Richard Cornelisse

Archive for the ‘Tax News’ Category

60% of companies say VAT/GST have a negative impact on their business

In Audit Defense, Benchmark, EU development, Indirect Tax Automation, Indirect Tax Strategic Plan, Tax News, Technology, VAT automation, VAT planning on 24/07/2014 at 6:28 pm

The importance of indirect tax has increased over the last couple of years. While the rates for direct tax, corporate income tax, are decreasing, the rates for indirect tax keep rising.

Time for Richard Cornelisse, editor of Global Indirect Tax Management, to act on that: ‘At multinational companies we’re easily talking about amounts of over 5 billion euros of indirect tax flowing through the books.

Yet according to big4 surveys, the related control mechanisms are still inadequate. Not only can an error in the accounts lead to major additional tax assessments and substantial penalties, with amounts like these, it can be devastating for the reputation of a listed company.’

The global bench mark study on VAT / GST 2013 of KPMG among multinationals (clients and relations), inter alia, shows that most companies haven’t yet developed an effective VAT/GST approach.

Tax Authorities, due to technological innovations, have become increasingly better in executing their tax audit. The probability that the Tax Authorities will issue additional assessments and penalties in the near future because errors in indirect tax are detected, increases by the day.’

Isn’t it strange that the indirect tax still isn’t high on the agenda of the Head of Tax and the CFO?

Cornelisse: ‘It is indeed. Not only are the amounts in the indirect tax cycle continuingly rising internationally, these surveys also reveal that the Tax Authorities, due to technological innovations, have become better at executing their tax audit.

The chance that the Tax Authorities will issue additional assessments and penalties in the near future because errors in indirect tax are detected, increases by the day.’

Still, companies hardly seem to react.

Cornelisse: ‘On the one hand it’s understandable. Because of the structure of determination and control within organizations, indirect tax is dealt with completely differently than direct tax.

The Head of Tax is responsible for all taxes in the company, but it appears that the main focus is on direct tax. The Indirect Tax Function often reports to the Head of Tax, who, in turn, reports to the CFO. This is one of the reasons that hardly any KPIs are determined for VAT/GST and the CFO almost exclusively attends to direct tax regarding tax risks.

The CFO has a lot on his plate and lines of reporting often fail to sufficiently pass on the risks of indirect tax and the necessity of managing this adequately.’

‘The chance that the Tax Authorities will issue additional assessments and penalties in the near future because errors in indirect tax are detected, increases by the day.’

Breaking the silo structure

But doesn’t the CFO’s financial auditor point out the large risks associated with insufficient control of indirect tax?

Cornelisse: ‘That is indeed strange since I assume that the results of the benchmark studies are not only shared with clients, but especially within the organization itself, including colleagues in the audit department.

In terms of quality and providing integrated service, it can be expected that a position be taken each year concerning materiality and thus the necessity for further examination during the annual audit.

It is remarkable, however, that regarding indirect tax, the tax advisory departments of the Big4 mention the increasing risks of additional assessments, penalties and loss of reputation because risks are rising and KPIs and controls of indirect tax are lacking, but that this knowledge is hardly ever taken into account during the financial statement audit.

The CFO assumes that the knowledge acquired within the walls of the large accountancy and tax consultancy firms is shared, but the tax advisors appear to be prone to focus solely on serving their own circle of clients and to a far lesser extent on strengthening other services within the organization itself. Focus on one’s own expertise is good on the one hand, but it can also lead to reduced transfer of information.’

Isn’t this where the financial auditor comes in?

Cornelisse: ‘It’s understandable from the financial auditor’s perspective that the accounting firms don’t always deploy the knowledge available in their own tax advisory department when performing the financial statement audit.

The tax advisors primarily address their own clients, for which personal KPIs such as sales turnover must be achieved, and therefore have an individual higher rate structure. The financial auditors apply sharp rates in their market competition, and expensive internal staff hours spent on control of indirect tax are limited as much as possible. It costs a lot of money to hire internal knowledge and that money isn’t always available in economically difficult times.

They have, however, a responsibility, especially when it comes to managing reputational damage.’

If the facts say that more control, more KPIs are required in monitoring the indirect taxes, then why doesn’t the CFO take that on?

Cornelisse: ‘The most important reason is that the CFO has a lot on his plate. Indirect tax has no priority.

Due to economical circumstances, choices have to be made regarding budgets for internal control. And because indirect tax has traditionally received little attention, it will surely not get more in times of crisis.

The deployment of expensive fiscal knowledge therefore usually remains limited to control of direct tax.’

‘The Indirect Tax Function is aware of the fact that it is understaffed and that budget is too limited to optimally execute its tasks, but they often don’t know how to change this and get it on the agenda of the CFO.

