Richard Cornelisse

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Facebook could owe $5 billion in taxes – Jul. 29, 2016

In Indirect Tax Strategic Plan on 30/07/2016 at 8:26 am

Facebook (FB, Tech30) disclosed on Thursday that it could owe billions due to an IRS investigation into the way it moved assets to an Irish subsidiary to avoid higher taxes.

The IRS tax penalty could total $3 billion to $5 billion, plus interest, according to a Facebook filing with the Securities and Exchange Commission. If so, Facebook says the penalty could have a “material adverse impact” on its financial position.

The tax issue was first disclosed publicly three weeks ago when the U.S. Justice Department filed a lawsuit forcing Facebook to comply with the ongoing IRS investigation. No figures were provided at the time for possible penalties. Source: Facebook could owe $5 billion in taxes – Jul. 29, 2016

(Also) Apple’s, Google’s and Coca Cola’s tax assessments are material from an annual report perspective besides financial risks contain reputational risks.

See for overview of these tax assessments

  • Will ‘tax assurance’ mandatory be reviewed by External and Internal Auditors?
  • How does it change the CFO and position of the head of tax (budget, resources, qualifications, etc.)?
  • Read more: Transfer pricing and IT needs

OECD’s – BEPS involving interest in the banking and insurance sectors

In Indirect Tax Strategic Plan on 28/07/2016 at 11:52 pm

OECD's - BEPS involving interest in the banking and insurance sectors

The report on Action 4, Limiting Base Erosion Involving Interest Deductions and Other Financial Payments, establishes a common approach to tackling BEPS involving interest, but highlights a number of factors which suggest that a difference approach may be needed to address risks posed by entities in the banking and insurance sectors.

These include the fact that banks and insurance companies typically have net interest income rather than net interest expense, the different role that interest plays in banking and insurance compared with other sectors, and the fact that banking and insurance groups are subject to regulatory capital requirements that restrict the ability of groups to place debt in certain entities.

The Report therefore provides at paragraphs 188 to 190 that countries may exclude entities in banking and insurance groups, and regulated banks and insurance companies in non-financial groups, from the scope of the fixed ratio rule and group ratio rule, with work to be conducted in 2016 to identify approaches suitable for addressing the BEPS risks posed by these sectors, taking into account their particular characteristics.

This discussion draft has been produced as part of the follow-up work on this issue, which focuses on –

  • the risks posed by banking and insurance groups to be addressed under Action 4,
  • approaches to address risks posed by banks and insurance companies, and
  • approaches to address risks posed by entities in a group with a bank or insurance company.

Read more: OECD’s – BEPS involving interest in the banking and insurance sectors

e-Learning modules on VAT

In Indirect Tax Strategic Plan on 26/07/2016 at 5:19 pm

VAT eLearning programme developed by the European Commission consists of 12 individual courses. The eLearning modules on value added tax (VAT) aim at presenting the fundamental elements of the VAT Directive.

The modules have an EU-wide perspective and do not explain national variations or derogations. Having completed all individual eLearning modules on VAT the learner should have a good understanding of the key principles of the EU VAT directive, to be incorporated into national legislation.The twelve eLearning modules on VAT are now available in 15 languages.

Read more: e-Learning modules on VAT

Public Consultation on reduced VAT rates for electronically supplied publications – European Commission

In Indirect Tax Strategic Plan on 25/07/2016 at 7:17 pm
  • Member States have the options to tax printed books, newspapers and publications at a reduced rate (minimum 5%) and some Member States were granted the applications of VAT rates lower than 5% (super-reduced rates) including exemptions with a deductions right of VAT at the preceding stage (so called zero rates) to certain printed publications.

    On the other hand, digital publications that are electronically supplied have to be taxed at the standard VAT rate.

  • A harmonisation of VAT rates for electronically supplied services and in particular electronically supplied publications was a need until 2015. Since 1 January 2015, with the entry into force of new “place of supply” rules , VAT on all telecommunications, broadcasting and electronic services is levied where the customer is based, rather than where the supplier is located.

    Suppliers can therefore no longer benefit from being located in the Member State with the lowest VAT rates.

  • While acknowledging the differences between printed and electronically supplied publications with regard to the format, they offer the same reading content for consumers and the VAT system needs to keep pace with the challenges of today’s digital economy.
  • Having carefully considered these issues, the Commission made a commitment in its 2016 Actions Plan on VAT (Com (2016) 148 final) indicating that it will make a legislative proposal in 2016 to allow Member States to apply to electronically supplied publications the same VAT rates that Member States can currently apply to printed publications.
  • Period of consultation: from 25.07.2016 to 19.09.2016

Source: Public Consultation on reduced VAT rates for electronically supplied publications – European Commission

Shift from direct tax to indirect tax

In Indirect Tax Strategic Plan on 21/07/2016 at 9:15 am

CFOs / Head of Tax apparently still focus more on direct tax than indirect tax. This is interesting as from a tax revenue perspective the current trend is a shift from direct tax to indirect tax by decreasing direct tax rates and increasing VAT/GST rates.

