtzager is the principal consultant at US VAT, Inc. – providing Value Added Tax support for U.S. multinationals.

via Fall VAT conferences in the U.S. | Value Added Tax Blog.

Webcasts about Indirect Tax Function Effectiveness

In Indirect Tax Strategic Plan on 16/08/2015 at 10:51 pm

Benchmark information, templates, modules and approaches are shared to support VAT process improvements and meet business objectives

The added value of benchmarking the VAT function against best practices in the market is to gain objective evidence to what has already been achieved but also what still needs to be done to get there.

Our ‘free’ community Global Indirect Tax Management (GITM) website shares benchmark information about the effective management of VAT. It shows the area where risk based controls are to be expected and in addition shares templates and methods for self assessments purposes.

‘Why’, ‘What’, and ‘How’ of Managing an Effective Indirect Tax function

The global tax environment is in a state of fast change. A shift to indirect taxes represents the global trend. 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.

In general the advisory sector may bring you a wealth of knowledge but in practice the translation gap to a process within the actual execution of the theory makes a business vulnerable for an endless increase in consulting cost and an ineffective approach in timely dealing with current indirect tax exposures. This may easily result in a financial disaster.

Tax authorities are continuing to pick up on the common weaknesses identified in the Indirect Tax function. The restyling of the indirect tax function in a business may have to be considered by a business in order to deal with the increasing number of indirect tax challenges or to benefit from indirect tax opportunities.

Enhance the indirect tax communication within the business functional hierarchy, increase business awareness of the current state of its indirect tax function and set the right priorities for in-house stakeholders/departments (AP, AR, Legal, Finance etc) to successfully move to a best-practice is our philosophy.

Our aim is to share our expertise with you through this 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.

A mythological way to express our mission statement would be to compare the general Indirect Tax function with the fall or rise of the Phenix legend.

Reinventing Performance Management

In Indirect Tax Strategic Plan on 16/08/2015 at 8:53 am

The current way of performance review apparently says more about the reviewer than the reviewed and takes a lot of time – 2 million hours annually at Deloitte (completing the forms, holding the meetings, and creating the ratings):

Objective as I may try to be in evaluating you on, say, strategic thinking, it turns out that how much strategic thinking I do, or how valuable I think strategic thinking is, or how tough a rater I am significantly affects my assessment of your strategic thinking.

It was time for Deloitte to redesign its performance management, realize process improvement and a better outcome. The simpler design for managing people’s performance was brought back to four questions:

  • Given what I know of this person’s performance, and if it were my money, I would award this person the highest possible compensation increase and bonus \[measures overall performance and unique value to the organization on a five-point scale from “strongly agree” to “strongly disagree”].
  • Given what I know of this person’s performance, I would always want him or her on my team \[measures ability to work well with others on the same five-point scale].
  • This person is at risk for low performance \[identifies problems that might harm the customer or the team on a yes-or-no basis].
    This person is ready for promotion today \[measures potential on a yes-or-no basis]

We ask leaders what they’d do with their team members, not what they think of them

From Harvard Business Reviews

The above could also be used to measure the performance of the tax function and evaluate whether the right skill set from a teaming perspective is available on the long run:

Developing a common framework for disclosing tax information

In Indirect Tax Strategic Plan on 13/08/2015 at 8:28 pm

See the KPMG – Developing a common framework for disclosing tax information – executive summary and actions proposed and below quote:

There can be little doubt that the debate around greater tax transparency by companies is becoming increasingly prominent. There are a growing number of calls from various parts of civil society for companies to be transparent about where they operate around the globe, where they make their profits, where they pay their taxes and how much tax they pay.

The above has a relation with the recent UK consultation request to publish company’s tax strategy, sign off such strategy by the executive and the voluntary code of conduct as discussed earlier in a previous article “Improving large business compliance“.

The impact goes beyond the UK when the company’s tax strategy is actually published on either the business website or in the annual report.

Some quotes from consultation document:
  • The strategy should set out the business’s attitude to tax risk, its appetite for tax planning and its approach to its relationship with HMRC.
  • It may also cover the governance framework describing the way a business takes decisions on taxation. The research found that “businesses with a greater appetite for risk tend[ed] not to have written (or published) tax strategies, while those with lower risk-appetite tended to have more formalised strategies.
  • Businesses will be required to inform HMRC as and when it is published.
  • It also shows us that increased scrutiny of tax strategy by a business’s Board actively discourages aggressive tax planning, with businesses stating that tax was now of “particular concern for senior management.
  • Building on this, the proposal is to include a requirement to have a named individual at Executive Board level who is responsible for owning and signing off the tax strategy. This will further encourage bringing responsibility for tax into the boardroom and align with the best practice many businesses already exhibit.
  • The proposed requirement for Board-level oversight echoes the existing Senior Accounting Officer (SAO) regime, which provides assurance that a business has adequate tax accounting arrangements in place. The SAO regime does not, however, extend to a business’s tax strategy. It is our intention that this proposal is kept apart from the existing SAO regime.
  • The consultation request is – when a company’s tax strategy is in the end actually published – therefore in my view a ‘tax trend beyond UK’ also when you read this in combination with other (e.g. OECD) initiatives.

