Richard Cornelisse

Author Archive

Tax Adviser of the Future

In Business Strategy on 23/04/2014 at 11:05 pm

If competitor benchmarking reveals that the traditional way of working is still successful and has growth potential, do you really need to change?

One answer might be that the scope of the benchmark exercise was too narrow, especially in cases where non-traditional competitors are targeting your market.

Is the impact of non-traditional competitors a realistic scenario?

The easiest way – without any further analysis – is simply to deny or ignore their existence. The obvious arguments include our strong brand name, our strong reputation and the strong position our company has achieved in the market traditionally.

Companies have responded like this and subsequently gotten burned. Ignoring innovation, being too self-confident or underestimating technology developers is not a smart move.

What happens when you don’t ignore?

In the worst-case scenario, you can accept your position, reinvent yourself, set new strategic objectives and mobilize your company’s resources to realize new sources of income. The wrenching effect of the change is less extreme, of course, if the company adapts its strategy and is capable of spotting new opportunities and (re)positioning itself.

Read more: The (Tax) Adviser of the Future.

Submitting data to the tax authorities

In Audit Defense, EU development, Processes and Controls on 23/04/2014 at 8:31 am

640-01356147The OECD has issued in May 2005 a guidance note on the development of Standard Audit File –Tax (SAF-T) and recommends the use of SAF-T as a means of exporting accurate tax accounting data to tax authorities in such way that can it can be analyzed easily.

Portugal has now implemented this guidance per January 1, 2013. On monthly basis, companies are obliged to submit the SAF-T (PT) reports for sales invoices to the tax authorities. Besides the SAF-T (PT) requirement there is also a Portuguese requirement to implement a digital signature for all sales invoices.

All the actions proposed to be taken up by the Commission in this document are consistent and compatible with the current Multi-annual Financial Framework 2007- 2013 and the new Multi-annual Financial Framework 2014-2020.

31. Develop an EU Standard Audit File for Tax (SAF-T) The use of an EU standard audit file for tax (SAF-T), along the lines of what is already in force or under development in certain Member States, would both facilitate voluntary compliance from taxable persons and facilitate tax audits. A pilot project is currently under development in the specific context of the mini One Stop Shop for telecommunications, broadcasting and electronic services. Its further development should be envisaged.

A checklist re submitting data to the tax authorities

  1. Have you analyzed the data and performed a tax risk assessment?
  2. What are the tax authorities doing with this data: perform data analysis?
  3. Does not meeting the requirement result in a higher risk of a tax audit?
  4. What are the KPIs of the tax authorities?
  5. If not impacting the present does the company show a audit trail that can be retroactively be investigated and backfire to tax position taken (ammunition for contra arguments, increase of penalties)
  6. If the data provided does not meet the required data format could this result in a higher risk of a tax audit?
  7. To avoid unforeseen risks or mitigate this risk is it not necessary to perform a data analysis prior to submitting data, as an internal pre-audit?

Is the mandatory data request approach of the Portuguese tax authorities

  • Is the mandatory data request approach of the Portuguese tax authorities incidental or will this become a future trend?
  • Is it not likely in the downturn economy that more countries will follow this in order to maximize tax revenues?
  • What is the current status in the European Union or beyond?

Read more: Tax Authorities Peeking At Your Data.

VAT should be considered in every aspect of the migration process, from concept through completion and beyond

In Business Strategy, Indirect Tax Strategic Plan, Processes and Controls, VAT planning on 22/04/2014 at 7:43 pm

Managing by design — looking at any process or transaction from end to end and factoring in all the requirements and controls essential to designing and optimizing a compliant VAT process.

Migration to a new jurisdiction will inevitably involve dealing with VAT. For some migrating corporations it may mean having to deal with VAT for the first time although probably for most, VAT will be a familiar concept albeit with variations from the ‘old’ jurisdiction.

Assessing the VAT treatment of the migration itself and the subsequent activities in the new jurisdiction is a necessary workstream that should run parallel with other disciplines/workstreams, primary because VAT is a transaction tax affecting both costs and revenue, and there will invariably be many transactions happening to achieve the migration and the on-going activities.

Misunderstanding or not recognizing the VAT implications of the migration and subsequent activities in the new jurisdiction could result in an unwelcome and unexpected cost.

However, the change of a business model can not only create VAT risks, but as well commercial risks such as logistics problems in getting goods into a country and delays and hold off of shipments resulting in disruption of daily business. Some root causes: the company forgot to register for VAT or procurement forgot to agree with supplier who was importing the goods.

In the next paragraphs a number of issues are addressed that should be considered for VAT purposes in order to ensure that the migration will take place in the most effective manner from a VAT perspective.

It is very much a question of assessing the VAT position of the entities affected by the migration as it is currently and determining whether the future position will be better, neutral or negative. If it is the latter, determine whether and how the VAT cost may be mitigated.

