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EY Global Indirect Tax Symposium 2016
20–22 April 2016
Digitization of the taxfunction
Page 2 Digitization of the tax function
PanelFrank CambieBelgium
Steve PattonUnited States
Andre HengstGermany
Isabelle RauchBoehringer Ingelheim
Susanne ReiterAdidas
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Agenda
Digitization of the tax function
► Trends
► External drivers
► Internal drivers
► Team impact
VATand GST changes
Argentina1 July 2015: taxpayers required to issue e-invoices
Brazil1 January 2016: sales of software in SãoPaulo are subject to state VAT on the totalsales price (previously, it was twice thevalue of the carrier medium)SurinamePlans to introducea VAT system havebeen postponed until further notice
Costa Rica2016: VATsystem to beintroduced to replace sales tax
Puerto Rico1 April2016: VATsystem tobe implemented
CanadaCurrently considering GST obligations fornonresident e-commerce businesses
Japan1 October 2015:consumption tax applies to the provision ofdigital services providedfrom overseas to Japanesecustomers
New Zealand1 October 2016:subject to theregistration threshold,foreign suppliers of“remoteservices” must register andaccount for VAT
South Korea1 July 2015: VATapplies to e-services purchased fromabroad
GCC2018: member states are expected to introducea VATsystem
Russia1 January 2017: planning to apply VAT to e-servicesprovidedby overseas companies to Russian customers
EgyptConsidering introducing VAT system toreplace generalsales tax regime
Kenya1 August 2015: allVAT returns mustbe filed electronically
Namibia1 January 2016: VATregistrationthreshold increased to NS500,000(from NS200,000)
Tanzania1 July 2015: nonresident suppliers oftelecoms and e-services are required toregister
São Tome and Principe2017: expected to introduceVATsystem
Australia1 July 2017: GSTapplies to e-servicessupplied by overseas business toAustralian customers1 July 2017: low-value importsthreshold to be abolishedChinaMid 2016: VATto be extended to realestate and property, financial andinsurance services, and lifestyleservicesUntil 31 December 2016: cross-border e-commerce pilot is being conducted inHangzhouIndiaLate 2016: proposed introduction ofnew indirect tax regimeconsisting ofcentral GST (CGST) and state GST(SGST)Indonesia1 July 2016: mandatory use ofe-invoices by all taxpayers
Poland1 January 2016: new VAT Act implemented
Romania1 April2016: substantial changes apply to Form 394 thatdetails supplies and acquisitions
Slovak Republic1 January 2016: cash accounting introduced1 January 2016: scopeof reverse-chargemechanismextended to all goods supplied by nonestablishedtaxpayersSwitzerland1 January 2017: certain overseas businesses sellinggoods ordered online to Swiss customers will becomeliable for Swiss VAT
FinlandVAT registration threshold increased to EUR10,000 (from€8,500)
Iceland1 January 2016: foreign businesses providing certaintravel-related goods and services are required to registerfor VAT, subject to theregistration threshold
UK1 January 2016: use and enjoyment provisions apply torepairs madeunder UKinsurance contracts1 February 2016: domestic reversecharge introduced forwholesale supplies of electronic communication services
Italy1 January 2016: new penalty regimeintroduced for VAT reverse chargemechanism violations
Denmark1 January 2016: increased controlsregarding distance sales of goodsand e-services supplied to non-taxable persons
France1 January 2018: newcertificationrequirements for IT accountingsystems and cash registers takeeffect
Azerbaijan1 January 2016: VATregistration threshold increased toAZN200,000 (from AZN120,000)
Belarus1 July 2016: allVAT payers must issue VAT invoiceselectronically
Czech Republic1 January 2016: newcontrol report required to befiledelectronically with VAT returns
Hungary1 January 2016: new rules introduced relatingto theobligation to issue tax invoices and input tax deductionrights
Kazakhstan1 January 2016: use of e-invoices mandatory for certainVAT payers involved in internationaleconomic activities1 January 2017: use of e-invoices mandatory for allVATpayersKosovo1 September 2015: VATregistration threshold decreased toEUR30,000 (from EUR50,000)1 September 2015: overseas persons who operate inKosovo through a permanent establishment are required toregister, regardless of turnoverLatvia1 January 2016: reverse-chargemechanism applies tomobilephones, tablets, integrated circuit devices andvarious timber used as wood fuel
Spain1 January 2017: newreporting system forinvoices expected to comeinto forceBelgium1 January 2016: new taxpoint rules apply
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SAF-T captures data from a number of areas stored in a typical business accounting or ERP system:
Content of SAF-T
General ledger • Journals
Accountsreceivable
• Customer master files
• Invoices
• Payments
Accountspayable
• Supplier master files
• Invoices
• Payments
Fixed assets • Asset master files
• Depreciation and revaluation
Inventory • Product master file
• Movements Source: OECD Guidance for the Standard Audit File – Tax, Version 1.0: Appendix 1:SAF-T OVERVIEW BLOCK DIAGRAM
Standard Audit File for TaxContent
Digitization of the tax function
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E-invoicing in Latam
Digitization of the tax function
E-invoicing is not adopted
Excluded from analysis
E-invoicing is optional
E-invoicing is mandatoryLow e-invoicing regulatory adoption
• E-invoicing is not adopted.• In some countries, legislation has been introduced but not actually
adopted.