Corporate income tax rates are continuing to fall in many countries. Global indirect taxes can amount to as much as 75% of the overall corporate tax burden, with VAT and sales/use tax outlays nearly 40% of total business tax expenditures — almost twice as much as corporate income tax.

More than 160 countries have a VAT regime. In the EU, between 2008 and 2013, the average EU standard rate increased from around 19.5% to more than 21%. The EU average VAT rate is now approximately 21.5%. VAT accounts for more than 20% of total tax revenue (OECD).

Read more: Shift from direct tax to indirect tax

Manage business model change

In Indirect Tax Strategic Plan on 21/07/2016 at 9:12 am

There is one common denominator that is too often missing from the strategic or planning elements of a business model change — indirect tax. But do these taxes get the attention they need, especially in light of increasingly complicated and globalized business models?

And although these tax considerations may not be among the issues that drive a financial transformation, tax can certainly give rise to some significant and costly challenges. That is particularly true of value added tax (VAT), which hits a number of disparate points within the enterprise as diverse as finance, procurement, IT or HR.

One of the most common side effects of an integration that cannot be fully realized surfaces in the realm of invoicing. For example, large numbers of payable invoices are not correctly coded so VAT is not deducted (in time). Or when the legacy system is only half integrated into the new model, incorrect sales invoices are issued, causing problems for customers, incorrect reporting of tax figures, and missed compliance obligations.

Read more: Manage business model change

Introducing a new VAT system

In Indirect Tax Strategic Plan on 21/07/2016 at 8:58 am

On 16 June 2016, the Finance Ministers of the Gulf Cooperation Council (GCC) held an extraordinary meeting in Jeddah, Saudi Arabia on GCC Value Added Tax (VAT). GCC States – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates that make up GCC – will most likely introduce VAT on 1 Jan 2018 or by 1 Jan 2019 at the latest.

How to get ready?

Read more: Introducing a new vat system

Certain SAP activities illustrated via ‘Brexit’

In Indirect Tax Strategic Plan, SAP add on, SAP add on for VAT, SAP for VAT, SAP implementation, SAP review, VAT automation, VAT for SAP on 04/07/2016 at 2:23 pm


The impact of ‘Brexit’ – its VAT law change – is used to illustrate the SAP activities and resources needed when a company has to deal with a country setting change from UK to Non-EU.

Assumed VAT law changes

‘Brexit’ will result that trade between the UK and the EU countries and vice versa will be treated as imports and exports. VAT reporting will change as well as EC Sales Lists and Intrastat reporting will no longer apply. Transfer of for example own stock to or from the UK is no longer considered a fictitious intracommunity transaction.

With respect to chain transactions UK companies or non-EU companies with a UK VAT registration can for example no longer be party B of a simplified triangulation, unless that UK company is also VAT registered in the EU. 

SAP – assess, redesign and … test!

In order to implement ‘Brexit’, SAP settings have to be changed. In SAP’s country table T005 the UK must me changed from EU to Non-EU. That also means that tax determination logic, tax codes, invoice and reporting requirements have to be assessed and any (new) rules implemented as well. Take for example ‘Plant abroad’ and transfer of own stock to or from the UK, it is no longer deemed a fictitious intracommunity transaction.

Companies that have GB hard coded in their tax determination logic to determine the VAT treatment of UK transactions need to review the logic setup to avoid non compliance.

Besides assessments by the tax function – extra costs when outsourced to external advisor – IT effort has to be scheduled in to make it happen. Change management processes follow strict IT policies and specific and extensive test rules in practice apply before it can go to production. Those mandatory test cycles are time consuming and have a huge impact on resources.

When manual processes and controls are setup to manage complex VAT transaction that includes dealing with the UK new guidance should be drafted and ongoing review take place to control that these new procedures are actually followed up.

The ideal SAP world of managing change

  • In the ideal world to implement Brexit and the current VAT rules from EU to Non-EU you would go to customizing of SAP and change the EU indicator field from ‘EU’ to ‘Non-EU’ and that the immediate outcome is that UK transactions are considered automatically import and export. Condition records do not have to be reviewed and ‘Plants Abroad’ settings are automatically updated.
  • Test cycles as mentioned above do not apply as the overall functionality has been tested before and has been IT approved as it works.
  • It would be ideal as well to have real-time access to UK transactions. That the blue print of the company can be shown so that you are able to immediately zoom in on (chain) transactions involving the UK. That such transactions can be made visible, accessed and changed on the spot. Not only important for UK companies but as well or even more for companies dealing with the UK.
  • Suppose SAP would have its own Tax Control Framework that automatically checks non VAT compliance. For example, the UK in a simplified triangulation is automatically picked up and blocked or put in an emergency table just because you have changed the country setting from EU to Non-EU.

Is that functionality already available?

Yes, all above functionality exist. It is called ‘PwC Taxmarc’

Data and technology

See also my first article about Brexit: ‘Brexit time to act‘?

