Roadmaps published for three VAT initiatives on December 22, 2016

This Inception Impact Assessment aims to inform stakeholders about the Commission's work in order to allow them to provide feedback on the intended initiative and to participate effectively in future consultation activities.

Stakeholders are in particular invited to provide views on the Commission's understanding of the problem and possible solutions and to make available any relevant information that they may have, including on possible impacts of the different options.

The Inception Impact Assessment is provided for information purposes only and its content may change. This Inception Impact Assessment does not prejudge the final decision of the Commission on whether this initiative will be pursued or on its final content.

Source: Roadmaps published for three VAT initiatives on December 22, 2016

UAE – expected revenues from the soon-to-be introduced VAT

Member Abdulaziz Al Zaabi also asked if the ministry had included expected revenues from the soon-to-be introduced value added tax (VAT) in its plan. "We are in the last stages of signing the VAT-related agreements with the GCC and it will be applied in 2018," the Finance Minister said. There were many speculations as to the revenues it would bring, he said, for instance, in the first year, it was expected to yield Dh12 billion, and up to Dh20 billion in its second year.  Source: Draft law for UAE 2017 federal budget approved | The National

 

According to surveys not many businesses have an adequate accounting systems to deal with VAT. Besides that lots of businesses lack the VAT knowledge of how a VAT works. Investments and training are needed to be ready in time.

To get VAT ready the following actions should be considered.

1. Assess the business impacts
2. Amend IT systems and business processes to the new situation forecasted and
3. Review existing contracts and set rules for new contracts

How to get VAT ready in time

Standard Audit File for Tax Purposes in OECD format

Creating XML SAF-T Structures directly in SAP ECC. SNI SAF-T is a SAP add-on that runs over SAP ECC, is compatible with OECD standard and covers the steps of creation of necessary structures in XML format including E-submission with signature and encryption.

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.

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.

Tax authorities collect and analyze already indirect tax data (e.g. SAF-T for VAT). The focus is not only about timely and accurate VAT reporting but as well whether on high risk areas an effective tax control framework is in place. Tax risk management methods are assessed.

Source: Standard Audit File for Tax Purposes in OECD format

Brexit - The benefits of a SAP add-on

In order to implement Brexit, SAP settings have to be changed. From an operational perspective processes and controls of companies have to be updated to the new situation at hand. SAP must reflect these changes which means that tax determination logics, tax codes, invoice and reporting requirements have to be assessed and the new rules should be implemented.

Besides assessments by the tax function, a considerable effort by the IT department is required to implement Brexit. Change management processes follow strict IT policies and specific and extensive test rules apply before changes can go to the ERP production system. Those mandatory test cycles are time consuming and have a huge impact on resources.

When manual processes and controls are set up to manage complex VAT transactions that include dealing with the UK, new guidance should be drafted and ongoing review should take place to check if these new procedures are actually complied with.

A thorough and effective preparation should include a stakeholder analysis and the development of a SAP roadmap for change. This will provide insight into the work effort and the amount of time and money that you’ll need to invest. To help you manage and process changes, such as 'Brexit' or the accession of a new EU member state, PwC developed the SAP add-on tax engine Taxmarc. When this add-on is up and running in your SAP environment changes become transparent and easy to manage.

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Italy new - submit quarterly data: 'VAT invoices' and 'VAT calculations'

Quarterly informative report VAT invoices data

Starting from 1 January 2017 a new informative report of VAT data related to AP and AR invoices, including related credit and debit notes and customs bills, has to be filed by taxpayers on a quarterly basis (former Spesometro).

This new report should include the following data:

• The parties involved in the transaction: VAT number, name, address, fiscal representative
• Date and reference number of the invoices
• Taxable basis, VAT rate and VAT amount
• Type of transaction, reason of VAT exemption
• For correction invoice the reference to the reported original invoice

The deadline for filing will be the last day of the second month following each calendar quarter (e.g., 31 May 2017 for the first quarter of 2017). Penalties apply in range from a minimum of € 2 to a maximum of € 1,000 per quarter will be imposed for any omission or incorrect filing of each invoice.

