Wts journal international - October 2017 - WTS Global
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
October 2017
international
wts journal Client
Information
# 2.2017
Tax Control
Framework
Table of Contents
5 Austria
6 Brazil
7 China
8 Czech Republic
9 France
10 Germany
11 Hungary
14 India
15 Italy
16 Mexico
17 The Netherlands
18 Poland
19 Singapore
20 Switzerland
21 United Kingdom
22 United States
international wts journal | # 2 | October 2017 2
Editorial
Lothar Härteis | Managing Partner | WTS Munich
Dear Reader,
The growing attention towards tax com- of a TCF as a condition for the participation
pliance is caused by both developments in a compliance programme. Tax control
in tax legislation and tax administration frameworks offer many benefits for a com-
following a broad public discussion on fair pany, its management and stakeholders,
taxation and aggressive tax planning1). for instance:
Tax compliance and tax risk management
have moved into the focus of manage- →→ Minimisation and avoidance of tax risks
ment, tax administrations and other and penalties for the company
Lothar Härteis
stakeholders. Finally, taxes and tax risks →→ Avoidance of liability risks for the man-
have entered the boardroom. Tax author- agement, tax department and supervi-
ities have also recognised the importance sory board
of tax risk management and established →→ Transparency and certainty regarding
new forms of cooperation with taxpayers, the tax position
such as horizontal supervision, which aims →→ Increased quality of tax data and
to increase tax certainty and to reduce tax reporting
risks and litigation2). There is a significant →→ Changing the manner and reducing the
trend towards a cooperative compliance risks of tax audits
approach as opposed to a rather bureau- →→ Improved cooperation with the tax
cratic administration of taxes. authorities and faster ruling procedures
This cooperative compliance approach is The objective of this report is to provide
supported by the OECD, which promotes a information and guidance regarding re-
perspective that combines the taxpayers’ cent developments in important countries.
processes and the administration by the All countries that were included in our
revenue bodies’ processes into one holistic study have recognised the importance
process that starts with the taxpayer car- of cooperative tax compliance and the
rying out his business and ends with the relevance of tax control frameworks in this
final correct tax being paid. Following the context. Most countries have already es-
report of the Forum on Tax Administration tablished schemes regarding cooperation
on Co-operative Compliance: A Framework and monitoring for large businesses and
– From Enhanced Relationship to Co-op- corporate taxpayers which are based on
erative Compliance3) the OECD, in 2016, general principles, voluntary participation
published a guide for Building Better or special legislation. Many countries offer
Tax Control Frameworks4) and started an different benefits as a reward for partici-
initiative for an International Compliance pation in tax compliance programmes and
Assurance Programme. the establishment of a TCF. These benefits
complement the benefits of the TCF, such
In the context of cooperative compli- as increased transparency, reliability and
ance, the design and establishment of a certainty.
tax control framework (TCF) constitutes
a central and important means of man- I would like to take this opportunity to
aging a company’s tax affairs and to be thank all of my colleagues at WTS Global
‘in control’ of its tax risks. An increasing for their valuable contributions and con-
number of countries require the existence structive discussions.
1) OECD Report on Tax Administration 2006; OECD Base Erosion and Profit Shifting, October 2015
2) OECD Forum on Tax Administration (“FTA”), Compliance Management of Large Business Task Group,
July 2009; Horizontaal Toezicht (Horizontal Monitoring in the Netherlands.
3) OECD A Framework: From Enhanced Relationship to Co-operative Compliance, July 2013
4) OECD Co-operative Tax Compliance, Building Better Tax Control Framework, May 2016
3 international wts journal | # 2 | October 2017
Tax Control Framework and cross-border aspects, especially
Permanent Establishments
Extended responsibility of management be less apparent but is more hazardous, as
non-compliance may lead to severe results
In today’s globalised world, top manage- such as the blacklisting of the company in
ment is not only liable for compliance the case of non-compliance.
regarding its represented company. In the
case of multi -national group companies, Tax Control Framework as enabler for
the parent company and its management compliant treatment of permanent
are responsible for ensuring tax com- establishments
pliance with regard to its subsidiaries
within the country, but also for its activities An appropriate Tax Control Framework
abroad which are performed by separate set up in order to ensure tax compliance
legal entities or Permanent Establish- not only locally but also globally and
ments (PE). This is the result of the Ad- for Permanent Establishments enables
ministrative Offence Law in Germany (and transparency throughout the whole
similar regulations) stating that appropri- organisation. This is a good start so as to
ate personnel must be chosen. avoid contentious tax controversy with the
tax authorities - showing taxpayers’ the
In the case of separate legal entities, this company´s interest in behaving in a com-
responsibility is doubled: direct liability pliant manner all over the world. Due to
of the local management and indirect the fact that also the authorities, not only
responsibility of top management. tax authorities, are deeply interconnected,
companies need to make sure that they
In the case of Permanent Establishments have full transparency within their organi-
(PEs) abroad, there is an extended risk. sation to ensure respective compliance.
PEs are not a separate legal entity. They
are part of a local legal entity performing Joint Audit
activities abroad. They exist even though
one may not have already realized their Joint Audits have already been considered
existence and even though a registration to be very efficient and successful in the
has not yet been performed, e.g. by ex- past - from both tax administrations as
ceeding a specific duration of time or due well as the tax payer. In light of the ex-
to sales activities abroad. Therefore, local tended global transparency requirements
management must ensure tax compli- resulting from country-by-country report-
ance not only for the local part of its legal ing, management should be aware that
entity but also for its PEs. Management tax compliance is not only a local issue but
must ensure that all registered and also a global one.
all potential PEs fulfil tax compliance. This
includes, in the first instance, the detection Impact of digitisation
within the organisation, but also regis-
tration, fulfilling all foreign tax and legal Considering the fact that many countries
requirements as well as complying with already require electronic tax filing in
local foreign rules in respect of PEs. Addi- all areas of taxation, especially in the
tionally, the PEs may need to be registered case of Multi National Enterprises and
Contact Person also according to the local tax law of the cross-border activities, digitisation and the
country in which the legal entity (= head transparency of processes and numbers
Sandra Winter office) is registered. Also, within the tax is vital. Also tax authorities will focus on
sandra.winter@wts.de returns of the legal entity, the results of direct data access and respective analysis.
