The tax function should ascertain proper implementation and determine the impact of changes in businesses, laws and regulations on implemented tax planning.
Operational changes have a tax consequence due to the change in transactional flows and the change in a company’s assets, functions and risks profile. Important is to ensure that the new operating model is not only implemented correctly from a tax perspective, but also ensures that business processes are tax aligned realizing support of the business in the areas of compliance, finance & accounting, legal IT systems, indirect tax and regulatory matters. That means teaming is a necessity with various work streams.
Technology-related tax risk: understand and address the potential harms and benefits of (new) technology
The selling arrangement may change from a buy/sell to broker/agent or vice versa. Goods purchasing may become centralized. The flows and storage locations of goods may change. In any of these cases, new VAT registration obligations may be created in different countries. Likewise VAT could be chargeable by different entities and the recoverability of the VAT could change and different billing flows are created.
That means that tax risk management continually influences operating decisions and strategic direction and indirect tax professionals are appointed to support multidisciplinary teams in projects and programs. That should ascertain timely input from indirect tax function before transaction, changes in activities, operations, structure and ensuring that unacceptable tax risks will be prevented where possible.
VAT should be considered in every aspect of the migration 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.