Quarterly VAT calculations data report

As of 1 January 2017, on a quarterly basis the figures for calculating the periodical VAT settlements - periodical VAT calculations as well as VAT calculations showing a VAT credit - have to be reported and submitted electronically. The deadline for filing will be the end of the second month following the each calender quarter (e.g., 31 May 2017 for the first quarter of 2017).

The tax authorities will perform a consistency check between the data reported and the VAT payments made. In the case of inconsistencies, penalties could apply from a minimum of € 500 to a maximum of € 2,000 for submitting an incomplete or inaccurate report.

We offer a new SAP add-on solution by which the quarterly informative report can be submitted timely via our integrated SAP solution in an automated fashion. We can provide support as well with implementing the right processes and controls of the quarterly VAT calculations.

Source: SAP - submitting close to real time data to tax authorities

Poland - create automatically the VAT SmartPdf file from SAP

Companies selling across European Union borders have to submit EC Sales List (ESL). This should contain the details of sales or transfers of goods and services to other VAT registered companies in other EU countries summarized per VAT registration number. The tax authorities in the EU use the listings to check whether VAT is declared by the parties involved in cross-border transactions (e.g. no mismatches).

In Poland a specific extra local requirement applies. From 1 January 2017 taxpayers making transactions with EU members will be required to submit mandatory the declaration only in electronic form. The aimed is earlier identification of possible abuse. The summarized amount per VAT registration number for the sales of goods, acquisition of good and services need to be reported separately to the authorities in PDF.

The PL Tax Authorities provides a VAT Smartform Pdf that a company has to fill in with the requested information. That Smartform has to be mandatory used to meet the requirement and without support the data has to be entered manually by the company.

Entering data is a time consuming process. Besides the impact on internal resources, such manual activity increases the risk of data errors, i.e. with entering the VAT registration numbers in the Smartform Pdf.

Stricter penalties apply for individuals involved in tax fraud and penalties are introduced for taxpayers who do meet the legal requirement of submitting declarations in electronic format.

We offer a new SAP add-on solution that creates automatically the VAT SmartPdf file from SAP. When our SAF-T SAP add-on solution has been purchased this additional functionality will be managed under SAF-T cockpit as a different report.

Source: SAP - submitting close to real time data to tax authorities

Spain - submitting close to real time data to tax authorities

In Spain a new VAT reporting system “Suministro Inmediato de Información” (SII) will enter into force on the 1st of July 2017 that will impact approximately 62,000 companies. These companies have to submit electronically to the Spanish tax authorities data from all AP and AR invoices within 4 days after an invoice is either issued or booked. In the first 6 months - as a transitional period - the companies will have 4 extra days (8 days in total) to submit these invoices.

Automated extraction of the invoice data will be essential to meet the new rules in an automated fashion. The required invoice data has to be transformed in the required SII format (XML) and due to the short deadlines for submitting the report it is preferred to do it in the source system where the invoices are captured. For most companies the required data are already available in the SAP system. When e-submission of invoice data is implemented the administrative burden will also be lowered as only certain tax self-assessments has to be filed and certain cumbersome declarations no longer need to be submitted.

Businesses classified as large companies will have just over 6 months to adopt this new requirement in its processes, controls and systems. It will be a real challenge. Failure to comply in time could result in penalties and increased risk of a tax audit.

We developed a SAP add-on solution by which the e-submission of the required data from AR and AP invoices is fully integrated in SAP without an external interface or use of external software.  With this add-on the submission of the requested invoices can be done automatically and in time.

Source: SAP - submitting close to real time data to tax authorities

UAE firms face hiring crunch as VAT implementation nears

Dubai: With the forthcoming implementation of value-added tax (VAT) in the UAE and across the region, companies are going to face a huge talent crunch next year, according to recruitment specialists.Businesses in the UAE are gearing up for the collection of VAT in 2018. It was earlier forecast that the next tax policy will generate thousands of new vacancies for finance professionals. Source: UAE firms face hiring crunch as VAT implementation nears | GulfNews.com

According to surveys not many businesses have an adequate accounting systems to deal with VAT. Besides that lots of businesses lack the VAT knowledge of how a VAT works. Investments and training are needed to be ready in time.

To get VAT ready the following actions should be considered.