+49 89 28646 1692 the PE need to be taken into consideration With a global transparency, a cross-border
according to the respective rules. Hence, in application of international standards will
Thomas-Wimmer-Ring 3 light of BEPS and its extended PE defini- also be enabled, avoiding the inconsistent
80539 Munich tion, ensuring worldwide tax compliance application of different local tax laws - the
Germany is a key responsibility of management, latter relevant particularly to the increas-
www.wts.de even more so in the case of PEs. This may ing number of Permanent Establishments.
international wts journal | # 2 | October 2017 4Tax Control Framework in Austria Austria
ICON Wirtschaftstreuhand GmbH
National rules in respect of a Tax Control with the Federation of Austrian Industries
Framework, differences due to size and the Chamber of Austrian Auditors and
Tax Consultants. The MoF is currently work-
In May 2016, the OECD released a report on ing on HM legislation in order to create a
“Co-operative Tax Compliance” outlining legal basis for the HM process in the future.
the essential features of a Tax Control It is expected that such legislation will be
Framework (TCF) and the tax authori- passed by the end of 2017.
ties’ expectations with respect to a TCF.
Although the Austrian Ministry of Finance Are the tax authorities bound to check
is very anxious to follow the OECD’s or consider the TCF? If yes, also for past
recommendations, currently no domestic years?
legislation exists requiring taxpayers to
install such an instrument. The MoF has already announced that
future participation in the HM programme
However, following the Netherlands will require corporate taxpayers to have
example, the Austrian MoF had already introduced an effective TCF. So it is to be
introduced an enhanced relationship expected that a taxpayer’s TCF will be ex-
called “Horizontal Monitoring” (HM) amined by the tax auditors before the HM
in 2011 which was offered to Austrian starts. In the course of tax audits, an exist-
corporate taxpayers on a voluntary basis. ing effective TCF can avoid the application
To participate in this process of continuing of financial penal law.
and permanent tax auditing, the existence
of an internal TCF was required or at least Cooperative compliance – is it agreed by
the willingness to develop such a tool in the fiscal authority? Cross-border appli-
cooperation with the tax authorities in cability of cooperative compliance
the course of the monitoring process. In
fact, this requirement limited the partici- Cross-border activities of Austrian enter-
pants to large Austrian corporate groups. prises are subject to Austrian taxation and,
Between 17 June 2011 and 30 June 2016, in many cases, to foreign taxation as well.
a total of 17 Austrian corporate groups Experience shows that non-compliance
covering 249 tax IDs participated in the with tax obligations abroad may result in
HM. An evaluation report about experienc- sensitive penalties for the enterprise, its
es collected by the tax authorities is avail- managers and employees. In practice, “co-
able for download at: https://www.bmf. operative compliance” has to cover both
gv.at/services/publikationen/BMF_Eval- domestic and foreign tax requirements in
uationsbericht_Horizontal_Monitoring. order to avoid such impacts.
pdf?5s3qa1.
Are there any rules regarding digitisa-
Benefits for the taxpayer resulting tion of tax processes? Contact Persons
from a TCF
In Austria there are no special regulations Stefan Bendlinger
The final evaluation of the HM project, as far as digitisation of TCF is concerned. stefan.bendlinger@icon.at
which came to its preliminary end in However, most of the filings, tax returns +43 732 69412 9274
mid-2016, came to the conclusion that this and appeals to be done by the Austrian
form of enhanced cooperation brings more taxpayer, including tax returns and assess- Matthias Mitterlehner
legal certainty for taxpayers, promotes tax ment notices issued by the tax authorities, matthias.mitterlehner@icon.at
compliance, can reduce compliance costs have to be communicated electronically +43 732 69412 6990
and secures contemporary and lawful via “FinanzOnline” based on a particu-
collection of taxes in favour of the state lar regulation released by the MoF. This Stahlstraße 14
budget. Between 2011 and 2016, the HM online platform can be accessed by visiting 4020 Linz
process was not set by law but based on http://finanzonline.bmf.gv.at after the Austria
a manual developed by the MoF together taxpayer has duly registered. www.icon.at
5 international wts journal | # 2 | October 2017Brazil Tax Control Framework in Brazil
Machado Associados
National rules in respect of a Tax Control Up to now, no proper action aiming to
Framework, differences due to size promote self-regularisation has been
implemented and all preliminary analysis
Although the Tax Control Framework has provided by tax authorities under the spe-
not been adopted in Brazil in line with cial tax follow-up is not definitive.
the studies promoted by the OECD, the We point out that, in 2015, the Federal
Brazilian Federal Revenue Service (RFB) Government tried to implement a tax
introduced a programme called “special planning disclosure system in which tax-
tax follow-up”, which provides for a more payers should disclose any acts or business
detailed review of the payment of federal that could eliminate, reduce or defer taxes,
taxes by certain Brazilian legal entities leaving it to the tax authorities’ discretion
(major taxpayers). whether the tax effect of such acts would
be accepted, or whether the reduced tax
This programme was introduced in late would be fully charged. This attempt was
2007 with the main objective of notifying not well received by Brazilian taxpayers,
tax auditors of any discrepancies in the being revoked before it came into force.
payment of federal taxes to increase tax
collection, with no benefits to the taxpay- In practice, tax assessments tend to take
ers. Brazilian legal entities falling under place very near the end of the statute of
certain criteria (amount of gross revenues, limitations, with the transactions imple-
total federal taxes paid, total wages paid mented by the taxpayers being qualified
to employees and total social security con- as fraud in a number of cases, the in-
tributions paid) would be selected to take creased fine of 150% being demanded and
part in the special tax follow-up. Unlike the legal entities’ officers and/or share-
co-operative compliance, the special tax holders being indicated as liable for the
follow-up is performed unilaterally by the tax debts.
tax authorities.
