Knowledge sharing

Friday, October 13, 2017

Towards a new and definitive VAT system for the EU

 

According to the Commission's proposals, VAT will now be charged on cross-border trade between businesses. Currently, this type of trade is exempt from VAT, providing an easy loophole for unscrupulous companies to collect VAT and then vanish without remitting the money to the government.It will be simpler for companies that sell cross-border to deal with their VAT obligations thanks to a 'One Stop Shop' (OSS).

Traders will be able to make declarations and payments using a single online portal in their own language and according to the same rules and administrative templates as in their home country. Member States will then pay the VAT to each other directly, as is already the case for all sales of e-services.The Commission also proposes a move to the principle of 'destination' whereby the final amount of VAT is always paid to the Member State of the final consumer and charged at the rate of that Member State.

 Source: Towards a new and definitive VAT system for the EU

Tuesday, September 19, 2017

Tax authorities demand more, faster and more frequent data

The fierce debate on a fair distribution of tax revenues by governments has reached new heights. Tax shift due to risk allocation of transactions to low tax rate countries and even globalization itself are under political discussion.

Protectionism is an important part of the strategic objectives of certain governments. Additionally, the discussion concerning BEPS and state aid have caused fiscal uncertainties that force companies to reevaluate risks. In some cases this can even lead to changes in the business model.

Current business models are put under a magnifying glass, but also the change of business models – for instance from commissionaire to limited risk distributor – will get attention from the tax authorities.

 A reorganization in the Dutch Tax and Customs Administration has established the objective that routinely and labor-intensive, yet relatively simple control activities are to be taken over by automated processes.

That is, modern technologies appear to substitute to role of the ‘traditional’ tax auditor. The idea is that new computer systems and data analysis software will allow data files from different source systems to be connected, thereby enabling more efficient tax control and requiring fewer ‘traditionally educated’ employees.

The objective also holds that the tax authorities have earlier and faster access to relevant tax data and that this data is periodically provided by tax payers in a format that is prescribed by the government and that can easily be read and immediately reveal inconsistencies in fiscal activities.

Transfer pricing and/or VAT regulations are still not sufficiently taken into account in the development of VAT-automation regarding business processes.

This makes that the data that is captured in a vast amount of financial administration, can ‘impossibly’ be compared with that which is stated on the tax returns.

All chapters

  1. Introduction: Relevant tax data from Transfer Pricing and VAT: explaining the ‘Why’, ‘What’ and ‘How’
  2. The auditor is not (yet) a risk analyst
  3. New tax legislation in the UK: 'Tone at the top'
  4. More attention for Transfer Pricing
  5. More attention for VAT
  6. Tax authorities request more, faster and more often tax data
  7. SAF-T rolled out in more countries
  8. 'The impact on in-house tax function' and 'Preaudit before submit'
  9. Realise a joint tax responsibility
  10. Read: complete article with all chapters and links to follow up articles (in depth)
Above is a translation of article published in Vakblad Tax Assurance. Dutch version can be downloaded for free: Download click the link

Wednesday, August 9, 2017

Tax Risk Management - submitting tax relevant data to the tax authorities

Tax authorities are besides optimizing traditional tax reporting systems increasingly implementing in addition electronic (almost) 'real-time' transaction reporting systems. It is expected that tax authorities due to technological innovations become increasingly better and faster in executing their tax audit.
Complementary to the existing and more traditional tax reporting in countries like Austria, France, Lithuania, Luxembourg, Norway, Poland, Portugal, Spain already (close) to real time data request have to be submitted and/or should be available on short notice when a tax audit is announced. 

In countries like Austria, France, Lithuania, Luxembourg, Norway, Poland, Portugal, Spain already (close) to real time data request have to be submitted and/or should be available on short notice when a tax audit is announced. 

What is next?

Italy, the VAT invoices data informative reports must be filed with the tax authorities on a six-monthly basis starting by September 18, 2017. From 2018 the deadlines will be on a quarterly basis. For Hungary realtime invoicing is postponed to 1 July 2018. Companies need to have a solution implemented that is capable of real time data transfer by 1st of July 2018 at the latest.


It is however not clear how the tax authorities actually will analyse the data received. That might change soon as their strategy is an improved and faster tax audit including combatting VAT fraud as an overall EU priority.


Let me explain

Monday, July 31, 2017

VAT Control Framework: how to get from A to B

The critical conditions for success
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. At multinational companies we’re easily talking about amounts of over 5 billion euros of indirect tax flowing through the books.
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. 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.
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.
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. And that deadlock must be broken.
What should be done to actually break it?