Surveys are alarming

If the risks are truly this high, then shouldn’t it receive more attention from the CFO?

Cornelisse: ‘That’s exactly the reason I started the Global Indirect Tax Management initiative. It’s not that the problem is unknown among the multinationals, but they just don’t share information sufficiently.

The Indirect Tax Function is aware of the fact that it is understaffed and that budget is too limited to optimally execute its tasks, but they often don’t know how to change this and get it on the agenda of the CFO.

The surveys of the Big4 are clear: we are talking about extremely large amounts of money that lack appropriate control, but because KPIs have never been developed for this particular purpose, the risks remain outside the CFO’s field of view.

Source: KPMG Indirect Tax Compliance Services – go beyond the data

  • “Indirect tax is the third largest item of working capital
    1. Sales
    2. Cost of sales
    3. Indirect tax
  • 60% of companies say VAT/GST have a negative impact on their business
  • Only 1 in 8 businesses have a global head of VAT/GST that has visibility over VAT / GST returns prepared locally”

Source: EY Managing indirect tax data in the digital age

“External drivers

  • Governments are increasingly relying on indirect taxes to meet their budgetary needs
    VAT rates have increased worldwide in recent years, and new indirect taxes are being introduced in many countries for sectors such as banking and energy
  • The “fair tax” debate has put companies’ tax affairs firmly in the media spotlight – drawing intense scrutiny not only from tax administrations, but also from regulators, investors and even the public
  • Tax and customs administrations are focusing more than ever on full compliance and using risk analytical tools to target their resources to tackle tax leakage and tax avoidance. They are collecting more taxpayer data and doing more with it”

One of the tools the Global Indirect Tax Management initiative offers, are aimed at achieving better awareness.

The fact that direct and indirect tax work in a different way must also be taken into account.

The Head of Tax should be more involved in the Indirect Tax Function. The Head of Tax mainly gets his information from corporate finance and not so much from other departments. And that is precisely where the indirect tax is managed and must be operated. It is therefore often not visible for the Head of Tax how important the controls on indirect tax are.

If the Head of Tax and the Indirect Tax Function would figure out how to cooperate more efficiently, they will also bring indirect tax more into the spotlight of the CFO.’

‘Just consider: a mistake of one percent can make the difference between profit and loss for a multinational company. Explain that to your shareholders.’

Carried by the organization itself

How can change be accomplished?

Cornelisse: ‘It’s essential that change comes from the organization itself. An advisor can repeat this over and over, but if it isn’t carried out within the organization, by the people who actually have to work with it, nothing will change.

It starts with the people in the organization becoming aware of the amounts that are at stake and the risks of something going wrong. Big4 surveys show unanimously that we’re easily talking about amounts of 5 billion euros concerning indirect tax. Benchmark studies repeatedly create the same picture: too little control, too few KPIs and when a mistake is made in the control, it usually concerns large amounts of money.

A mistake of one percent can make the difference between profit and loss for a multinational company. Explain that to your shareholders.’

The reason is that both from within the organization – that is, via the Indirect Tax Function, the Head of Tax and the internal audit – and from outside – that is, financial auditor – insufficient signals reach the CFO in order to raise priority of indirect tax.

Cornelisse: ‘That’s right. And that deadlock must be broken. The internal and external stakeholders are all chains in the process and if one isn’t cooperating, change is difficult to accomplish.

It is essential that financial auditors also read the surveys, acknowledge the risks and discuss them with the CFO. The best outcome would be if the indirect tax would be controlled by default in audit or if a stand point would be taken not to do that.

In case control is required, all methods and tools developed by one’s own Tax Advisory Department of the Big4 – (technology, methods and tools such as reconciliations and data analytics including auto generated reports based on the right data sets)  are to be deployed in order to ensure overall quality of service.

This influences the CFO externally, can bring about change top down and can lead to new instructions for internal audit and Head of Tax. Of course the indirect tax function itself has to improve its working relation with the head of tax.

As a result, the Indirect Tax Function can have the tools (mandate, resources, budget etc.) necessary to execute its tasks adequately.

Richard Cornelisse is editor of Global Indirect Tax Management.

One Stop Shop guidelines for 2015: a practical guide

In Indirect Tax Strategic Plan, Tax News, Technology, VAT planning on 14/05/2014 at 12:00 pm

A practical guide has been prepared in order to provide a better understanding of the EU legislation relating to the mini One Stop Shop, as well as the functional and technical specifications for the special schemes, as adopted by the Standing Committee on Administrative Cooperation (SCAC).

This guide is not legally binding and is only practical and informal guidance about how EU law and EU specifications are to be applied on the basis of the views of the Commission’s Directorate General for Taxation and Customs Union.

It is the product of collaborative work between the Directorate General for Taxation and Customs Union and Member States.