It is expected that this mistrust will in-
In 2015, the regulation of the special tax crease as of 2017 due to the establishment
follow-up was altered so that the main of a bonus to tax auditors based on the
objectives of the program were to provide amount of tax assessments issued, which
updated information about the behaviour will only increase the tax litigation (and
of major taxpayers, allow the tax author- not reduce it, as intended by co-operative
ities to act in close proximity with the compliance).
taxable event, and promote regularisation
of federal taxes by taxpayers prior to any Cooperative compliance – is it agreed by
tax procedures/assessment (self-regular- the fiscal authority? Cross-border appli-
ization), among others. cability of cooperative compliance
Benefits for the taxpayer resulting Although co-operative compliance has
from a TCF not been adopted internally, the Brazilian
Contact Persons tax authorities are known to exchange
If the objective of the special tax follow-up information with tax authorities in other
Júlio M. de Oliveira of promoting self-regularisation of federal countries in an efficient manner.
joliveira@machadoassociados.com.br taxes were implemented in practice, this
would allow Brazilian legal entities to pay Are there any rules regarding digitisa-
Erika Tukiama federal taxes relating to previous periods tion of tax processes?
etukiama@machadoassociados.com.br without the levy of ex-officio fines.
Brazil is at the forefront of digitisation
Gabriel Caldiron Rezende Are the tax authorities bound to check of tax processes, allowing Brazilian tax
grezende@machadoassociados.com.br or consider the TCF? If yes, also for past authorities online and immediate access
+55 11 3819 4855 years? to very detailed accounting, tax and social
security information on Brazilian legal
Av. Brigadeiro Faria Lima, 1656, 11th floor Despite the existence of the special tax fol- entities, among others. Tax audits (and,
01451-918, São Paulo low-up programme since 2007, the Brazil- sometimes, even tax assessments) may
Brazil ian taxpayers and Brazilian tax authorities be carried out only by crossing data from
www.machadoassociados.com.br still view each other with mistrust. electronic reports.
international wts journal | # 2 | October 2017 6Tax Control Framework in China China
WTS China Co., Ltd.
National rules in respect of a Tax Control TCF is an important factor in the company’s
Framework, differences due to size tax risk management work. Therefore, tax
auditors will consider the TCF in their prac-
China’s State Administration of Taxation tical work to determine how to conduct
(SAT) established the Large Business Taxa- the investigation work on the company,
tion Department in 2008. The Department though TCF does not offer any statutory
is seeking to develop a new approach to protection.
supervise taxation and control the compa-
ny tax risk via TCF. SAT issued two circulars Cooperative compliance – is it agreed by
on the TCF in 2009 and 2011 respectively. the fiscal authority? Cross-border appli-
The circular issued in 2009 introduced a cability of cooperative compliance
guideline on TCF for large businesses and
suggested a set of key elements for the A cooperative tax compliance agreement
internal TCF system. between the taxpayer and the tax ad-
ministration is also encouraged. Starting
Another circular issued in 2011 is on the from 2012, signing of the tax compliance
tax administration of large businesses. This agreement was gradually implemented,
circular specified the definition of a large firstly done by SAT with large businesses
business as being the group companies and later extended to provincial-level tax
earmarked by SAT and the tax authorities authorities. Such a compliance agreement
at the provincial level. Some provincial is still not yet available for companies not
tax authorities have rolled out their own classified as a “large business”.
regulations for the administration of local
large businesses. No cross-border cooperative compli-
ance request has yet been formalised.
Benefits for the taxpayer resulting Nonetheless, some local provincial tax
from a TCF authorities have taken initiatives during
their management of tax issues dealing
A well-established TCF system is beneficial with large multi-national enterprises
for taxpayers in that it could help ensure (MNEs). For example, some tax authorities
the efficient control and management of in eastern China have been continuously
taxation, and prevent damage to financial issuing guidelines for the MNEs within
goals and corporate image. The tax bureau their jurisdiction to include cross-border
regularly evaluates the implementation tax risk management in the internal tax
and effectiveness of the TCF and passes risk management system.
the questions it discovers to the taxpayer.
Further, companies with TCF system are Are there any rules regarding digitisa-
more likely to be granted advance rulings tion of tax processes?
for specific tax issues.
China has also invested substantial re-
Are the tax authorities bound to check sources in promoting tax process digitisa- Contact Person
or consider the TCF? If yes, also for past tion. Most tax compliance tasks now can
years? be completed online, even on a mobile Martin Ng
phone. In addition, the concept of big data martin.ng@wts.cn
China’s tax authority encourages the tax- also stirred up new thinking in taxation +86 21 6047 8665 202
payer to set up a TCF but does not make it administration and risk management. It
mandatory. The tax authority controls the is foreseeable that digitisation will be a Unit 031, 29F, Hang Seng Bank Tower,
tax risk via investigating the implementa- phenomenal trend under which the details No.1000 Lujiazui Ring Road
tion of the TCF. of tax matters will become more transpar- Pudong New Area
ent, and the prediction and identification of Shanghai, 200120
tax risks will be made possible at an earlier China
stage. www.wts.cn
7 international wts journal | # 2 | October 2017Czech Republic Tax Control Framework in the Czech Republic
WTS Alfery s.r.o.
National rules in respect of a Tax Control On the other hand, it follows from the
Framework, differences due to size basic tax principles (apart from the obliga-
tion to cooperate) that tax authorities are
Czech legislation does not explicitly obliged to take account of everything that
regulate a Tax Control Framework (TCF), came out during tax administration. Con-
enhanced relationship or cooperative sequently, tax authorities should deal with
compliance. Nor has this topic been the the introduction of a TCF when performing
subject of non-binding information or their activities.
instructions issued by the tax adminis-
tration. According to our information, no As already stated above, the tax admin-
amendment to the legislation or internal istration has little experience with a TCF,
instructions of the tax administration which does not allow us to draw more
concerning TCF, enhanced relationship or general conclusions.
cooperative compliance is planned in the
near future. Cooperative compliance – is it agreed by
the fiscal authority? Cross-border appli-
However, the legal basis for a TCF, en- cability of cooperative compliance
hanced relationship and cooperative
compliance can be found in one of the As mentioned above, the cooperative
general principles applying to tax pro- compliance concept lacks any basis in
ceedings defined in the Tax Code (which national law (with the exception of the
is the basic act governing the tax process aforementioned basic tax principles) or in
in the Czech Republic). This is the principle non-binding information or instructions
of cooperation according to which taxable issued by the tax administration.
entities and the tax administration should
cooperate with each other, the tax author- Are there any rules regarding digitisa-
ities accommodating taxable entities in tion of tax processes?
administering taxes where possible.