1. Assess the business impacts
2. Amend IT systems and business processes to the new situation forecasted and
3. Review existing contracts and set rules for new contracts

How to get VAT ready in time

Guidelines for a Model for a European Taxpayers’ Code

The European Taxpayers' Code provides a core of principles, which compiles the main existing rights and obligations that govern the relationships between taxpayers and tax administrations. 

Source: Guidelines for a Model for a European Taxpayers’ Code

OECD - Consumption Tax Trends 2016

Tax revenues collected in advanced economies have continued to increase from last year’s all-time high, with taxes on labour and consumption representing an increasing share of total tax revenues, according to new OECD research.

The 2016 edition of the OECD’s annual Revenue Statistics publication shows that the OECD average tax-to-GDP ratio rose slightly in 2015, to 34.3%, compared to 34.2% in 2014. This is the highest level since the Revenue Statistics series began in 1965. An increase in tax-to-GDP levels was seen in 25 of the 32 OECD countries that provided preliminary data in 2015, while tax-to-GDP levels fell in the remaining seven countries.

Consumption Tax Trends 2016 highlights that VAT revenues are the largest source of consumption tax revenues in the OECD, and have now reached an all-time high of 6.8% of GDP and 20.1% of total tax revenue on average in 2014.

Continu reading

Modernising VAT for cross border e-Commerce

The European Commission released legislative proposals to remove VAT obstacles for e-commerce to realize fair competition between traditional business and e-commerce.

The Commission has proposed practical new measures to support the digital economy when it comes to VAT compliance, which can currently place heavy burdens on small companies operating online. The new rules should help to accelerate growth for online businesses, in particular startups and SMEs.

Proposals include:

• New rules allowing companies that sell goods online to take care of all their VAT obligations in the EU through a digital online portal ('One Stop Shop'), hosted by their own tax administration and in their own language. These rules already exist for online sellers of electronic services ('e-services');
• To support startups and micro-businesses, the introduction of a yearly VAT threshold of €10 000 under which cross-border sales for online companies are treated as domestic sales, with VAT paid to their own tax administration. This goes hand in hand with other initiatives such as same invoicing and record keeping rules. Our aim is to make trading in the single market as similar as possible to trading at home for these companies;
• The removal of the current exemption from VAT for imports of small consignments from outside the EU, which leads to unfair competition and distortion for EU companies;
• A change to existing VAT rules to enable Member States to apply the same VAT rate to e-publications like e-books and online newspapers, as they apply to their printed equivalents.

These new rules will have a major effect for companies selling goods and services online that will now be able to benefit from fairer rules, lower compliance costs and reduced administrative burdens. Member States and citizens will benefit from additional VAT revenues of €7 billion annually and a more competitive market in the EU.

Continue reading

A cost efficient way to submit SAF-T files and perform risk management

To support the development of this guidance the OECD has laid out the Standard Audit File for Tax Purposes (SAF-T). This guidance establishes the standard to be used for the exchange of tax data between companies and tax authorities. 

The aims of the CFA guidance are to simplify tax compliance and audit requirements by clarifying the information required from business and accounting systems for tax reporting. As a result SAF-T is intended to give tax authorities easier access to the tax relevant company data (corporate income tax and VAT) in a consistent format leading to more efficient control and audit of tax regulations. 

Every company with a SAF-T-requirement is now facing the challenge of finding an easy and reliable way to deliver the required data. Multinationals have the further challenge of providing a range of country-specific information in a controlled and efficient manner. Efficient use of technology lowers costs of data collection and compliance. 

As a result more and more tax administrations around the world are implementing electronic auditing of business’s financial records and systems as part of their compliance regime. Countries might have their own specific local SAF-T requirements but in case the basic required data are covered in the OECD framework it could be managed with country specific variants. 

You can compare it with the EU VAT requirements: EU Directive as framework with some country specific rules based on the options in the EU Directive. Taxpayers will be obliged often to submit the SAF-T format:

• - on request in the case of a preliminary tax inquiry, a tax audit and tax proceedings;
• - monthly mandatory VAT SAF-T

The SAF-T VAT file should reconcile with the numbers of the VAT return to avoid a higher risk of a VAT audit. Often I hear that the on request is given a lower priority. Be aware that audit defence is an important building block for a sound tax strategy.