The guide is work in progress: it is not a final product, but it reflects the state of play at a certain point in time in accordance with the knowledge and experience available. Over time, it is expected that additional elements may be needed.

one-stop-shop-guidelines_en

via Telecommunications, broadcasting & electronic services – European commission.

B2C place of supply change: telecommunications, broadcasting and electronic services

In EU development, Indirect Tax Strategic Plan, Processes and Controls, Tax News on 09/05/2014 at 11:31 am

From 1 January 2015, telecommunications, broadcasting and electronic services will always be taxed in the country where the customer belongs*:

  • whether customer is a business or consumer
  • whether supplier based in the EU or outside

* For a business (taxable person) = either the country where it is registered or the country where it has fixed premises receiving the service.

* For a consumer (non-taxable person) = the country where they are registered, have their permanent address or usually live.

Legislation now – and after 2015

Sales to final consumers B2C – overview

CURRENT RULES

Telecommunications, broadcasting & electronic services (1)

Services supplied by/to

EU consumer
in EU country 1

EU consumer
in EU country 2

Non-EU consumer(3)

EU supplier
(EU country 1)

Taxable in EU country 1

Taxable in EU country 1

No EU VAT

EU supplier
(EU country 2)

Taxable in EU country 2

Taxable in EU country 2

No EU VAT

Non-EU supplier

Taxable in EU country 1(2)

Taxable in EU country 2(2)

No EU VAT

 

  • (1) One-time registration (MOSS) available for electronic services.
  • (2) Taxable in country of effective use & enjoyment, if this is not the country where the customer belongs.
  • (3) Unless used in a country that applies the effective use & enjoyment rules.

RULES FROM 2015

Telecommunications, broadcasting & electronic services

Services supplied by/to

EU consumer
in EU country 1

EU consumer
in EU country 2

Non-EU 
consumer(2)

EU supplier
(EU country 1)

Taxable in EU country 1

Taxable in EU country 2(1)

No EU VAT

EU supplier
(EU country 2)

Taxable in EU country 1(1)

Taxable in EU country 2

No EU VAT

Non-EU supplier

Taxable in EU country 1(1)

Taxable in EU country 2(1)

No EU VAT

  • (1) One-time registration (MOSS) available.
  • (2) Unless used in a country that applies the effective use & enjoyment rules.

Changes to one-time registration scheme (MOSS) from 2015

Online declaration/payment

For supplies to consumers, both EU and non-EU businesses can use a web portal in the EU country where they are VAT-registered to declare and pay the VAT due in their customer’s EU country.

Access : Forum Global Indirect Tax Management for additional information

From: Telecommunications, broadcasting & electronic services – European commission.

OECD’s guidelines on value-added tax find widespread support

In General, Macroeconomic effects of VAT, Tax News on 06/05/2014 at 8:41 am

AN IMPORTANT development in the VAT world occurred recently in the Japanese capital Tokyo, when 86 countries endorsed a new set of international guidelines, devised by the Organisation for Economic Co-operation and Development (OECD) committee on fiscal affairs, aimed at mitigating the risks of double taxation or unintended double non-taxation.

About 160 countries have adopted value added tax (VAT) systems over the years, and at the same time international trade in goods and services has expanded rapidly. This means greater interaction between VAT systems, and increased risks.

OECD deputy secretary-general Rintaro Tamaki said at the meeting of the OECD Global Forum on VAT in Tokyo that jurisdictions often used different VAT rules to determine which jurisdiction had the right to tax a cross-border transaction, or they interpreted similar rules differently. These differences had caused “severe obstacles” for international trade and investment and hinders economic growth, he said.

“Policy action to address this issue was urgently needed, and the OECD has therefore made it a key priority to develop consensus around internationally agreed principles for a coherent application of VAT to international trade.”

South Africa is one of the 86 countries that endorsed the guidelines.

Tax authorities and the business community realised as far back as the late 1990s that VAT rules required greater coherence to avoid burdens on global trade. The OECD’s work started in 1998 with the Ottawa Conference on electronic commerce.

The 2014 OECD international VAT guidelines state that not only electronic commerce poses challenges, but that VAT could distort cross-border trade in services and intangible assets more generally, as they cannot be monitored at border posts in the same way as goods.

The OECD guidelines focus on the neutrality of VAT and the definition of the place of taxation for cross-border trade in services and intangibles between businesses. They accept the widespread consensus that the destination principle is the international norm: revenue accrues to the country of import where final consumption occurs.

The guidelines encourage similar levels of taxation where businesses in similar situations carry out similar transactions, that VAT rules be framed in such a way that they are not the primary influence on business decisions, and where specific administrative requirements for foreign businesses are considered necessary, they should not impose a disproportionate or inappropriate compliance burden on the businesses.