In the Czech Republic, clear legislative rules
Benefits for the taxpayer resulting regarding the digitisation of tax processes
from a TCF have been in place for several years. In
particular, tax returns and other statements
The very existence of a TCF does not au- (such as VAT recapitulative statements or
tomatically mean that the taxable entity VAT control statements) should be filed
gains an advantage. For example, the tax electronically using the prescribed format.
administration can require that a tax audit
is carried out more quickly. Electronic filing means filing through (i)
a special application of the tax admin-
So far, the Czech tax administration has istration, (ii) a data box or (iii) by e-mail
little experience with a TCF, not only in the accompanied by an advanced electronic
case of small and medium-sized enterpris- signature, all of that solely in XML format.
es; thus, it is not yet possible to evaluate
the benefits it has brought. The obligation to file tax returns and
Contact Person further statements electronically using
Are the tax authorities bound to check the prescribed format currently applies
Roman Pechacek or consider the TCF? If yes, also for past to all trading companies and a number of
roman.pechacek@alferypartner.com years? individuals, with a view to implementing
+420 221 111 777 full digitisation.
The tax authorities are not explicitly
Vaclavske nam. 40 bound by the existence of a TCF. They are
110 00, Prague 1 not obliged to check or consider the TCF
Czech Republic in administering taxes, in particular in the
www.alferypartner.com course or result of a tax audit.
international wts journal | # 2 | October 2017 8Tax Control Framework in France France
WTS SELARL
National rules in respect of a Tax Control Are the tax authorities bound to check
Framework, differences due to size or consider the TCF? If yes, also for past
years?
Since the OECD report (2013) and the OECD
guidance (2016) were issued, several In France, there is no clear evidence of
tests have been carried out to explore the effective “co-operative compliance”, but
advantages and drawbacks that can be there is a real and strong intention to ease
derived from a TCF. the relationship by the previous and cur-
rent government. To make this goal more
In 2013, the government established the concrete, the government in its electoral
principle of the “relationship of trust”, commitments would like to encourage a
which means a new relationship between relationship based on co-operation and
companies and tax administration. The trust by having “the right to make mis-
principle was to support the company takes”.
throughout their reporting processes for
all taxation falling within the “Direction This right could put an end to the auto-
Generale des Finances publiques” (DGFiP). matic suspicion of deliberate intention or
The revenue authorities and taxpayers had recklessness in complying with tax duties
been encouraged to establish a working by recognising the possibility of an error
environment, processes and protocols instead and opening a dialogue. What is
within which a working relationship expected is a state that accompanies and
based upon mutual trust, transparency and facilitates the tax and legal step that needs
cooperation can be achieved. to be taken by the taxpayer to comply with
its duties by applying this right. The role of
Thus, the FTA and the company conducted the tax administration would be to correct
a complete review of the tax options and the taxpayer, help them to apply it and not
tax obligations of the company. This new to reduce to sanction all the time. We are
procedure began in October 2013 with a waiting for the next financial bill which
sample of companies before considering will give us more information. No further
how it could be extended. It was reserved details have been provided yet.
for mid-sized companies whose turnover
did not exceed EUR 150 million. Cooperative compliance – is it agreed by
the fiscal authority? Cross-border appli-
Benefits for the taxpayer resulting cability of cooperative compliance
from a TCF
In France there are no internal rules on
The first test was positive but not conclu- co-operative compliance.
sive. It concerned 11 companies and was
followed by a second test in 2014. Unfor- Are there any rules regarding digitisa-
tunately, at this point, the test has neither tion of tax processes?
been extended nor repeated. However, Contact Person
the enhancement of the relationship be- Digitisation exists in all segments of taxes
tween the tax authority and the taxpayer and tax processes. In the case of a tax Christoph Seseke
has become a major concern and a key el- audit, the accounts need to be delivered Christoph.seseke@wtsf.fr
ement in government policy and all signs to the French tax authorities in a stan- +33 (0) 1 42 27 05 38
indicate that this movement will continue dardised electronic format (fichier d’écri-
further. tures comptables = FEC). Most tax returns 57, avenue de Villiers
need to be filed electronically, for exam- 75017 Paris
ple in the following matters: value added France
tax, corporate tax, income tax. www.wtsf.fr
9 international wts journal | # 2 | October 2017Germany Tax Control Framework in Germany
WTS Steuerberatungs-
gesellschaft mbH
National rules in respect of a Tax Control fault of intention or recklessness. In their
Framework, differences due to size own interest, the tax authorities will also
consider an implemented TCF in order to
Despite the fact that there is an OECD get a better insight into the structure and
report dated 2013 and the OECD guidance organisation of the taxpayer.
was issued on 13 May 2016, there is no
German national legislation but only guid- In Germany there is also no clear guidance
ance from the Ministry of Finance issued in on this yet, but we expect that TCFs may
May 2016. This deals with one article of the be considered by the tax authority only for
German Fiscal Code regarding correction future years. Nevertheless, the implemen-
of tax returns and has to be considered in tation of a TCF may be considered as an
close context with the allegation of tax indication that a taxpayer is following the
fraud. Tax fraud is connected to penalties rules, mainly not evading tax either with
on both financial and personal (criminal) intent or out of carelessness.
liability, in addition to reputation damage.