Although it is an 'on request' obligation it is important to run this requests regularly and archive. This data will be used by the tax authorities for a tax audit to check whether tax positions taken in the tax reporting and /or rulings closed (corporate income tax and VAT) actually reflect the data in the SAF-T files.

It is critical that your in-house tax department has sufficient time to assess the 'on request' data for any unacceptable tax risks. I recommend use this functionality in-house as a pre-audit prior to the law being in force.

A SAF-T SAP add-on solution developed together by 'Tax Assurance and certified SAP add-on specialists' is now available for Poland, Lithuania and Norway and is scalable. The SAP add-on is extendable to countries that uses the OECD framework as the basis for SAF-T reports.

Note that countries might have their own specific local requirements but in case the basic required data are covered in the OECD framework it could be managed with country specific variants. Certain countries such as France, Portugal, Austria, Luxembourg, etc. - have already SAF-T in force.

Richard H. Cornelisse, Tax Assurance specialist- access PowerPoint for further explanation

Business models that are changing

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.

Continu reading

UAE implementing VAT in 2018

The United Arab Emirates (UAE) has proposed implementing Value Added Tax from 1 January 2018. A new tax office, the Federal Tax Authority, has been established by Federal Law 13 of 24 October 2016. This body will be responsible for the role out of VAT, and local laws on other taxes, too. It will manage the VAT registration and returns processes. Aside from launching the new consumption tax, the new Authority will co-ordinate VAT harmonization amongst the other Gulf states in the GCC single market. Source: UAE VAT 2018

According to surveys not many businesses have an adequate accounting systems to deal with VAT. Besides that lots of businesses lack the VAT knowledge of how a VAT works. Investments and training are needed to be ready in time.

To get VAT ready the following actions should be considered.

1. Assess the business impacts
2. Amend IT systems and business processes to the new situation forecasted and
3. Review existing contracts and set rules for new contracts

How to get VAT ready in time

IMF: VAT will generate $1bn for Omani government

The International Monetary Fund (IMF) is estimating $1 billion (OR 385 million) windfall for the Omani government from value added tax (VAT). The consumer tax, not conspicuously stated yet, will account for nearly 1.5 per cent of the gross domestic product though the amount can fluctuate depending on variables such as compliance rate and exemptions, the IMF said. Source: ArabianBusiness.com

According to surveys not many businesses have an adequate accounting systems to deal with VAT. Besides that lots of businesses lack the VAT knowledge of how a VAT works. Investments and training are needed to be ready in time.

To get VAT ready the following actions should be considered.

1. Assess the business impacts
2. Amend IT systems and business processes to the new situation forecasted and
3. Review existing contracts and set rules for new contracts

How to get VAT ready in time

VAT Fraud and personal liabilities

59 percent of respondents (53 percent in 2014) expect the personal liability of compliance officers to increase in 2015, with 15 percent expecting a significant increase. Compliance officers or its Executives at firms as diverse as Swinton Insurance, Bank Leumi, Bank of Tokyo-Mitsubishi, Brown Brothers Harriman and Deutsche Bank (DB: VAT fraud) having been fined, banned or jailed (or a combination).

Continu Reading

Innovation and tax audits

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.

The 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.

Mandatory data filing gives food for thought. Looking to the future The submission of the SAF-T file means that a taxpayer has to provide specific data to the tax authorities every month. From a tax controversy strategy it is common practice that before information is provided to the authorities, a company performs a risk assessment and determines the worst case scenario to avoid unforeseen tax risks.

Continu Reading

Council VAT rules on cross-border transactions improvements

On 8th November 2016, the Council adopted conclusions on improvements to VAT rules for cross-border transactions. The conclusions come in response to certain issues raised when a Commission action plan on VAT was discussed by the Council. The conclusions relate in particular to:

• the VAT identification number as an additional condition for application of an exemption in respect of an intra-EU supply
• in order to better tackle VAT fraud, improving the quality and reliability of data used in the EU's VAT information exchange system
• determining the VAT treatment of the transaction chain, including 'triangular transactions' (where goods are shipped from a member state other than that of the supplier and the customer)
• simplifying rules for call-off stock (where goods are sent to a customer's storage facility in another member state)
• work concerning the exemption from VAT of intra-EU supplies

The Commission is asked to present legislative proposals and conduct studies, as appropriate.

