digitalization of tax compliance...adopted as an electronic delivery point where financial...

The Digitisation of Tax Compliance

2018 KPMG EMA Tax SummitRome

September 2018

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Document Classification: KPMG Confidential

© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

Agenda

1. The emergence of digital reporting

2. Trends across the EU

3. A view from ASPAC

4. How organisations are adapting

5. Q&A

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© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. 3



Why now?

Technological advances

Cost of tax evasion

Adapting to the changing

environment

Global momentum

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© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. 4



2001 2002

Audit files (SAF-T, VAT books)

Real-time Reporting

E-invoicing

Periodic

On demand

B2G

B2B

2007 2008 2020201920182017201620142013201120102009…

Making Tax Digital

Digital requirements timeline

Other

UK – MTD (2019)What is it:

VAT registered businesses with a taxable turnover above the VAT threshold (£85,000) will be mandated to keep digital VAT records and send returns using Making Tax Digital (MTD) compatible software from April 2019.

Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs -meaning the end of the annual tax return for millions.

Why:

Reduce amount of avoidable errors, efficient real time look into what taxes are owed and why

Impact:

— HMRC estimated total costs of £8 billion in lost revenues due to tax return mistakes

— 2014-2015 – over £3.5 billion was lost due to mistakes in VAT alone

USA- FATCA (2010)The Foreign Account Tax Compliance Act (FATCA) is an important development in U.S. efforts to combat tax evasion by U.S. persons holding accounts and other financial assets offshore. The Treasury Department and the IRS continue to develop guidance concerning FATCA.

The International Data Exchange Service (IDES) has been adopted as an electronic delivery point where Financial Institutions (FI) and Host Country Tax Authorities (HCTA) can transmit and exchange FATCA data with the United States

CBCR (2013) — The data required by the template is intended, along with

transfer pricing maser file and local files, to provide tax administrations with sufficient information to conduct transfer pricing risk assessments and examinations as an essential part of tackling BEPs issues.

— A dedicated XML Schema has been developed by OECD to provide structured feedback on received CbC information, this allows for fewer errors, and improving overall data quality.

SAF-T— SAF-T (Standard Audit File for Tax) is an international

standard for electronic exchange of reliable accounting data from organizations to a national tax authority or external auditors. The standard is defined by the OECD.

— The standard is now increasingly adopted within European countries as a means to file tax returns electronically (7 countries have adopted or will )

…

Trends across the EU

6© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.


Spanish SII & Hungarian Real Time reporting - Process

Client’s ERP/ Accounting Systems• AR/AP

1. Extraction 2. Data transfer

Converter Data warehouse

Data integrity & logical checks

Translate reply

3. Submission

4. ReplyWarning and errors communicated in an

XML

5. Exception report



Real Time Reporting vs. E-invoicing

InvoiceData

Portal

Invoice data

InvoiceData

Portal

Invoice data

1. Issue the invoice

1. Record invoice data 2. Send to the TA 3. TA sends to customer

Client

Client

2a. Send the invoice to the customer2b. Report the invoice data to the Tax Authority



Progression of E-Invoicing

Invoice issued Invoice received Goods sent Goods received Payment received



Implementation status of B2G Directive

RomaniaFinland

HungaryLithuaniaBelgium

SwedenItaly

UKLatviaAustria

Ireland

Netherlands

Cyprus

PolandDenmark

PortugalEstonia

SloveniaFrance

SpainGermany

SlovakiaLuxembourgCroatia

GreeceMaltaCZ

Asia Pacific



Regulators digitising globally – Asia Pacific

China

India

Australia

Singapore Philippines

New Zealand

South Korea

Japan

Client Experience



GSK’s experience with the changing tax environment

IT & Cost Resource& Capabilities

The futureFrequency & Visibility



Tax departments of the future

Tax functions devoting less resources to tax complianceand more to data management

Tax professionals will require a blend of new skills

Global taxfunctions will become ever more centralized

External service providers willdevelop new ways to deliver solutions

Thank you


The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International haveany such authority to obligate or bind any member firm. All rights reserved.

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