Tax authorities are encouraged to apply tax laws fairly, reliably and transparently; to encourage compliance by ensuring the costs of complying are kept to a minimum ; and to deliver quality information.

PwC VAT leader Charles de Wet, who attended the Tokyo meeting, says SA is already adhering to the guidelines to a large extent.

The problem is that not all its trading partners in Africa are doing the same.

Several African countries also attended the Tokyo conference, including Kenya, Zambia, Ghana and Mozambique. It is not clear whether all of them endorsed the guidelines.

Mr de Wet says all the positive elements expected in the design of a good VAT system have been encapsulated in the guidelines.

“VAT is supposed to work through the production cycle and it should be borne by the end consumer of the product or service and not by business.” VAT is a major source of revenue for governments, which take a knock from under-taxation, but double taxation hurts trade.

“The boxes that need to be ticked include whether the system offers neutrality, certainty and efficiency,” says Mr de Wet.

“It is an important development in the VAT world, and it is important for traders and tax authorities to take note of where VAT is being positioned in the tax value chain,” says Mr de Wet.

South African Revenue Service spokesman Adrian Lackay says the guidelines offer revenue authorities greater certainty on how VAT should be imposed on cross-border services. Ignoring them could lead to “either double taxation or double nontaxation”. He says South African legislation will have to be amended in the near future to comply fully with the OECD guidelines, as domestic legislation is not yet aligned with them in certain instances.

These amendments will be done under the guidance of the National Treasury.

“Fraudulent VAT activities and refund claims, in particular, pose significant risks to the fiscus. These risks have to be managed continuously to protect the fiscus against abuse and fraud,” says Mr Lackay.

VAT collections in South Africa amounted to 26.4% of the government’s main sources of tax revenue in the 2012-13 fiscal year, compared with 24.7% in 2008-09. Total collections increased from R191bn in 2009-10 to R240bn in 2012-13.

From: OECD’s guidelines on value-added tax find widespread support | Business | BDlive by Amanda Visser

January 2014 International Indirect Tax Updates

In EU development, General, Indirect Tax Automation, Tax News on 08/01/2014 at 1:34 am

January 2014 International Indirect Tax Updates

By Patrycja Wolniczek Mucha On January 2, 2014

Along with released budget measures for year 2014 many countries have passed legislation or announced a number of changes that have an impact on the VAT rates. These changes are a response to economic and budgetary developments in the particular country. We have summarized the upcoming VAT rate changes with the following countries.

The changes will become effective 1 January 2014 unless otherwise noted.

Croatia

In accordance with the Law Amending the Law on Value Added Tax of 4 December 2013, the reduced VAT rate of 10% will increase to 13%.  The government expects that these measures along with excise and income tax changes will reduce the budget deficit by HRK 2 billion or around 0.6% of Gross Domestic Product and by HRK 4 billion or 1.2% of GDP in 2015 and a further 1.7% of GDP in 2016. On 1 July 2013 Croatia became a Member of the European Union.

Cyprus

In year 2012 the Cypriot government has announced a VAT increase in two stages. In accordance with the plan, on 14th January 2013 the standard rate went up by 1% reaching 18%. A further 1% increase will come into effect on 13th January 2014. The new standard rate will be 19% and the reduced rate will increase to 9%. Cyprus’s VAT change is an economic response to the Greek financial crisis. In order to secure beneficial loan terms with Russia, the government had to agree to the VAT changes as part of the bail out by the ‘Troika’ of the European Union, European Central Bank and International Monetary Fund.

Dominican Republic

Under the Law No. 253-12 effective 1 January 2014 the reduced VAT rate of 8% will go up to 11%. The VAT change is part of the 2012 tax reform which included the initial reduced rate increase to 8% in 2013 and the standard rate hike to 18%. According to the law schedule the reduced rate will further increase to 13% in 2015 and to 16% in 2016. The standard rate is planned, however, to go down to 16% in 2015. Subject to the reduced rate increase are most of the basic food commodities.

France

The standard VAT rate will increase to 20% on 1 January 2014. In addition, many basic commodities will become more expensive as the reduced VAT rate will go up from current 7% to 10%. In Corsica the current 8% reduced rate will also go up to 10%. The increase reflects changes included in the Amending Finance Law no. 2012-1510 of 29 December 2012.  Article 68 of the above mentioned law, initially provided for a decrease in the lower reduced VAT rate from 5.5% to 5% as of 1 January 2014. The new Budget Finance Law 2014 draft keeps, however, the 5.5% rate in place for 2014.  With the VAT increase France will be joining most other EU member states which have been shifting the tax burden from business onto consumers in a bid to attract and retain multinational businesses.

