Indirect tax function effectiveness: Indirect Tax Positions are properly Disclosed, Presented and Documented

Tax controversy considerations and requirements are built into the preparation of the indirect tax return and those responsible for indirect tax controversy review indirect tax returns to verify indirect tax positions are properly disclosed, presented and documented.

An overview of some best practice approaches:

  • There is a process for managing indirect tax positions and documentation
  • Documentation is updated throughout the life cycle of an indirect tax position
  • Workflow/document management tool supports the process
  • The indirect tax function seeks proactively to engage with tax authorities and tax policy makers on a global basis to establish strong relationships in all jurisdictions in which the business operates
  • Developing a winning strategy to support an indirect tax position requires having clear insight about your tax policies and execution, how the tax authorities conducts their examination, anticipate next moves, etc.
  • Standard global processes exist for indirect tax enquiries and litigation with supporting documentation stored in a central repository

An non-exhaustive overview of questions that could be useful as a guideline

  1. What is the nature of the desired relationship between taxpayer and tax authorities?
  2. Who decides what resources to allocate to audit issues?
  3. What are the typical blockers to managing audit information?
  4. What are the audit approaches of the tax authorities?What is the impact of any new approaches?
  5. What information has to be shared mandatory on tax authorities request understanding the rules of the game?
  6. What is the companys strategy re disclosing exposures?
  7. Why is the audit conducted?
  8. What is the time schedule and scope?
  9. What is the financial impact re any non compliance?
  10. Is there a reputational risk that needs to be considered?
  11. How can the audit be more streamlined or even accelerated e.g. how to set up a joint tax audit plan?
  12. Is there a tax policy to maintain an audit summary sheet outstanding issues, status etc?
  13. What is the number and amount of penalties assessed or paid on VAT/GST assessments ?
  14. What is the number of unanticipated exposure assessed or paid and what is the root cause?
  15. What is the cost of audit defense?

Via A roadmap to a sound ‘Audit Defense’ Strategy / Richard Cornelisse

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