Cooperative compliance – is it agreed by
According to this guidance, a certain ben- the fiscal authority? Cross-border appli-
efit may be seen: “If a tax control frame- cability of cooperative compliance
work is implemented to comply with the
tax duties, this may been considered as In Germany, there is a clear concept of hier-
an indication against deliberate intention archy of the tax administration towards the
or recklessness. It does, nevertheless, not taxpayer, even more so as large companies
release from checking the particular case.” are under ongoing scrutiny by the tax audit,
Unfortunately, no clear further guidance not only randomly as in other countries.
has so far been given by the tax authorities Hence, no risk-based selection of taxpay-
either on the form or size of the TCF or on ers is applied. Nevertheless, in most cases
differences for companies of various sizes. there is now already a fair relationship be-
tween the tax administration and taxpay-
Benefits for the taxpayer resulting ers based on mutual respect and trust.
from a TCF
Despite the fact that there are not even
In Germany, no benefits – such as an local rules on cooperative compliance in
instruction to speed up tax audits, get ad- Germany, the German Ministry of Finance
vance certainty due to faster rulings or ma- has realised that, in a globalised world
terial benefits – are laid down in writing. and with the implementation of BEPS, tax
Nevertheless, there is clear commitment audits also need to cooperate globally on
from the German tax authorities to look a grand scale. A high level of success can
into the implemented TCF. Also, once the be seen in the “joint audits”. The Coop-
timely tax audit (“zeitnahe Betriebsprü- erative Compliance Model may even be
fung”) is in place (currently only if all past widened cross-border, possibly also with
tax audits have already been completed) the testing of systems and processes.
there is a strong focus on tax audit check-
ing and on processes implemented by the Are there any rules regarding digitisa-
taxpayer such as a TCF. tion of tax processes?
Are the tax authorities bound to check In Germany, digitisation is already a reality
or consider the TCF? If yes, also for past in most areas of taxation. Especially in
Contact Person years? mass areas such as VAT and wage taxation,
digitisation was already implemented
Lothar Härteis In Germany, no clear instructions from the some years ago. Electronic filing of corpo-
lothar.haerteis@wts.de Ministry of Finance have yet been received rate tax returns and tax balance sheets has
+49 89 28646-2222 by the tax auditors but broad training is also been required since 2015 and is also
planned as, in the past, there was strong highly appreciated for personal income
Thomas-Wimmer-Ring 3 pressure on tax auditors to involve the tax tax returns. Tax auditors are bound to get
80539 Munich fraud investigation departments. With the an insight into the IT tools that are used
Germany new guidance, it will be clearer in which and they have had data access on the ac-
www.wts.de cases there is no initial suspicion – in de- counting system for more than 10 years.
international wts journal | # 2 | October 2017 10Tax Control Framework in Hungary Hungary
WTS Klient Adótanácsadó Kft.
National rules in respect of a Tax Control Cooperative compliance – is it agreed by
Framework, differences due to size the fiscal authority? Cross-border appli-
cability of cooperative compliance
There is no such measure in the nation-
al jurisdiction so far. Until 2012, it was During a cooperative procedure, which is
obligatory for the tax authority to audit a new element of the customer-friend-
the 3,000 largest taxpayers every 3 years. ly tax authority concept, the Hungarian
In order to have a better insight into large tax authority makes a direct request to
companies’ activities and have follow-up the taxpayer to conduct a self-revision
on the tax audits, the tax inspectors were (presumably in cases when an issue can be
dedicated to companies. This model can judged easily based on data in the system)
still be found in practice for large taxpay- or contacts the taxpayer to remedy the de-
ers, facilitating a better communication on tected errors and shortcomings together,
tax issues between the authorities and the using the professional support of the tax
companies. authority.
Benefits for the taxpayer resulting Participation in the cooperative procedure
from a TCF is voluntary and companies can decide for
themselves whether to avail themselves of
The timely internal discovery of dis- the opportunity offered by the Hungarian
crepancies is the best way to avoid tax tax authority. Passing up on it would not be
penalties. Self-revision is one of the most very wise, however, because no sanctions
important legal institutions of the Act on can be applied to any violations of law
Rules of Taxation, which allows compa- identified and resolved during the proce-
nies themselves to correct any tax bases dure, whereas if the cooperative procedure
filed incorrectly or any tax liability, so is not successful, the tax authority can
as to avoid these issues being detected resort to a proper inspection at any time.
by the tax authority during a potential
tax inspection. Obviously, self-revision is Are there any rules regarding digitisa-
more expensive than managing to declare tion of tax processes?
everything correctly in the tax return the
first time round, since the general rule is Digitisation is one of the main areas which
that self-revision interest has to be paid if seems to be rapidly evolving in Hungary.
the liability increases, but this is still much Since 2016, the invoicing software should
cheaper than when the tax authority finds contain a separate, built-in program
the tax shortfall and imposes a 50% tax function called “tax audit data reporting”,
penalty alongside late payment interest. which can export the data of the invoices
falling into a specific period determined
Are the tax authorities bound to check by the starting and closing date of issuance Contact Persons
or consider the TCF? If yes, also for past (year, month, day), and a specific number
years? range determined by the starting and Tamás Gyányi
closing invoice number. The next stage of tamas.gyanyi@wtsklient.hu
Currently, there is no such measure imple- digitisation will be online data provision, +36 1 887 3736
mented in the Hungarian jurisdiction that which will be mandatory from 1 July 2018
explicitly states that a company will be ex- when using invoicing software, while Tamás Felsmann
empted from fines if it operates a TCF. Nev- taxpayers can test this way of providing tamas.felsmann@wtsklient.hu
ertheless, the tax authority is legally bound data from 1 July 2017. The Government +36 1 881 0621
to check all circumstances before levying a expects that this new tool will be of great
penalty. We take the view that establishing assistance in legalising the economy (as Stefánia út 101-103
a TCF at the company may be considered well as electronic cash registers and the 1143, Budapest
by the tax authority as a commitment to EKAER (Electronic Public Road Trade Con- Hungary
transparency and rule-keeping. trol System)). www.wtsklient.hu
11 international wts journal | # 2 | October 2017© bobsairport
WTS Global –
German roots – Global reach
WTS Global is a leading international tax network. We have a
clear tax focus and offer a full-fledged tax service portfolio in
all countries. To supplement our offering, we provide adjoin-
ing legal and financial advisory services.
Since our foundation in 2003 by WTS Germany we are contin-
uously growing. Today we are represented in more than 130
countries through our hand picked partner firms, which are
strong players in their local markets.
We strongly believe that tax services should be separated from
audit services. Thus, we deliberately refrain from conducting
annual audits throughout the countries in order to avoid po-
tential conflict of interest. It is one of our utmost priorities to
advise our clients on a sustainable and long-term basis.