High e-invoicing regulatory adoption• E-invoicing is mandatory for companies meeting certain federal
standards.• The minimum requirements for meeting this benchmark are dropping
every year, such as lower revenue figures.• Strict legislation across countries dictates specifics of what must be
reported; legislation does not vary widely by country.
Medium e-invoicing regulatory adoption• E-invoicing is optional.• Taxpayers should comply with local and federal regulations, but these
vary by country in terms of strictness.• Invoices may be issued electronically.
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Business partners
Materials andproducts
Tax rates
Trading conditions
Employees
Calculation schemes
II.Transaction data
VAT determination
Transfer pricing
Customs values andreporting
Wage tax
Withholding tax
III.Reporting
VAT
GL: International. GAAP vs.local GAAP
Customs
Intrastat
Listings for cross-bordertrade
Hidden data Known output
I.Master data
Operational monitoring barriers for tax function
Digitization of the tax function
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Numbers tell the story in Mexico
Digitization of the tax function
100% ofnew taxpayersregister online
5.4 millioncompanies andindividuals issueelectronic invoicesevery day
20.6 millione-invoices areissued daily 292,813
companieshave communicationwith the tax authoritythrough the digitaltax mail
JULY 2016 is the beginning of e-audit and automated refunds
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Digital government in Mexico
Digitization of the tax function
Level 1: e-fileCompanies use standardizedelectronic form for filing taxreturns. Other income data isfiled electronically and matchedannually.
Level 2: e-accountingCompanies submit accounting or othersource data to support filings in a definedelectronic format at a defined frequency.
Level 3: e-matchCompanies submit additional accountingand source data, and the Governmentaccesses additional data and begins tomatch data across tax types, potentiallyacross taxpayer jurisdictions..
Level 4: e-auditCompanies’ level 2 data is analyzed bygovernment entities and cross-checked withfilings in real time or near real time to preventfraud and unintended errors, and to map thegeographic economic ecosystem.
Governments send taxpayers electronic auditassessments with a limited window torespond.
Level 5: e-assessGovernment entities use submitted datafrom corporate entities to assess tax withoutthe need for tax forms.
Taxpayers have a limited window oftime to audit government-calculated tax.
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Snapshot of digitization of Mexico
Digitization of the tax function
Corporate incometax Global trade
Automatedinformationexchange
Use ofe-invoicing
Use of dataanalytics/risk
enginesFuture state
►E-filing required;maintain andsubmit electronicaccounting records(EARs) for eachtransaction.
►Almost all taxobligationsconductedelectronically.
►Must e-reportrelevanttransactions(financialderivatives, transferpricing, etc.).
►Must e-fileamended returns.
►Taxpayers’ accessweb services toconsult anddownload theinformation ofcustomsdeclarations.
►VAT credits ofcertifiedcompanies arecontrolled online inreal time.
►Allcommunicationsbetweenauthorities andtaxpayers is donevia tax mail.
►Taxpayerinformation isexchanged withtax authoritiesfrom countrieswith treaties andagreements.
►Taxadministratorsmay collaboratewith othergovernmentagencies.
►E-invoicing ismandatory withvalidation by thetax administration.
►Taxpayers mustmaintain EARsand submit themelectronically on amonthly basis.
►Digital tax receiptsfrom e-billingreconciled withaccountingrecords.
►Taxpayers selectedfor inspectionbased on digital/electronicinformation.
►Audits can beconductedelectronically.
►Pre-filed individualand small businesstaxpayer VAT returnsforthcoming.
►Committed toimplementing theOECD’s AutomaticExchange ofInformation form bythe end of 2017.
►Specific partiesobliged to file OECDBase Erosion andProfit Shifting(BEPS) country-by-country (CbC)report.
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Do you know what the Mexican tax authorities are doingwith your digital data?
Digitization of the tax function
q Analysis in real timeq Analysis of 100% dataq Electronic audits
Predictive models(i.e., networkanalysis)
Business rules todetectdiscrepanciesBenchmarking
betweencompanies
2015/162013
20092004
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The future of tax analytics and reporting
Real-time analytics:►Analyze business operations using huge volumes of detailed information
while business is happeningMultipurpose, in-memory technology:► Instantly explore and analyze all transactional and analytical data in real
time from virtually any data source, not just SAPAdaptable, powerful analytic models:►Create flexible views that expose analytic information at the speed of
thoughtExtensive, source-agnostic data access:►Add external data to analytic models to incorporate data from across the
entire organization
Digitization of the tax function
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Questions
Digitization of the tax function
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