Read more: Indirect Tax Considerations: Migration To New Jurisdictions?

The efficiency and effectiveness of the indirect tax function

In Business Strategy, EU development, Indirect Tax Strategic Plan, Processes and Controls, Uncategorized on 21/04/2014 at 3:15 pm

Richard CornelisseEffectiveness is the degree to which an organization achieves the objectives.

When is effectiveness achieved?

For the tax function this is if all risks are managed and opportunities spotted and implemented. Efficiency refers to the extent to which time, effort or cost is well used for achieving the objectives.

As indirect tax resources are normally scarce it is important that the available time is used in the most efficient and effective way. Beside the fact that managing all risks is cost inefficient, it will have negative impact on efficiency beyond indirect tax (e.g. time spent by finance department on VAT matters). It is about making the right choices.

In order to allocate resources to risk and cost saving areas that matter, the level of risk appetite of the company has to be determined. 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.

The resources and budget is aligned with the outcome of a risk assessment. Most of our time on high risk areas. The efficiency and effectiveness of the indirect tax function is periodically measured and compared with financial and operational KPIs. This is discussed in review meetings and corrective actions are identified.

Sometimes percentages are used to prove the apparent level of control. The most famous is the 80-20 rule. Another example is statements like 95% of our transactions are compliant. These numbers can cause misperception of senior management when the overall feeling within the business is that the company is in control. For potential impact of such error rates, we refer to VAT throughput calculation described below.

An example

What does the following statement say about risk management: tackling master data can contribute to getting over 80% of your invoices VAT compliant. If 80% of these invoices qualify as a low risk and 20% exceed the risk appetite level of the company if it goes wrong, the solution supports efficient deployment of employees, but does not support the achievement of risk management objectives. Note that currently I assumed that the 20% is a high risk.

In practice, of course this should be investigated first and measured to become useful from a management perspective.

Richard H. Cornelisse

Read more: How to realize objectives via practice approaches, tools + methodology.

Governments endorse new OECD Guidelines on applying VAT across borders

In Processes and Controls, EU development on 20/04/2014 at 10:35 pm

The Global Forum on VAT is a platform for a global dialogue on international VAT standards and key issues of VAT policy and operation. Meeting topics included:

  • Global VAT policy trends and developments.
  • OECD International VAT/GST Guidelines: Setting the right standards and identifying options for their implementation.
  • Applying VAT to cross-border services and digital supplies.
  • Tackling VAT fraud.
  • The economy of VAT reform.

This event was a unique opportunity for tax officials and other stakeholders from around the world to:

  • identify common standards and best practices
  • share policy analysis and experience
  • strengthen international co-operation

18/04/2014 - The governments of 86 countries have taken a key step towards preventing value added tax from weighing on trade while also safeguarding state revenues by endorsing the first internationally agreed framework for applying national VAT rules to cross-border transactions.

More than 250 high-level representatives of around 100 countries, jurisdictions and international organisations attending the OECD Global Forum on VAT meeting in Tokyo on 17-18 April endorsed a new set of OECD Guidelines for the application of VAT or GST (Goods and Services Tax) to international trade. See the Statement of Outcomes here.

These International Guidelines seek to address the problems that arise from national VAT systems being applied in an uncoordinated way in the context of international trade. They set standards aimed at ensuring neutrality in cross-border trade and a more coherent taxation of business-to-business (B2B) trade in services.

“The endorsement of these Guidelines is a big step towards reducing double taxation and under-taxation in trade,” OECD Deputy Secretary-General Rintaro Tamaki told the Forum. “The Guidelines are good for the private sector and good for governments as they should boost both trade and tax revenues. I encourage countries to start using them from today.” (Read full speech here)

VAT is a major source of revenue for governments but becomes problematic when the tax is applied to international trade, particularly in services, as different tax jurisdictions often use different rules to determine which of them has the right to tax a transaction. This creates the risk of double taxation, which hurts trade, and under-taxation, which hurts governments.
The Guidelines set standards in two key areas: ensuring VAT neutrality and making taxes on B2B trade in services destination-based. The first makes sure VAT targets private consumption and not businesses, so it has a neutral effect on production and levels the playing field for domestic and foreign businesses in cross-border trade. The second should ensure that B2B trade in services is only taxed in the country of the recipient of the service.

This year’s Forum also discussed the equity impact of VAT. Countries often implement reduced rates to alleviate the burden on poorer households but discussions at the Forum confirmed that this is a very expensive way of providing support to the poor, particularly when compared to the use of targeted cash transfers.

The OECD is working with all the Global Forum participants to extend its Guidelines to cross-border sales of services to private consumers (B2C), an area that is growing strongly with the rise in online shopping.

For further information, journalists can e-mail Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, Piet Battiau, Head of the Centre’s Consumption Tax Unit, or contact the OECD Media Office (+33 1 4524 9700).

via Newsroom – OECD.

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.

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