Ghana

Following the 2014 Budget, the parliament passed a new VAT Act, which increased the standard VAT rate from 12.5% to 15%. The government justifies the increase with the need of infrastructure investments in accordance with the development agenda.  Currently, Ghana is heavily reliant on deposits of gold. Expanding the revenue basis with higher VAT would help raise €300 million.

Honduras

As published in the Official Gazette of Honduras and in accordance with Decreto No. 278-2013, the standard VAT Rate went up from 12% to 15% and the increased VAT rate went up from 15% to 18% effective 1 January 2014. The increase was included in the package of fiscal measures aiming at preventing the country from a major economic crisis. The economists assess the impact of changes as intense enough to generate, according to estimates of the Ministry of Finance, about three billion Lempiras in inflation by rising prices of basic commodities. The rate change will also contribute to increase the poverty rate among Hondurans.

Source: http://www.laprensa.hn/mobile/minicio/441082-274/las-medidas-tristemente-son-necesarias-cardenal

Japan

In accordance with the new Consumption Tax Act, the consumption tax will increase from 5% to 8% with effect from April 2014. This change is the first of a two-step process which is expected to reach 10% by 2015. The reason for the hike relates to the government’s long-term plan to reduce its primary budget deficit by 2015 and stabilizing its debt burden by 2020. Before a final decision on the 2015 increase, the government will have to further examine economic factors and other conditions.

Mexico

With the economic package, the government repealed the current 11% rate of VAT, as applicable for the border region (the border between Mexico and the United States), and will impose the general VAT rate of 16% as of 1 January 2014. The change will have a negative impact on local business and employment in the border zone.

Portugal Autonomous Regions – Azores

As part of the 2014 budget and in accordance with the budget approving Decree n. º 191/XII, the standard and both reduced VAT rates will go up. As of 1 January 2014 the standard VAT rate will increase from 16% to 18%, the intermediate rate from 9% to 10% and the reduced rate from 4% to 5%.

Serbia

The reduced VAT rate of 8% will become 10%. Serbia’s Finance Minister Lazar Krstic explained the measure as a necessary step to avoid a financial meltdown. The increase will help close the budgetary gaps but will also hit the poorest parts of society hardest.

As a result of economic factors the following initially scheduled VAT rate changes will not be implemented in the upcoming months:

Belarus

According to the Belarusian Deputy Prime Minister Piotr Prokopovich last statement, the current VAT rates will remain unchanged for the year 2014. Earlier this year, the Government announced a plan to increase the standard VAT rate to 22% in 2014.

Poland

The current VAT rates will remain unchanged as a result of the last VAT Act amendment.   The VAT rates were temporarily increased on 1 January 2011 and were scheduled to take effect until 31 December 2013. Effective 1 January 2014 the VAT rates were supposed to return to their previous lower level. Based on the information provided by the Government Information Centre (CIR), the extension of the current higher rates was caused by the need to reduce imbalances in public finances, as well as by a weak demand in major export markets. Both factors are limiting the economic growth.

Ukraine

On 19 December 2013, the parliament adopted amendments to the Tax Code. The initially planned decrease of the VAT standard rate to 17% has been postponed until 2015. In 2014, the VAT standard rate will remain at 20%.  On 31 December 2013 the President Viktor Yanukovych signed the amendments into law.

via January 2014 International Indirect Tax Updates – Thomson Reuters Tax & Accounting.

KEY – LiNKiT launching eBilanz-Cockpit for Germany: our integrated SAP solution

In Business Strategy, EU development, General, Processes and Controls, Tax News on 11/09/2013 at 3:22 pm

Ferry_LinkedIn KEY-GROUPThe legal requirement for the creation and submission of an electronic tax balance sheet (e-balance) in XBRL poses a major challenge for all companies located in Germany. Even though the new law is applicable as of fiscal year 2013 for most taxpayers, many ERP software providers, such as SAP, do not offer a satisfactory solution for complying with the comprehensive legal requirements.

The standard functionality of SAP supports only the data provisioning for the electronic tax balance. Separate add-ons are needed for the creation of the final XBRL file and the electronic submission. SAP’ s own ‘solution’ is called ‘SAP ERP client for E-Bilanz’ and is a local Excel Add-on application and not an integrated SAP solution. It does not work without the generic risk of interfaces.

These risks can be eliminated with as endgame the entire process fully integrated into SAP.

All our products are in SAP integrated products (without external interface) and have been implemented by major multinationals and of course client references are available.