The consultation request – when a company’s tax strategy is in the end actually published and what currently proposed is in force – should be seen in my view as a ‘tax trend beyond UK’ also when this is read in combination with other (e.g. OECD) initiatives.

Status

European_Parliament_transparancy

I gathered most relevant documents for quickly access in the chapters ‘Audit Defense‘ and ‘Tax Trends‘. Those initiatives are or will be embraced by governments for establishing a good and effective tax audit practice (see also below performance review of tax administrations).

Understanding the bigger picture and how it all fits is therefore important.

I gave as example on the GITM website that certain countries have implemented Standard Audit File for Tax Purposes submission (also originated from OECD). In Europe: Austria, France, Luxembourg and Portugal have already implemented SAF-T. 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.

In line with SAF-T obligations, from 1 January 2016 registered businesses in the Czech Republic will be required to file a new VAT return which will have details of each taxable transaction made with other Czech registered business. The Slovak Republic and Hungary have also introduced similar VAT filing requirements in order to prevent VAT fraud.

Other countries such as Netherlands still have their own local methods, but that might change soon. The Dutch tax authorities announced on May 19, 2015 that 5,000 of its 30,000 employees will lose their current job, while at the same time 1,500 specialized data analysts will be hired as tax returns will be automatically assessed via data analysis.  The world how we know it is changing.

A pending reorganization at the Dutch tax authority Belastingdienst will likely result in the elimination of 4,000 to 5,000 jobs. The staff cuts are due to improvements to computer systems that reduced the need for many spot checks done by workers, reports broadcaster NOS. Improvements to information technology infrastructure will lead to better data analysis, and thus more accurate tax assessments, sources told NOS. This should not only reduce the amount of tax evasion, but also increase the amount of tax revenue received by anywhere from hundreds of millions to billions of euros every year.

The documents gathered in chapters ‘Audit Defense’ and ‘Tax Trends’ – should give a clear view of that bigger picture – about trends and actions needed to manage CIT and VAT.

These documents and initiatives should also be read in combination with the latest surveys: the performance review of tax administrations ‘OECD Tax Administration 2015‘ and ‘OECD – Update on voluntary disclosure programmes‘.

The tax world is changing fast and it is important to keep up:

  1. From a direct tax and indirect tax perspective begin to think further about how this aspect of tax strategy will be articulated on both a UK and international basis
  2. If the UK document is going to be published, as planned in the consultation, it will be accessible to other tax authorities of course and they will need to be considered when drafting even a purely UK strategy document
  3. Make all the improvements possible in the time before such legislation comes into force so that the starting position is as strong as possible

OECD – Update on voluntary disclosure programmes

In Indirect Tax Strategic Plan on 12/08/2015 at 8:06 pm

Executive summary – a pathway to tax compliance

In general terms, voluntary disclosure programmes are opportunities offered by tax administrations to allow previously non-compliant taxpayers to correct their tax affairs under specified terms.

When drafted carefully, voluntary disclosure programmes benefit everyone involved – taxpayers making the disclosure, compliant taxpayers, and governments.

Voluntary disclosure programmes complement the rapid improvement in exchange of information and the ability of governments to detect offshore evasion.

They are an integral part of a broader compliance strategy – they need to be considered as part of a variety of compliance actions that tax administrations and governments take in order to encourage all taxpayers to meet their obligations.

Section I explains how voluntary disclosure programmes fit into the overall compliance strategy of a tax administration. The design of a voluntary disclosure programme should be such that taxpayers who come forward voluntarily pay more than they would have done had they been fully compliant from the outset, but face less punitive sanctions than evaders who make no disclosure but are detected by their tax administration.

Voluntary disclosure programmes can generally be grouped into two categories – permanent programmes and temporary initiatives. The OECD’s Forum on Tax Administration (FTA) has developed a decision tree to assist administrations that are considering a voluntary disclosure programme.

The decision tree provides an overview of the factors that tax administrations need to take account of when designing and administering a voluntary disclosure programme – weather it be permanent in nature or established on a temporary basis. In particular, decision makers should:

i) establish a reason for the programme,
ii) determine the scope,
iii) establish the terms,
iv) establish the reporting requirements,
v) consider the opportunity for intelligence gathering, and
vi) develop a communication strategy.

Section III identifies principles on which a successful voluntary disclosure programme should be based. A successful programme will:

  1. be clear about its aims and terms,
  2. deliver demonstrable and cost-effective increases in current revenues;
  3. be consistent with the generally applicable compliance and enforcement regimes;
  4. help to deter non-compliance;
  5. improve levels of compliance among the population eligible for the programme; and
  6. complement the immediate yield from disclosures with measures that improve compliance in the longer-term.

In order to improve uptake in voluntary disclosure, section IV provides a list of topics on which it would be desirable to provide a greater level of certainty for taxpayers who are considering participating in voluntary disclosure programmes.

Taxpayers’ primary concern is to understand exactly what will happen if they make a full and accurate disclosure and whether criminal charges will be brought. Taxpayers are also concerned about the confidentiality of the information that is provided, both because of the reputational damage that might result from any publicity and for reasons of personal security.

