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Below is a SAP example, but we are also experienced in other ERP systems (SAP, Oracle, PeopleSoft, JD Edwards, Microsoft Dynamics AX) and tax engines (add-on or bolt-on).
During a SAP review we verify the proper working of the implemented VAT configuration. Changes in the business model, master data or legislation will have an impact on the implemented VAT configuration.
The SAP review can demonstrate that the VAT configuration must be improved or that additional control measures should be added to the Tax Control Framework.
The review can also bring errors and risks to light, allowing a more focused data analysis to take place. After the quantification and evaluation of the risks and errors, these are assigned a risk profile in order to be able to test against risk tolerance.
Depending on the client's requirements, the following VAT- relevant subjects can be analyzed during a ERP review from for example a risk perspective:
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We combine technical knowledge with industry understanding and knowhow of technologically advanced tools and methodologies available in the market or developed by ourselves.
Technology-related tax risk: understand and address the potential harms and benefits of (new) technology.
Ascertaining proper IT support for ensuring efficient, timely and reliable reporting.
VAT should be considered in every aspect of the process, from concept through completion and beyond. Managing by design — looking at any process or transaction from end to end and factoring in all the requirements and controls essential to designing and optimizing a compliant VAT process.
With indirect taxes intertwining through the day- to-day operations of a company—raising sales invoices, moving inventory, paying suppliers, collecting cash—indirect tax risk can have a distinct and domino-like effect on the commerciality of an organization.
More than 80% of businesses are still using spreadsheets to manage their VAT compliance in at least one jurisdiction in which they operate, despite tax authorities around the world investing in better tools.
The SAF-T standard, originally created by the OECD (similar as BEPS), is intended to give tax authorities easy access to the relevant data in an easily readable format for both corporate income tax as VAT.
What if there are glitches in your data, input errors, empty fields, awkward descriptions in fields or apparent inconsistencies?
Identify the lowest performing indirect tax processes that have the most direct impact on the company’s business and tax objectives. These are then targeted for improvement. Generate and select a set of solutions to improve the performance.
The tax department risk management strategy differentiates between strategic, operational, financial and compliance risks and contains detailed action plans for managing these risks. Managing risk is about making decisions at all levels of an organization, to limit the effect and likelihood of threats happening and to increase the effect and likelihood of opportunities.
Assess that tax advice given is also correctly implemented:
And impact of changes in business, laws and regulations on implemented tax planning.
In order to quickly gain insight into the level of tax risks (i.e. calculation of the potential assessment), statistical sampling can be used. By selecting a few elements (euros), the reliability of the composition of tax items can be determined to a high degree of certainty.
If not correct, the tax authorities might seek to recover tax due from this supplier via a levy of a tax assessment. If the applicable VAT rate is 25%, the tax assessment will be 25/125 of the consideration charged. This assessment will be increased with interest and penalties to determine the total tax burden.
In order to solve a problem, we also have to identify it completely, and not just settle for the most apparent symptom of that problem.
In order to fix a problem, we have to first understand the root cause thoroughly. We have to accept the possibility that the problem involves far more than what is immediately apparent and will require more work than is estimated at the beginning.
Define the causes of defects, measure those defects, and analyze them so that they can be reduced.
An ERP review should highlight where the VAT configuration could be improved or if additional control measures should be added to the business’s Tax Control Framework.
In order to get senior management's buy-in for change and accept indirect tax priorities it is important that proper visibility exist of the amount of VAT/GST under management in the key jurisdictions.
To avoid any reputation damage and negative publicity around taxes, through building a tax control framework.
The internal tax function should always have insight into the areas for attention through this logbook. The risk register should contain the following labels: number, name of the risk, risk definition, cause for the risk to occur, risk category and the risk owner.