The advantages of the eBilanz Cockpit

  • The KEY – LiNKiT eBilanz Cockpit is an easy-to-use and lean solution for the German e-balance
  • It is fully integrated into SAP, thus easily accessible while it avoids problems with generic interface risks
  • The cockpit’s ten steps process, provide an intuitive guideline for the process of creating and filing the e-balance
  • The cockpit has clever features, such as the drag & drop functionality for mapping the company’s chart of accounts to the required fiscal taxonomy, making the cockpit an user-friendly tool
  • In order to provide a comprehensive solution for the entire corporate group, the cockpit also has an interface for non-SAP systems, enabling the upload of financial data from subsidiaries not using SAP
  • All the group’s tax balances can be created in and filed from one central SAP system. Various characteristics of the cockpit ensure an audit-proof process
  • The tax adjustments made in the cockpit do not influence the regular SAP data and are tracked in a separate document journal.
  • Just as in SAP itself, all entries and changes are recorded, thus ensuring that the cockpit meets high standards of IT and process security, including a full audit trail.

Read more about  basic data flow within the cockpit, implementation plan and return on investment opportunities in slide deck below.

LiNKiT eBilanz Cockpit front

Download LiNKiT eBilanz PowerPoint

Consumption tax – Organisation for Economic Co-operation and Development

In EU development, General, Processes and Controls, Tax News on 09/08/2013 at 9:31 am

Consumption tax – Organisation for Economic Co-operation and Development

05/08/2013 – On 4 February 2013, the OECD released an invitation to comment on four new draft elements of the OECD International VAT/GST Guidelines.

The OECD has now published the comments received, which can be downloaded by clicking on the links below. The OECD is grateful to the commentators for their input.

Working Party No. 9 of the Committee on Fiscal Affairs will use the main findings to inform its work on the development of the OECD International VAT/GST Guidelines.

  1. A3F
  2. AFME
  3. BASF
  4. BBA
  5. BP
  6. BUSINESS EUROPE
  7. CATERPILLAR
  8. CBI
  9. CFE
  10. CIOT
  11. Confederation of Swedish Enterprise
  12. DELOITTE
  13. EBF
  14. Ernst & Young
  15. FBF
  16. Febelfin
  17. FEE
  18. FIDAL
  19. ICAEW
  20. Insurance Europe
  21. IUA
  22. Law Society of England and Wales
  23. NFTC
  24. ODIT
  25. RISHI GAINDA (Unilever)
  26. SOFTEC
  27. SwissBanking
  28. TAXAND
  29. TEI
  30. USCIB
  31. VPG

Taxmarc™ Basic

In Audit Defense, Benchmark, Business Strategy, Indirect Tax Automation, Indirect Tax Strategic Plan, Processes and Controls, SAP add on, SAP SLO renaming tax codes, System Landscape Optimization, Tax News, Technology, VAT automation, VAT planning on 02/08/2013 at 9:43 am

Taxmarc™ SAP solution2

Taxmarc™ Basic is a standard package of Taxmarc™ Tax Engine that uses native SAP functionality and contains an integrated Tax control Framework. Taxmarc™ Basic is specifically useful for companies that run medium complex business models.

Taxmarc™ Basic uses assumptions via pre-defined configuration, thus without a real-time reality check performed by Taxmarc™ of such. For those businesses that have a complex business model but do not need the full Taxmarc™ Tax Engine functionality, the Taxmarc™ Basic solution offers a VAT compliant determination solution.

Taxmarc™ Basic does not only address the shortcomings in standard SAP VAT determination, but also ensures control of VAT with the integrated VAT Control Framework in a transparent and easily maintainable way.

Taxmarc™ Basic is built on the proven Taxmarc™ platform and the de-scoped features from the full Taxmarc™ Tax Engine can be added at any point later on when additional budget becomes available or new requirements and controls are needed due to changes in VAT legislation and/or business models.

Introduction

The SAP VAT determination logic was developed a long time ago (1980’s) and except for the “plants abroad” logic SAP’s VAT determination logic has not changed much. This in contrast with the VAT rules and business models as these have changed significantly. A brief overview of some of these changes:

  • the EU VAT laws have been more harmonized (EU VAT directive)
  • substantial increase of cross border transactions,
  • businesses are registered for VAT in multiple countries,
  • businesses are operating more often under complicated principal structures
  • increased number of (integrated) intercompany and supply chain transactions

As a result, there has been a huge increase in the complexity for the SAP system to meet all VAT requirements, which leads to necessary modifications to the standard SAP VAT for many multinational businesses.

Modifications of already very complicated SAP systems create a risk for maintenance and half-hearted solutions. At the same time, tax authorities across the world both sharpen their focus on non-compliant taxpayers and increase their focus on reviewing ERP systems as a source of VAT compliance risks. As a result, businesses have to ensure that the VAT determination logic in the SAP systems is correct, easy to implement and remains VAT compliant.

Taxmarc™

Taxmarc™ Tax Engine integrates tax relevant data from multiple transactional data sources to determine the correct VAT in a consistent way. Taxmarc™ Basic uses assumptions via pre-defined configuration, thus without a real time reality check performed by Taxmarc™ of such.