Taxpayers want reassurance that the financial terms on which their liabilities will be settled will not be prohibitive. They also want reassurance that once the disclosure is complete, they will not be unduly targeted for enhanced scrutiny in the future.

Finally, the last section of this paper compares the key features of voluntary disclosure programmes in 47 countries.

Countries considering the introduction of measures in this area can use this information to compare different strategies.

They can also use the information to review their own measures with a view to redesigning or adapting them.

Read update

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OECD Tax Administration 2015

In Indirect Tax Strategic Plan on 12/08/2015 at 7:44 am

Tax Administration 2015, produced under the auspices of the Forum on Tax Administration, is a unique and comprehensive survey of tax administration systems, practices and performance across 56 advanced and emerging economies (including all OECD, EU, and G20 members). Its starting point is the premise that revenue bodies can be better informed and work more effectively together given a broad understanding of the administrative context in which each operates. However, its information content is also likely to be of interest to many external parties (e.g. academics, external audit agencies, regional tax bodies, and international bodies providing technical assistance).

The series identifies some of the fundamental elements of national tax system administration and uses data, analyses and country examples to identify key trends, comparative levels of performance, recent and planned developments, and good practices.

I have grouped together other key documents in ‘Audit defense strategy‘ and ‘Tax trends‘ for easy access

OECD

SAP VAT Health Check

In Indirect Tax Strategic Plan on 11/08/2015 at 8:59 pm

During a health check for VAT and GST we will verify the proper working of the company’s VAT configuration. The deliverable will provide a clear understanding of how changes in the business model, master data or legislation will have an impact on the configuration at hand.

Schermafbeelding 2015-08-11 om 21.48.30

SAP VAT Health Check - 1

SAP VAT Health Check - 2

Standard for Automatic Exchange of Financial Information in Tax Matters

In Indirect Tax Strategic Plan on 11/08/2015 at 7:16 pm

The purpose of the CRS Handbook is to assist government officials in the implementation of the Standard for the Automatic Exchange of Financial Account Information in Tax Matters (herein the “Standard”).

The Handbook provides a practical guide to the necessary steps to take in order to implement the Standard. Against that background, the Handbook is drafted in plain language, with a view to making the content of the Standard as accessible as possible to readers.

The Handbook provides an overview of the legislative, technical and operational issues and a more detailed discussion of the key definitions and procedures contained in the Standard. It is intended to be a living document and will be updated and completed over time.

The Handbook is to assist in the understanding and implementation of the Standard and should not be seen as supplementing or expanding on the Standard itself. Cross references to the Standard and its Commentary are therefore included throughout the document (in the column on the right hand side of the page in Parts I and II of the Handbook). The page numbers refer to the pages in the consolidated Standard.

Background to the creation of the Standard for Automatic Exchange

  1. For many years countries around the world have been engaging in the automatic exchange of information in order to tackle offshore tax evasion and other forms of non-compliance. The OECD has been active in facilitating automatic exchange by creating the legal framework, developing technical standards, providing guidance and training and seeking to improve automatic exchange at a practical level. As shown by the 2012 OECD report to the G20 in Los Cabos, automatic exchange of information is widely practiced and is a very effective tool to counter tax evasion and to increase voluntary tax compliance.
  2. In 2010, the US enacted the laws commonly known as FATCA, requiring withholding agents to withhold 30-percent of the gross amount of certain US connected payments made to foreign financial institutions unless such financial institutions agree to perform specified due diligence procedures to identify and report information about US persons that hold accounts with them to the US tax authorities. Many jurisdictions have opted to implement FATCA on an intergovernmental basis and, more specifically, to collect and exchange the information required to be reported under FATCA on the basis of a Model 1 FATCA Intergovernmental Agreement (herein “FATCA IGA”). Many of these jurisdictions have also shown interest in leveraging the investments made for implementing the FATCA IGA to establish automatic exchange relationships with other jurisdictions, which themselves are introducing similar rules.
  3. These countries recognise that, through the adoption of a common approach to automatic exchange of information, offshore tax evasion can be tackled most effectively while minimising costs for governments and financial institutions.
  4. With the strong support of the G20, the OECD together with G20 countries and in close cooperation with the EU and other stakeholders has since developed the Standard for Automatic Exchange of Financial Account Information, or the Standard. This is a standardised automatic exchange model, which builds on the FATCA IGA to maximise efficiency and minimise costs.
    The automatic information exchange framework
  5. The diagram in the next page (Figure 1) depicts the automatic exchange framework for reciprocal information exchange under the Standard. In broad terms, financial institutions report information to the tax administration in the jurisdiction in which they are located. The information consists of details of financial assets they hold on behalf of taxpayers from jurisdictions with which their tax administration exchanges information. The tax administrations then exchange that information.
  6. This process requires: rules on the collection and reporting of information by financial institutions; IT and administrative capabilities in order to receive and exchange the information; a legal instrument providing for information exchange between the jurisdictions; and measures to ensure the highest standards of confidentiality and data safeguards.

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