Session O116: Transfer Pricing, Indirect Tax and Customs Post-BEPS— Building a Business Case Niren Saldanha, Tax Partner, KPMG LLP Gisele Belotto, Tax Senior Manager, KPMG LLP Doreen Liu, Tax Managing Director, KPMG LLP Where can you get tax insight and explore leading tax technology?
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Transfer Pricing, Indirect Tax & Customs Post-BEPS – Building a Business Case
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Session O116: Transfer Pricing, Indirect Tax and Customs Post-BEPS—Building a Business Case
Where can you get tax insight and explore leading tax technology?
• Niren Saldanha is a Partner in KPMG’s Indirect Tax Technology practice and leadsKPMG’s Tax Technology efforts for global deployments. Based in New York, Niren hasover 15 years experience advising multinational clients on indirect tax (Sales/Use andVAT) automation and optimization areas. Niren holds an MBA and a CPA and is amember of the AICPA.
• Gisele Belotto is a Senior Manager in KPMG’s Trade and Customs practice and leadsKPMG’s Trade technology alliance with Thomson Reuters. Based in Miami, FL Giselehas over 16 years experience in international trade matters. Gisele holds an MA inEconomic Development and is a member of OWIT, ICPA and AAEI.
• Doreen Liu is a Managing Director in KPMG’s Global Transfer Pricing Services practice and leads KPMG’s Operational Transfer Pricing technology alliance with Thomson Reuters. Based in New Jersey, Doreen has nearly 15 years experience in delivering transfer pricing planning, documentation and controversy services to clients covering a broad range of industries. Doreen holds an MBA and is a co-author of the article “Staying Ahead of the Curve: What Companies Should Consider in Preparing the BEPS Master File”, in Bloomberg BNA’s Transfer Pricing Report, November 13, 2014.
BIOGRAPHIES
•To connect the dots between Indirect Tax, Customs Duties and Transfer Pricing and their dependencies
•How do you build a compelling case for change and influence key decision makers and stakeholders?
•How can you measure the value you add to your organization?
OBJECTIVES
• Overview – Synergies in Indirect Tax, Customs and Transfer Pricing
• The benefits of collaboration• The tax function in flux• Building a business case for collaboration
AGENDA
Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates.
PRODUCT PRICE TIME LINE
Cross-Border: Goods Transaction
t0
Set Transfer Price by
Product, by Supply Chain
Customs Import Value/Clearing• Duty
• Import VAT
Goods Receipt• VAT Accrual?
• Cost of Goods
A/P Invoice• Tax
• Offset Import VAT
TP adjustment for profitability target
t1 t2 t3
DISCIPLINE CONNECTIVITY
Indirect TaxCustomsTransfer Pricing
VAT calculations
Registration
Invoicing
Cash flow
Reporting
VAT grouping
Title transfer
Formalities
Vendor contracts
Refunds
Classification
Duty payments
Free trade agreements
Incoterms
Circumstances of sale
Importer/exporter of record
Country of export & import
Bonefide sale
Import/export declarations (documentation)
Product descriptions
Exchange rate
Customs valueMethod/desired profit benchmark
Profit results
Royalties/licensing
Retroactive adjustments
Function & risk
Permanent establishment
Value chain
Entity roles & structure
Taxing complex global supply chains in a post-BEPS world
The need to manage the impact of the anti-BEPS proposals across the company’s supply chain can provide the impetus to drive interaction and collaboration among these three often-isolated disciplines. Starting from the premise that intercompany pricing is:
1) A major element in managing transfer pricing policy,
2) Used to calculate import duties, and
3) The basis for indirect tax calculations.
THE BENEFITS OF COORDINATION
Analyzing and planning the company’s intercompany pricing stands to generate more ideas, efficiencies and value than are likely to be produced when transfer pricing is considered on its own.
The resulting collaboration and integration of a company’s transfer pricing, VAT and customs teams could continue producing benefits for the company for years to come.
THE BENEFITS OF COORDINATION (CONTINUED)
TAX FUNCTION EVOLUTIONValue
• Ensuring accuracyand timeliness of financial reporting and compliance
• Managing tax riskand tax authority audits
• Controlling costs –shared services, outsourcing, etc.
• Increasing efficiency– ERP implementations, tax technology, etc.
• Delivering cash tax savings or deferral
• ETR optimization
Risk
Cost
Transparency
• Managing information for country-by-country reporting, CRD IV, etc.
• Managingreputation with a focus on tax in the media
The focus of the tax function has evolved over time as its responsibilities have increased and it has been expected to deliver more with less.
10 – 15 years ago 5 – 10 years ago Today – 5 years ago Today
WHERE ARE YOU TODAY… AND WHAT IS YOUR AMBITION FOR THE TAX FUNCTION?
I
I
I
I
I
I
I
No f ormal career dev elopment paths or training programs
Limited consideration giv en to design of the organizational model f or tax
No f ormal tax policy or tax risk management f ramework
Financial data has to be signif icantly reworked bef ore it can be used by tax
Processes are not standardized or documented and hav e unclear responsibilities
Heav y reliance on spreadsheets and low lev el of automation
Tax f unction has no specif ic perf ormance measures
Clear career dev elopment paths and training programs
av ailable
Organizational model designed to take into account tax strategy , risk
and business needs
Board approv ed and documented tax policy and risk
management f ramework
No rework of data required and data can be relied upon
by tax
Standardized and documented global processes with clearly
def ined responsibilities
High lev el of automation and range of tax technology
implemented
Tax f unction has a scorecard aligned to business objectiv es
Governance and Risk
Organizational Model
People and Capability
Process and Responsibility
Data and Information
Systems and Technology
Performance Management
I=Initial
D
D
D
D
D
D
D
O
O
O
O
O
O
O
D= Defined O=Optimized
– Current state – Future state
HOW ARE TAX FUNCTIONS RESPONDING?Organizational
ModelProcess and
ResponsibilitySystems and Technology
Data andInformation
People and Capability
Governance and Risk
Performance Management
Tax Control Framework
1. Identify Strategic Partners• How can this benefit them?
2. Why is this project so important?3. How does this project tie into strategic plan?4. What is the potential impact of not doing this
project?5. Governance of Technology
BUILD BUSINESS CASE
There are some things we have seen which are almost universally true
CREATING A COMPELLING BUSINESS CASE
Cost of doing nothing
Cost of the alternative
It is important to establish the cost to build your tax solution in your ERP or build a custom solution.
Never forget that there is almost *always* a cost of doing nothing. The status quo also has a price.
There is greater value in a solution you can use now than one you cannot take advantage of for some time.
The value of NOW
WHY BUSINESS CASES SUCCEED OR FAIL
• Based on fact and reason • Actionable• Realistic• Focused on numbers
Business cases succeed when they are:
• Based on guesswork• Too esoteric• They overpromise• Heavy on conjecture
Business cases may fail when they are:
• Make it as short as you can• Provide real examples• Make it relevant• Be bold, but reasonable
Business case best practices
IN GENERAL: COMMON BENEFITCOMMON DATA, DIFFERENT USE
Customs
Transfer Pricing Indirect Taxes• Pricing and Value• General Ledger• A/R, A/P• Goods Movements• Dates (events)• Material vs. Service• Contracts Data• Related-party
• There are various connections among TP, Customs, Indirect Tax
• Today, most companies view and handle each area independently; compliance risk and missed opportunities
• Increased coordination and strategic planning not only can mitigate risk but also provide tangible benefits and savings
• Technology is becoming available to address the three areas more strategically
IN SUMMARY
THANK YOUSome or all of the services described herein may not be permissible for KPMG audit clients and their affiliates.
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.