For those businesses that have a complex business model but do not need the full Taxmarc™ Tax Engine functionality, the Taxmarc™ Basic solution offers a VAT compliant determination solution.

Taxmarc™ Basic does not only address the shortcomings in standard SAP VAT determination, but also ensures control of VAT with the integrated VAT control framework in a transparent and easily maintainable way. Compared to any other solution available in the market the features of Taxmarc™ Basic contribute considerable more in realizing indirect tax objectives.

An additional advantage is that when the proven platform of Taxmarc™ is implemented, the de-scoped features can be added at any point later on when additional budget becomes available or new requirements and controls are needed due to changes in VAT legislation and/or business models.

Taxmarc™ Basic features

Taxmarc™ Basic includes the following features:

  • VAT management cockpit (light version)
  • Standard SAP IMG (Implementation Guide) functionality to implement and customize the Taxmarc™ solution and enabling easy and cost efficient maintenance
  • Automated VAT determination based on available customer VAT registration (combined with tax control framework)
  • Smart VAT condition design – using a maximum of approximately 250 conditions per tax jurisdiction (low maintenance costs)
  • Automatic assignment of condition records/tax codes in case the company gets new VAT registration numbers (jurisdiction must already be available in Taxmarc™)
  • An integrated Tax Control Framework which ensures that transactions that fail to comply with fiscal requirements are automatically blocked (immediate resolving the non-compliance) or put in an emergency table (retrospective correction)
  • Automated VAT determination of: 1. Standard Triangulation, 2. VAT group scenarios, 3. Bonded/VAT warehouses, 4. Domestic Reverse charge, 5. Special VAT regions (i.e. Canary Island), 6. Plants abroad scenarios, 7. Intra EU and Export. 8. Supply of services (including VAT package 2010)
  • Automated sequential invoice numbers per Tax Jurisdiction
  • Automated and improved VAT code determination for EDI (iDoc) intercompany invoices
  • Required VAT data to comply with invoice requirements

Taxmarc Basic final

Return on Investment – after implementation Taxmarc™ Tax Engine

  • Less resources needed for indirect tax compliance process due to automation (excellent ROI)
  • Less commercial risks re vendors and customers because of  incorrect invoicing with cause effect a hidden factory: substantial time spent on corrections and monitoring (excellent ROI)
  • Reduction on time needed re maintenance and training resulting in lower overall costs (excellent ROI)
  • Reduction of unforeseen tax risks during audits (outcome lower assessments) and time needed for inhouse and/or external advisor to manage indirect tax risks that exceed companies’ risk appetite properly (excellent ROI)
  • Lower external advisory costs due to improved effective communication possibilities as stakeholders can be given access real time to relevant data by which wrong assumptions/rework/inefficiencies could be avoided (excellent ROI)
  • Real time blue print of business model available and accessable for continuous monitoring and planning re change management: new supply chain (model), centralization, outsourcing etc. (excellent ROI)
  • Optimized multidisciplinary (tax) planning via real time data: e.g. detailed visibility of intercompany transactions for transfer pricing, customs and VAT purposes (excellent ROI)
  • Efficient and effective Indirect Tax function: real time involvement on risk areas that matter by which future firefighting can be avoided (excellent ROI)

By Richard Cornelisse, Director Strategy & Sales van Taxmarc™

Download Taxmarc™ Digital Flyer

Press release – Taxmarc™ adds brain capacity to SAP and enables companies to comply with all VAT obligations

In Audit Defense, Business Strategy, EU development, Indirect Tax Automation, Indirect Tax Strategic Plan, Processes and Controls, SAP add on, SAP SLO renaming tax codes, System Landscape Optimization, Tax News, Technology, VAT automation on 15/02/2013 at 1:45 pm

Real-time and fully automatic evaluation of tax compliance eliminates VAT risks

Amsterdam, February 15, 2013 – Taxmarc™ – an online VAT manager – provides companies with a complete overview of all data relevant to determining the VAT liability for business transactions.

This enables tailor-made  VAT determination of transactions. Moreover, Taxmarc™ provides an online tax control framework that encompasses real-time evaluation of tax compliance and the consistency of the combination of the VAT data entered.

Hereby it offers an effective tool that facilitates efficient deployment of employees and optimal risk management regarding indirect tax.

For virtually every company the efficiency of compliance with local VAT regulations depends entirely on the functionality of the underlying ERP system, such as SAP. Determining the VAT liability and recovery in these systems is only partly automated and is mostly done manually.

By drawing upon 30 parameters instead of the 4-8 parameters in standard SAP, Taxmarc™ enables – without extra interface – a fully automated VAT determination of all (chain) transactions in SAP.