Continu Reading

Taxation Trends in the European Union 2016

This report contains a detailed statistical and economic analysis of the tax systems of the 28 Member States of the European Union, plus Iceland and Norway which are members of the European Economic Area.

Continu reading

Approaches and models

A Tax Strategy should cover all taxes and all key business locations and should be aligned to the overall business strategy. A tax strategy document should also include guidelines as to acceptable planning, which is then further detailed in a Tax Planning Policy.

Features to be considered may include likelihood of tax authority challenge and litigation, likelihood of adverse press coverage and likely impact on tax authority risk rating.

Continu reading

What is considered tax avoidance

Tax avoidance is an attempt to exploit legislation to gain a tax advantage that was never intended. This often involves artificial transactions that serve little or no purpose other than to produce a tax advantage.

But tax avoidance is not the same as tax planning, which involves applying tax legislation in the way it was intended - for example saving in an ISA (Individual Savings Account) where you don't pay tax on the interest.

Continu reading

When expertise is needed upfront

The tax function should ascertain proper implementation and determine the impact of changes in businesses, laws and regulations on implemented tax planning.

Getting ahead of possible problems at the planning stage before they arise in practice is one critical way to make sure that the company reaps the benefits. When the business model changed as a result of the implementation of a centralized procurement model, this could create not only VAT risks, but commercial risks as well.

Continu reading

Norway introduces SAF-T to improve tax inspections

Norway is introducing SAF-T reporting for corporate entities, either resident or with physical presence in Norway (VAT registered businesses). From 1st January 2017 onwards it is required to provide SAFT-NO files in XML format on request of the Norwegian Tax authorities.

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. 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.

Continue reading

A scalable SAP solution for countries implementing SAF-T

The SAP add-on is extendable to countries that uses the OECD framework as the basis for SAF-T reports. Note that countries might have their own specific local requirements but in case the basic required data are covered in the OECD framework it could be managed with country specific variants.

You can compare it with the EU VAT requirements: EU Directive as framework with some country specific rules based on the options in the EU Directive.

Our partner's core business is to develop SAP certified add-ons and many well-known multinationals companies have implemented it for the comparable submission of electronic data.

The SAF-T SAP add-on solution is now available for Poland, Lithuania and Norway. 

Our SAF-T solution is fully integrated in SAP without an external interface or use of external software and SAP release and upgrade independent. It is implemented without core modification and ABAP is the programming language. Installation done simply by external transport file. It contains user-friendly screens, own customized tables and own transaction codes and menus.

We provide 12 months of free maintenance service and yearly maintenance agreements (optional) for consecutive years. Maintenance services include version upgrades according to new regulations issued and bug-fixing:

• Online Helpdesk
• Dedicated Project Manager (SPOC -Single Point Of Contact)
• 2 hours response time for first priority issues.
• Mail tracking
• Ticket Reporting

Scalable solution 

The solution is scalable.   The SAP add-on is extendable to countries that uses the OECD framework as the basis for SAF-T reports. Countries could be added quickly in an (cost) efficient and effective manner as the SAF-T add-on is designed in a way that it allows companies to extend SAF-T requirements for other countries:

Product consists of two main parts;

1. Core Part : The data extraction and main functionalities.
2. Localization part : Designed for further country adaptation requirements.

Country adaptations are as you can see quite straight forward after the core implementation.

Turn key solution

The solution is a turn key solution and that means:

• Implementation (4-6 weeks)
• Training
• Support & Maintenance (one year free & yearly renewable)

More detail also including an overview of the requirements for Lithuania, Norway and Poland and the challenges companies need to overcome when SAP is run can be found in attached slide deck.

Strategic partnership

SNI and KEY Group have formed a strategic partnership to leverage the synergies between KEY Group's tax and SAP services and SNI’s SAP add-on solutions.

The partnership positions the KEY Group as a preferred partner of SNI. Through this strategic alliance, the two organizations will bring to market SAF-T SAP add-on and web based portal solutions. We work for some of the world’s biggest businesses in the areas of tax, ERP consulting and technology.

The service will be provided by our core team and supported by our operations in Poland, The Netherland and Turkey.