We offer innovative and highly customised solutions. We see
ourselves as pioneers in tax with a strong affinity for new
approaches. That notwithstanding, we provide pragmatic
advice and are proud to be renowned as reliable business
Your global contact:
partners with high implementation competency.
Wim Wuyts
WTS Global has been acknowledged regularly as a Tier 1 CEO WTS Global
network by Chambers & Partners and has been recently
awarded as European Indirect Tax Firm of the Year 2017 by Tiberghien Ghent
International Tax Review.
Esplanade Oscar Van de Voorde 1
We are looking forward to working with you. BE-9000 Ghent
Belgium
More information under wts.com wim.wuyts@wts.comIndia Tax Control Framework in India
Dhruva Advisors LLP
National rules in respect of a Tax Control Benefits for the taxpayer resulting
Framework, differences due to size from TCF
We understand that the Central Board of Selection of revenue potential cases for
Direct Taxes (CBDT) i.e. apex Tax admin- scrutiny by using the CASS is expected to
istration body has developed a Central bring overall improvement in assessments
Action Plan 2016-17, providing an internal as unimportant cases are filtered out in the
framework on several aspects of tax com- selection process. By adopting the CASS,
pliance and tax administration inter-alia a small number of cases are expected to
including be selected under the compulsory criteria
thereby reducing dependency on manual
→→ Strategy for undertaking quality audits , discretion.The e-assessment facility will
collection and recovery of tax demands; also enable tax payers to interact in audit
→→ Widening of taxpayer base; proceedings without having the need to
→→ Developing speedier mechanism for visit tax office. The automatic stay of de-
disposal of tax payer grievances; mand achieves a balance as reduces undue
→→ Using technology for improving tax hardship for tax payers for an immediate
compliance and tax administration payment of a high tax demand payment;
at the same time, it also helps the tax ad-
In line with the Central Action Plan, the CBDT ministration in obtaining tax collections.
has been issuing instructions from time to
time on various aspects of tax compliance Are the tax authorities bound to check
and tax administration. Some of these or consider the TCF? If yes, also for past
instructions have been discussed below: years?
→→ Selection of scrutiny audits: The instructions, circulars issued by the
Tax authorities in India have the power CBDT are binding on the Tax Officers.
of initiating scrutiny audits. The CBDT
has issued criteria for selection of scru- Cooperative compliance – is it agreed by
tiny cases. Cases are selected manually the fiscal authority? Cross-border appli-
for compulsory scrutiny audit based cability of cooperative compliance
on certain parameters. Cases are to
be selected through Computer Aided The concept of co-operative compliance
Scrutiny Selection (‘CASS’). The CASS is agreement has not been introduced in
an intelligent risk-based system where India so far.
the Income-tax administration has fed
certain red-flag indicators to select cases Are there any rules regarding digitisa-
for scrutiny. tion of tax processes?
→→ E-assessments: The Income-tax Act has introduced provi-
Recently, the Income-tax administra- sions for digitisation of several processes.
tion has initiated e-tax audits enabling E-filing facilities for filing of tax returns,
taxpayers to interact with Tax authorities online payment of taxes, online infor-
for the audit proceedings on e-mail. mation on availability of withholding tax
credits and withholding tax certificates are
Contact Person →→ Automatic stay of demand: already functional. A Central Processing
To streamline the process of grant of Centre (CPC) has been set up by the Tax ad-
Rakesh Dharawat stay of demand, where the outstanding ministration for speedier processing of tax
rakesh.dharawat@dhruvaadvisors.com demand is disputed before the Com- returns and refunds. With the introduction
+91 22 6108 1020 missioner (Appeals) (i.e. First Appellate of GST, the Government has been working
authority), the Tax officer shall grant stay on developing the GSTN portal where
1101, One Indiabulls Centre, of demand till disposal of first appeal on several indirect tax compliances are digi-
11th floor, Tower 2B, payment of 20 percent of the disputed tised. Over the long run, the digitisation is
841, Senapati Bapat Marg, demand. expected to smoothen GST compliance for
Elphinstone Road (West), tax payers and provide transparency with
Mumbai 400013 a comprehensive taxpayer dashboard and
India ledgers.
international wts journal | # 2 | October 2017 14Tax Control Framework in Italy Italy
WTS R&A Studio
Tributario Associato
National rules in respect of a Tax Control tax treatment to the topics discussed, in
Framework – differences due to size? the case of an assessment, the penalties
are halved.
With legislative decree no. 128, of 5th Au-
gust 2015, art. 3-7, followed by ministerial In addition to the above, the taxpayers
decrees of 14th April 2016, 15th June 2016 have access to faster ruling procedures
and 26th May 2017 and the ministerial since, differently from the ordinary rules,
circular letter n. 38/E of 16th September the answer to the rulings submitted by
2016, Italy provides a clear set of rules for those tax payers must be granted by the
companies that want to take advantage of relevant tax office within 45 days.
the “TCF”.
Finally, the taxpayers joining the TCF are
The taxpayers that can join the TFC at pres- exempted from the submission of the
ent are: resident and non-resident entities guarantee in the case of a request for the
whose turnover or level of revenues is not reimbursement of CIT and VAT.
less than ten billion euros; resident and
non-resident entities whose turnover or Are the tax authorities bound to check
level of revenues is not less than one bil- or consider the TCF? If yes, also for past
lion euros, provided that they have asked years?
to join the pilot project that the Italian
Tax Authority started in 2013; companies The admission to the TCF is subject to a
wishing to execute the agency’s ruling on formal request of the taxpayer followed
new investments – Dlgs no. 147/2015, art. by an assessment by the tax authorities on
2 – regardless of the level of turnover or the tax risk control system adopted by the
revenues. company aimed to confirm the existence
of the requisites for the admission. Further
The above-mentioned taxpayers must assessments on the tax risk control system
adopt an effective tax risk control system are carried out on a regular basis, and
which allows the company to exercise a the related outcomes discussed with the
constant control of the internal processes taxpayer. To the extent that the taxpayer
with a tax risk and, if necessary, to inter- maintains the requisites for joining the TCF,
vene, adopting the necessary measures to the tax authorities are bound to consider it
correct any failure. with effect from the date of the admission
onwards.