The tool incorporates VAT relevant data of all legal entities in order to ensure the correct VAT determination of transactions. SAP exclusively focuses on transactions within a single company; it only assesses the underlying individual transactions and fails to link the current transactions to the VAT results of previous transactions.

As a consequence, companies with VAT registrations in different countries cannot automatically comply with all VAT obligations. In addition, many multinationals operate with different versions of ERP systems, each business unit often has a separate system and there are multiple core systems per country.

This creates genuine risks such as VAT assessments, insufficient VAT refunds, and possibly fraudulent transactions. Also, synchronizing the periodic VAT reports based on these different sources takes a lot of time and resources.

Extra ‘brain capacity’

“The business models of internationally operating enterprises have radically changed over the last couple of years. As business practices go beyond national boundaries and sufficient harmonization of regulations in different countries is lacking, maintaining the VAT position is extremely complicated.

Without the right VAT regulations, regular ERP systems fail to process data correctly, risking incorrect calculation of VAT, failure to comply with local VAT obligations, and transactions that cannot be commercially executed”,

Richard Cornelisse, Director Strategy & Sales of Taxmarc™ emphasizes.

“The standard functionality of SAP is insufficient for building a viable and adequate virtual VAT manager.

In actual practice, these flaws in SAP are often patched up in order to keep the system running. Taxmarc™ basically creates a bypass in SAP, thereby building on the standard functionality and infrastructure of SAP, but we are adding extra ‘brain capacity’.

Real-time fiscal monitoring

Taxmarc™ provides a VAT/GST Tax Control Framework integrated in SAP. This framework ensures that transactions that do not comply with tax laws are automatically blocked.

Beside the highly improved preventive controls regarding risk management, Taxmarc™ underpins more efficient business processes and increased productivity. It enables a substantial reduction of the working hours and resources that are spent on the regular manual tax return process, as well as centralization of local compliance functions (Shared Services Centers).

Taxmarc™ has been implemented by multiple renowned multinational companies, including AkzoNobel Chemicals, Sigma Aldrich, ASM International NV, Fujifilm and ExxonMobil.

Our business model is extremely complex, especially with regard to VAT. We’re operating worldwide with many (chain) transactions that go across the borders and therefore we often have multiple VAT registrations per legal entity. 

Using the standard settings in SAP, automatic VAT determination of individual transactions was not possible.

Taxmarc™ has enabled automatic VAT determination of all transactions for our company. Taxmarc™ identifies real-time when certain transactions are not possible, for instance because a local VAT registration is missing. 

Improbable and atypical results are immediately visible and can instantly be corrected, so corrections afterwards can be prevented. 

Client references are important and can be provided. It is your way to validate that we indeed keep our promise.

Taxmarc™ is investigated by a Big4 organization and is qualified as the best VAT quality solution for the complex business models of customers.

- END PRESS RELEASE –  

For more information

Richard Cornelisse, Director Strategy & Sales of Taxmarc™, phone: +31 6 53 99 48 74; e-mail: richard.cornelisse@taxmarc.com

Robbert Hoogeveen, Director Technology of Taxmarc™, phone: +31 6 57 94 70 93; e-mail: robbert.hoogeveen@taxmarc.com

Website: www.taxmarc.com/en/

Download Taxmarc™ Digital Flyer

Taxmarc™: your best SAP solution for Indirect Tax Automation (indirecttaxtechnology.com)

Taxmarc™ SAP solution2

OECD Issues Draft Guidelines On VAT On Services, Intangibles – February 2013

In EU development, General, Tax News on 10/02/2013 at 11:43 am

The Organization for Economic Cooperation and Development (OECD has released its latest set of draft Guidelines to address uncertainty and the risk of double taxation and unintended non-taxation that results from inconsistencies in nations application of value-added tax VAT to international trade, with a specific focus on trade in services and intangibles.

The Guidelines build on two core principles that were adopted by the OECD’s Committee on Fiscal Affairs in 2006:

  • The “neutrality” principle, whereby VAT is a tax on final consumption that should be neutral for business;
  • The “destination” principle, whereby internationally traded services and intangibles should be subject to VAT in their jurisdiction of consumption.

Read more: OECD Issues Draft Guidelines On VAT On Services, Intangibles.

OECD International VAT/GST Guidelines – Draft Consolidated

4 interim drafts:

  1. a preface to the Guidelines;
  2. the core features of VAT-systems to which the Guidelines are intended to apply,
  3. place of taxation for cross-border supplies of services and intangibles to businesses that have establishments in more than one jurisdiction,
  4. implementation of specific rules for determining the place of taxation for cross border business-to business supplies of services and intangibles.

OECD International VAT/GST Guidelines – Draft Consolidated – INVITATION FOR COMMENTS FEBRUARY 2013

 

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