This team is led by experienced and highly regarded Tax and SAP professionals who will be actively involved in all stages of the work we undertake. Our senior team is supported by experienced and motivated professionals with backgrounds as tax lawyers, chartered accountants and SAP (technical architects and functional).

The team has enormous experience in this type of SAP work including having managed migration / on-boarding projects and on-going (tax) performance advisory services for a number of global businesses.

Case studies outlining similar projects could be provided.

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Strategic partner alliance - leverage synergies

SNI and KEY Group have formed a strategic partnership to leverage the synergies between KEY Group's tax and SAP services and SNI’s SAP add-on solutions. The partnership positions the KEY Group as a preferred partner of SNI.

Continue reading

Integrated SAP solution for SAF-T

Besides recently Poland, SAF-T is introduced now also for Lithuania and Norway. A fully integrated solution in SAP without an external interface or use of external software is available for Lithuania, Poland and Norway.

Other countries will follow.

This integrated SAP solution is developed together with a certified Global SAP Application Partner. 

Read more: Integrated SAP solution for SAF-T

Criminal charges and jail time

59 percent of respondents (53 percent in 2014) expect the personal liability of compliance officers to increase in 2015, with 15 percent expecting a significant increase.

Compliance officers or its Executives at firms as diverse as Swinton Insurance, Bank Leumi, Bank of Tokyo-Mitsubishi, Brown Brothers Harriman and Deutsche Bank (DB: VAT fraud) having been fined, banned or jailed (or a combination).

Continue reading

Identify the lowest performing process

If you know the company's risk appetite, you have to identify the lowest performing indirect tax processes that have ‘the most direct impact on the company’s business objectives.

 Continue reading

Gain awareness and acceptance

Create, protect and prove value and write a business case for investment to realize business objectives such as improve cash flow, reduce costs, improve tax processes and manage tax related risks.

Continue reading

Spreadsheets and VAT compliance

With human error added into the equation, some defects are going to occur. If the tax function only has MS Excel to perform data transformation to make the data tax ready, the volume of procedures and controls will have to be significantly greater.

The problem is that in Excel altered data can lose its audit trail back to its source: mismatches with a companies ERP system. A point of attention as ERP data is the source of truth by the tax authorities (e.g. e-audits such as SAF-T).

Continue reading

SAP add-on for SAF-T Poland

In Europe SAF-T is now in force in Austria, France, Lithuania, Luxembourg and Poland. Germany, UK, Ireland, Norway and the Czech Republic are most likely next to introduce SAF-T. Lithuania is expanding its SAF-T.

Starting October 1, 2016 all VAT-registered taxable persons, - including foreign companies registered for VAT - will be required to submit a SAF-T file in XML format to the LT Tax authorities on a monthly basis.

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SAF-T SAP solution: fully integrated in SAP

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We now offer a SAP add-on solution for SAF-T Poland (ABAP) at a fixed all inclusive fee. It is fully integrated in SAP without an external interface or use of external software. All inclusive means implementation, training and 1 year of free support and maintenance for bug-fixes & legal updates.

Our IT solution can be reused for other countries.

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SAF-T Poland

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Besides the monthly SAF-T VAT file in Poland, companies have to be able to meet the SAF-T obligation 'on request' containing different legal requirements. This submission applies in case of a preliminary tax inquiry, a tax audit and tax proceedings where the SAF-T file should be provided to the PL tax authorities in a short timeframe.  To avoid disputes and or penalties it is therefore important that a company is ready.

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To establish synergies we have setup a joint venture initiative with a global development partner of SAP and leading software company in the area of e-invoice, e-bookkeeping, e-archive, e-ticket and such SAP add-ons in Poland. This company provides SAP certified add-ons for legal compliance to a large number of global well-known companies.

• Runs over SAP
• User friendly with single user interface (SAP)
• Easy to install by external SAP transport
• Easy to maintain by upgrades via transport files
• Has its own global SAP namespace so there is no effect on SAP standards and is not affected by SAP upgrades
• Standard SAP authorizations used
• Open source code as ABAP programming language
• Vendor independent
• One year free maintenance service including bug-fixes & upgrades according to legal compliance

Last Thursday - 25 August 2016 - was the deadline of the monthly VAT SAF-T PL submission.