Participation in the scheme is also allowed
for group companies other than the one Cooperative compliance – agreed by fis-
with the above-mentioned requirements, cal authority? Cross-border applicability
if that group company pursues activities of cooperative compliance?
with a relevant impact in relation to the
tax risk control system. The TCF system implemented in Italy does
not contain special rules for cross-border
Benefits for the taxpayer resulting from transactions. Nonetheless, topics associat-
the TCF? ed with these transactions may be brought
to the attention of the tax authorities so as
In Italy, taxpayers joining the TCF have to obtain their “preliminary opinion” and
different advantages. can access the same benefits provisioned Contact Person
for domestic matters.
First of all, they can take advantage of the Paolo Dragone
“preliminary opinion” of the tax authori- Are there any rules regarding the digital- paolo.dragone@taxworks.it
ties. In fact, before the submission of the isation of tax processes? +39 045 8006905
tax return, the taxpayer can ask the tax
authorities’ position on the issues that are Digitalisation is already a reality in mass Vicolo Oratorio 5/A
discussed from time to time. If the taxpay- areas such as VAT and bookkeeping. The 37121 Verona
er does not agree with the tax authorities’ electronic filing of corporate tax returns Italy
preliminary opinion, and lends a different and tax balance sheets is also required. www.taxworks.it
15 international wts journal | # 2 | October 2017Mexico Tax Control Framework in Mexico
Turanzas, Bravo & Ambrosi, S.C.
National rules in respect of a Tax Control The conclusive agreement is an alternative
Framework, differences due to size procedure that allows for discussion and
negotiation between both parties before
Despite the fact that there is a 2013 OECD negotiation tables organised by PRO-
report and 2016 OECD guidance, as yet DECON regarding the classification of acts
there is no Mexican legislation on Tax or omissions identified by tax authorities
Control Frameworks (TCF), no enhanced re- within an audit procedure before a tax
lationship or cooperative compliance, nor assessment are imposed.
any further guidance or recommendations
on the form or size of TCFs or differences This procedure for a tax dispute resolu-
for companies of various sizes. tion promotes an enhanced relationship
between taxpayers and government to
We expect that, in the future, government obtain a common understanding of all
authorities will give a recommendation the relevant facts and circumstances in
with settings and essential building blocks order to speed up the process and resolve
for existing enterprise-wide models of in- disputes quicker.
ternal control that provides more certainty
for taxpayers. Another incipient programme is the pro-
gramme of verification in real time, which
Benefits for the taxpayer resulting currently applies to a reduced group of
from a TCF taxpayers, notably including entities in-
volved in certain trusts that issue publicly
In Mexico, there are no official benefits – traded securities and that invest in com-
such as a right to faster tax audits or other panies dedicated to energy and infrastruc-
material benefits. Nevertheless, in audits, ture (informally known as Fibra E’s).
the tax authorities might consider a TCF to
be support documentation indicating the Are there any rules regarding digitisa-
accuracy and completeness of the tax re- tion of tax processes?
turns and disclosures made by an enterprise.
On 2011, new rules were added to the
Are the tax authorities bound to check Federal Tax Code introducing the electron-
or consider the TCF? If yes, also for past ic invoicing system. All taxpayers that have
years? over MXN 4,000,000 of annual income
and are operating with another domestic
In Mexico, the tax authorities are not bound taxpayer with a Mexican Tax ID (this law
to check the TCF. However, once a tax audit is not applicable to foreign invoices) must
is in place, the tax authorities may consider submit and store all of their invoices worth
the TCF in order to obtain a better insight over MXN 2,000 in official electronica data
into the structure and organisation of the format.
taxpayer. On the other hand, the TCF may
be considered as an indication of the dis- In addition to electronic invoicing, along
closure and transparency of the taxpayer. with the 2014 Mexican tax reform, the
Contact Persons Mexican Congress made several amend-
Cooperative compliance – is it agreed by ments to tax laws, one of which relates to
Mauricio Bravo Fortoul the fiscal authority? Cross-border appli- the digitisation of tax processes.
mbravo@turanzas.com.mx cability of cooperative compliance
As a part of the 2014 tax reform pack-
Carl Koller Despite the fact that there is no regula- age, the Federal Tax Code establishes the
ckoller@turanzas.com.mx tion on cooperative compliance or the requirement of taxpayers to maintain ac-
+52 1 5550814590 enhanced relationship in Mexico, there counting books and records through elec-
is an alternative tax dispute resolution tronic systems and report on a monthly
Paseo de los Tamarindos 100 procedure (conclusive agreement) in the basis to the fiscal authorities by uploading
05120, Mexico City Mexican system through which an inde- this information to the Tax Administration
Mexico pendent public organisation known by its Service Internet portal through the elec-
www.turanzas.com.mx acronym as PRODECON acts as a contact tronic tax mailbox.
forum between the tax administration and
the taxpayer.
international wts journal | # 2 | October 2017 16Tax Control Framework in The Netherlands The Netherlands
WTS World Tax Service B.V.
Atlas Fiscalisten N.V.
National rules in respect of a Tax Control as soon as possible and pay its (advance)
Framework, differences due to size taxes within the payments terms. The tax
authorities will raise assessments as soon
In 2005 the Dutch tax authorities intro- as possible and try to handle the levying of
duced ‘Horizontal Monitoring’ (HM) or, in taxes as quickly as possible.