Written by Richard H. Cornelisse

Monthly SAF-T VAT file in Poland (JPK-VAT)

In Indirect Tax Strategic Plan, SAF-T Poland, SAFT on 30/06/2016 at 12:02 am


According to new regulation Large Enterprises are obliged to submit mandatory VAT SAF-T file in legal XML format for the first time on 25 August 2016. It is a monthly obligation even if the VAT reporting period itself is quarterly.


I refer for complete overview to ‘SAF-T for Poland and SAP‘.

Most companies download the standard SAP VAT return reports from SAP to Excel and have an Excel working paper for review and adjustments. The data in the SAP reports are retrieved from various SAP tables.

The SAF-T VAT file need to reconcile with the submitted VAT return (monthly or quarterly). If this file does not reconcile to the submitted VAT return the risk that the PL tax authorities will ask questions – explain the differences – is high.

Our SAF-T VAT solution for Poland

  • First deadline to submit SAF-T file is August 25, 2016 (feasible)
  • Our solution ensures the completeness of the required data
  • Meets legal XML format
  • A control report exists that the total VAT amounts and data in the SAF-T VAT file reconcile

Read more

HMRC guidance: publish your tax strategy – June 24, 2016

In Indirect Tax Strategic Plan on 27/06/2016 at 10:54 pm


Who needs to publish

If you’re a company, partnership, group or sub-group, you’ll need to publish a tax strategy if in your previous tax year you have either a:

  • turnover above £200 million 
  • balance sheet over £2 billion

For groups and sub-groups, it’s the combined totals of all the relevant bodies that you must use. This is separate to the 2014 Organisation for Economic Co-operation and Development’s (OECD’s) ‘Country-by-Country Reporting’ model (CBCR). A business not headed by a UK company not meeting the threshold in its own right may still qualify if they satisfy the OECD’s CBCR framework threshold of a global turnover of more than €750 million.

Who doesn’t need to publish

You don’t need to publish a tax strategy if you’re an:

  • open-ended investment company
  • investment trust


Your business is responsible for determining whether it meets the threshold and for publishing the tax strategy, unless it’s part of a group or sub-group. In these cases it’s the responsibly of the head of the group or sub-group. You can publish a strategy on behalf of a group or sub-group if your company is registered in the UK.

What to include in your strategy

Your tax strategy will explain your business’s tax arrangements. You don’t need to include amounts of tax paid or commercially sensitive information. If your group has a separate UK tax strategy you should publish the relevant parts.


HMRC wants to know how your partnership as a whole manages its tax affairs.


If your business is part of a multinational group, you should publish any strategy, or parts, relevant to UK tax.

How you manage tax risks

You should work out and include what tax risks are linked to your business’s size, complexity and any changes to your business. Other information on governance arrangements to include:

  • details on how you manage your business’s tax risk
  • a high level description of key roles and their responsibilities
  • information on the systems and controls in place to manage tax risk
  • details on the levels of oversight of your business’s board and its involvement

Your attitude to tax planning

If your business has a code of conduct you should include details of it. You should also include:

  • why you might seek external tax advice, if any
  • an outline of your tax planning motives
  • the importance of each to your tax strategy

Where your business forms part of either a group or sub-group, you should include the group’s overall approach to structuring tax planning.

Your tax risks

You should say if your business’s internal governance has rigid levels of acceptable tax risk. If so, you should explain how it is influenced by stakeholders.

Working with HMRC

While your business’s approach to working with HMRC will be understood by your Customer Relations Manager (CRM), you’ll still need to put it in your tax strategy. You should include:

  • how your business meets its requirement to work with us
  • how you work with us on:
    • current, future and past tax risks
    • tax events
    • interpreting the law

You can include further information to add value, understanding or context. CRMs won’t give you any clearances in relation to publishing details of your dealings with us.

How to publish

You must make your tax strategy available free of charge on the internet as either a:

  • separate document
  • self-contained part of a wider document

You must make it available to the public free of charge until the following year’s strategy has been published. It doesn’t need to be called a strategy.

When to publish

Your first strategy should be published before the end of your first financial year commencing after Royal Assent of Finance (No. 2) Bill 2016. Your strategy counts as ‘published’ when it is first put on the internet. After the first strategy, you must publish one each year, within 15 months of the last one being published. Although you don’t have to notify HMRC when you’ve published, it would be helpful for HMRC to assess compliance if you let your CRM know when you have done so.

You can get a penalty if you haven’t published your tax strategy correctly and in time. You may also receive a penalty if your strategy doesn’t remain accessible free of charge until publication of the next strategy. HMRC will send you a warning notice giving you 30 days to either publish your strategy or make it available again (free of charge).

Any penalty will run from the first day you didn’t publish your strategy properly. The penalties are for:

  • the first 6 months – up to £7,500
  • 6 to 12 months – a further penalty of up to £7,500
  • more than 12 months – £7,500 every additional month

If your business is part of a group or sub-group the head will get the penalty.


If you believe you shouldn’t have a penalty, you should speak with your CRM first. You can appeal any penalty.

HMRC – Large businesses: publish your tax strategy
HMRC Guidance – historical background


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