Our generated SAF-T VAT file reconciles with the numbers of the Polish VAT return and have also been checked with the official tool of the Ministry of Finance.

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Contact us for more information

The Indian Parliament passes GST Constitution Amendment Bill

The Indian Parliament has voted unanimously to introduce the Goods and Services Tax (GST). This is a significant development which will affect all businesses with interests in India or who trade with India. Continue reading

It is now time to take the necessary preparations as the go live date is ambitious. The article in the next hyperlink includes also a roadmap and points of attention in PowerPoint that might be useful: 'Introducing a new VAT system'.

Publishing your tax strategy

Certain businesses have to publish their tax strategy and be able to demonstrate how the tax strategy is being applied in practice. The strategy should set out the business’ attitude to tax risk, its appetite for tax planning and its approach to its relationship with HMRC. Although it applies to the UK, being consistent across jurisdictions is important as these obligations might be a global tax trend.

Continue reading

Sale-and-lease back not rental but other service subject to VAT

The Supreme Tax Court considers a sale-and-lease-back transaction as a taxable other service rather than a lease or the tax-exempt grant of a loan if the chosen scenario is a reasonable non-tax driven choice of form used to enable the seller (lessee) to enjoy certain accounting and reporting benefits.

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VAT exemption for Intra-Community supplies: Transport document can be replaced by destination document

In order to apply the VAT exemption for intra-Community supplies in Belgium (article 39bis of the Belgian VAT Code), Belgian VAT authorities require the supplier (amongst others) to obtain and keep a set of commercial documents that the goods have been transported from Belgium to another Member State. Suitable evidence includes contracts, purchase orders, transport documents and payment documents.

In order to enhance legal certainty, the Belgian VAT authorities recently published a new Administrative Decision (E.T. 129.460) which confirms that the transport document can be replaced by a so-called destination document.

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Monthly SAF-T VAT PL - deadline 25 August 2016!

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.

SAP and VAT SAF-T

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.

Continue reading

Transfer pricing and IT needs

From a tax controversy perspective TP documentation is important and often results in conflicting priorities within the tax function (allocation of budget and tax resources).

Better resource allocation and process improvement can be achieved via (semi)automated documentations, configure ERP systems to support TP needs or implement add-on or bolt-on tools. For example, in the area of data extraction and workflow management, entity charting, document storage, real time reporting, scenario planning and data interrogation.

Read more: Transfer pricing and IT needs

Set concrete measurable actions (KPIs)

Setting realistic objectives is the starting point for any successful change effort. In order to increase indirect tax function effectiveness it is important to set S.M.A.R.T. objectives and define tasks: add to objective the word by ... as shown in below example. Break down larger tasks into smaller ones.

Read more: Concrete measurable actions

Spreadsheets and VAT Compliance

With human error added into the equation, some defects are going to occur. If the tax function only has MS Excel to perform data transformation to make the data tax ready, the volume of procedures and controls will have to be significantly greater.

The problem is that in Excel altered data can lose its audit trail back to its source: mismatches with a companies ERP system. A point of attention as ERP data is the source of truth by the tax authorities (e.g. e-audits such as SAF-T).

Read more: Spreadsheets and VAT Compliance

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

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

Real time VAT ledgers in Hungary

Following the changes announced on ERP and invoicing software requirements in Hungary, the Hungarian government recently announced that businesses issuing invoices using an invoicing software will be required to provide real time data regarding these invoices.

The real time data provision will have to include all transactions in which another business with a Hungarian tax number is involved and the invoice includes at least 100,000 HUF VAT.

The new real time data providing requirement will be introduced in two steps. As the first step from the 1 January 2017 (as a test phase) it will be optional to provide the additional data. The system will go live and the new requirement will become an obligation from the 1 July 2017. The new requirement assumes additional IT development in terms of the invoicing software on the side of the taxpayers issuing invoices.

Since the invoicing software is supposed to be able to provide data for the Tax Authority in case of an audit since the 1 of January 2016, the new requirement is not supposed to put an excessive administrative burden on the taxpayers.