Dutch, Horizontaal Toezicht. The philoso-
phy behind HM was that it can provide an Are the tax authorities bound to check
instrument for the tax authorities to better or consider the TCF? If yes, also for past
utilise their limited tax audit capacity. The years?
most efficient way to use that capacity is
to audit taxpayers that, based on a risk HM is strictly voluntary and implement-
analysis, show the highest risk in terms of ed through an agreement with the tax
material non-compliance. Capacity can be authorities, though the overriding aspect
freed up by giving minimum attention to of the arrangement is (to build) mutual
(groups of) taxpayers that are deemed to trust. However, no formal statement can
have a low non-compliance risk because be expected from the tax authorities on
they are ‘in control’ of their tax position. whether the taxpayer is in control. Before
By relying on the TCF of such taxpayers, an agreement can be concluded, the tax
the activities of the tax authorities can authorities will, however, review whether
be minimised. At first, HM was applied the TCF of the taxpayer is adequate and
to large multinational enterprises on an whether there are any tax issues pending
individual basis. Later it was expanded to that need to be resolved first in order to
smaller companies and was introduced as start with a clean slate. Should there be
a collective arrangement, i.e. with respect issues from past years, the tax authorities
to tax advisers who monitored the tax will usually press to resolve these matters
positions of their clients when preparing before HM is implemented.
their returns.
Cooperative compliance – is it agreed by
Benefits for the taxpayer resulting the fiscal authority? Cross-border appli-
from a TCF cability of cooperative compliance
After implementation, taxpayers can HM as a form of cooperative compliance
expect easy access to their tax inspector is voluntary and not regulated by specific
if there are real-time issues they want to legislation. It is, in principle, a domestic
resolve, e.g. if there is a Dutch tax issue instrument. Cross-border application is not
involving an acquisition. Certainly for big a focus, but for multinational groups there
Dutch multinationals, this can be benefi- are clear cross-border aspects, like the link
cial as very material issues can be resolved with country-by-country reporting. Contact Persons
in real time. Frequent contact with the tax
inspector will be part of such an arrange- Are there any rules regarding digitisa- Denis Pouw
ment, so that each party remains informed tion of tax processes? denis.pouw@wtsnl.com
on issues that are of importance to the +31 10 217 91 73
other party. The taxpayer will be expected Digitisation of tax processes is already old
to proactively share material uncertain tax news in The Netherlands as practically all Conradstraat 18
positions with the tax authorities before tax returns are filed electronically. The tax 3013 AP Rotterdam
the tax return is filed. Understanding, authorities offer a service so that Individ- The Netherlands
transparency and trust are keywords in uals can download their personal income www.wtsnl.com
that respect. In return, the taxpayer can tax returns with all known data, like
expect not to be audited unless the tax au- taxable wages received, wage tax paid, Roelof Gerritsen
thorities have indications that the taxpayer known bank accounts, deductible interest rg@atlas.tax
is not holding to their end of the agree- etc. already recorded in the return, where +31 20 5354560
ment. Taxpayer and tax authorities can still the taxpayer only has to review the return
agree to disagree, which ensures room and add or change data. Where possible, Weteringschans 24
for discussion for following the most tax tax audits are performed based on statisti- 1017 SG Amsterdam
efficient route and for eventually going to cal information derived from the systems The Netherlands
court. The taxpayer will have to file returns of the taxpayer. www.atlas.tax
17 international wts journal | # 2 | October 2017Poland Tax Control Framework in Poland
Doradztwo Podatkowe
WTS & SAJA Sp. z o.o
National rules in respect of a Tax Control It must be noted that, in Poland, tax com-
Framework, differences due to size pliance is not checked by authorities until
during a tax audit.
Poland has not turned any Tax Control
Framework rules into legislation. That If an audit finds arrears of tax, the taxpayer
said, businesses committed to good may:
practices create their own internal tax →→ pay the arrears with interest pursu-
procedures to ensure that their tax matters ant to the audit report (this is called
are properly managed in compliance with “self-adjustment”), which will release
tax and accounting regulations and to de- them from criminal liability, or
velop a sound document and information →→ appeal/seek judicial review, but if they
flow framework within the organisation. lose, they cannot avoid being held
Importantly, however, internal Tax Control criminally liable.
Frameworks do not bind the tax author-
ities nor will they facilitate official tax Are there any rules regarding digitisa-
audits should these occur. tion of tax processes?
Benefits for the taxpayer resulting E-audit: Poland has had a new tax com-
from a TCF pliance audit regime since 1 July 2016.
Certain businesses are required to make
Having internal tax procedures is good for detailed tax disclosures with the data to
the company because it: be generated and transmitted electroni-
→→ limits the company’s tax risk; cally in a format called Single Audit File For
→→ makes it possible to identify those Tax (JPK in Polish).
responsible for tax risk or arrears of tax
that arise; The JPK format comprises logical structures
→→ limits the criminal liability of the man- of electronic tax records and accounting
agement board as Polish law imposes vouchers. Currently JPK consists of seven
such liability on the management structures:
board whenever persons specifically re- →→ books of account – JPK_KR
sponsible for the arrears of tax may not →→ bank statement – JPK_WB
be identified and brought to account. →→ inventories – JPK_MAG
→→ VAT sales and purchases records – JPK_VAT
Are the tax authorities bound to check →→ VAT invoices – JPK_FA
or consider the TCF? If yes, also for past →→ tax book of receipts and disbursements –
years? JPK_PKPIR
→→ revenue records (flat-rate tax) – JPK_EWP
Poland does not have TCF laws, while
internal tax procedures or controls do not ”Large enterprises” have been required to
bind the tax authorities. send JPK files on request by the tax author-
ities (except JPK_VAT) since 1 July 2016.
Cooperative compliance – is it agreed by This duty will start to apply to micro, small
Contact Person the fiscal authority? Cross-border appli- and medium enterprises as of 1 July 2018.
cability of cooperative compliance
Magdalena Saja Single audit file for tax in VAT: There is a new
magdalena.saja@wtssaja.pl Generally, Poland does not have a proce- law, in effect since 1 July 2016, requiring
+48 61 643 45 50 dure for businesses to cooperatively agree large enterprises to make monthly electron-
correct tax treatments with tax authorities. ic filings of their VAT sales and purchases re-
Bałtyk Building, 13th floor If a taxpayer is in doubt about the treat- cords using JPK_VAT format without request.
Roosevelta 22 ment of a transaction, they can apply to the The same duty applies to small and medium
60-829 Poznań relevant authority for a private tax ruling enterprises as of 1 January 2017, with micro
Poland applicable to the taxpayer’s specific case. enterprises required to make their monthly
http://wtssaja.pl JPK_VAT filings as of 1 January 2018.
international wts journal | # 2 | October 2017 18You can also read