As these rules are in the proposal phase right now, nothing is certain until the Hungarian Parliament approves them. What is certain is that it is never too early to start preparing for these changes, which will affect the administrative obligations of a great number of business.

Read more: Real time VAT ledgers in Hungary

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

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

Introducing a new VAT system

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

Manage business model change

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

Shift from direct tax to indirect tax

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

Certain SAP activities illustrated via ‘Brexit’

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.

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Assumed VAT law changes

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‘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. 

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SAP - assess, redesign and ... test!

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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.

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The ideal SAP world of managing change

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• 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.

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Is that functionality already available? 

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Yes, all above functionality exist, contact.

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Data and technology

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• ERP systems and tax engines
• When is standard SAP (in)sufficient?
• SAP and triangulation
• SAP and import, export and chain transactions
• SAP and plants abroad
• SAP checklist for VAT rate change
• Everything you always wanted to know about VAT in SAP * but were not aware to ask
• SAP implementation
• Tax engines questions to ask before you commit
• SAP and SAF-T Poland
• SAP and monthly SAF-T VAT file in Poland (JPK-VAT)

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Written by Richard H. Cornelisse

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

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.

SAP and VAT SAF-T

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

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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.

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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

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Responsibility

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.

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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.

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Partnerships

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

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Multinational

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

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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

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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.

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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.

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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.

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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.

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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.

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Penalties 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.

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Appeals

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

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

'Brexit': time to act?

Relax, the VAT law will probably not change in the next 2 years.

The UK must first give the European Council notice of its intention to withdraw and a 'Brexit' agreement has to be negotiated. The negotiations are about setting the new relation between the UK and the EU and include tax and tariffs. That is already delayed as Prime Minister David Cameron considers that all a task of his successor.

"Mr Cameron has said it should be up to his successor to decide when to activate Article 50 by notifying the European Council. Once this happens, the UK is cut out of EU decision-making at the highest level and there will be no way back unless by unanimous consent from all other member states. 

Quitting the EU is not an automatic process - it has to be negotiated with the remaining 27 members and ultimately approved by them by qualified majority. These negotiations are meant to be completed within two years although many believe it will take much longer. The European Parliament has a veto over any new agreement formalising the relationship between the UK and the EU." Brexit: What happens now?

'Brexit' will result that trade between the UK and the EU countries will be treated again as imports and exports and most likely - unless negotiations will have a different outcome - result that customs duty have to be paid when goods move between the UK and the EU (duty rates might change).

As EU law will no longer apply - 'be in force' - the UK regains the right and flexibility to introduce own VAT legislation (again). That can be done much quicker as EU approval is also no longer required:

• VAT rates and the scope of zero-rating and exemption.
• Reversed CJEU decisions (e.g. broader scope of exemptions)
• Place of supply rules that could result in double taxation or non taxation

The interpretation of UK VAT law during litigation becomes a UK matter only at least for issues that took place after the secession. With other words the UK regains full control.

VAT reporting will change as well as EC Sales Lists and Intrastat reporting will no longer apply unless a similar concept is negotiated with the EU. UK businesses that operate in the EU the VAT compliance obligations are impacted and an analysis should be made:

• Appoint a fiscal representative
• Invoicing and reporting requirements
• Simplified trangulations for chain transactions
• Distance sales rules
• Mini One Stop Shop
• EU VAT refund rules
• etc.

From an operational perspective a company's processes and controls have to be updated to the new situation at hand. ERP systems must reflect these changes and that means that tax determination logics, tax codes, invoice and reporting requirements have to be assessed and new rules implemented as well. IT time has to be scheduled in to make it happen.

That being said businesses will have sufficient time to oversee the consequences and be well prepared. It will probably take 2 years to come into force. 

Lots can also happen in the meantime. Maybe a next referendum reverses the 'Brexit'. Or United Kingdom will become less united as Scotland and the city of London (??? - LOL) decide to remain with the EU.

The future will tell.

Richard H. Cornelisse

Which problems are the most important to solve

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Table of Contents

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Executive summary	Tax Control Framework	Enhanced relationship	Forum CIT / TP
Planning of non-routine transactions	Data and Technology	Training	Forum Indirect Tax
Tax strategic plan	Reporting	VAT fraud
Tax risk management	Tax Transparency	EU developments

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