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Lunch & Learn

Managing your end-to-end VAT processThursday, 20 August

Building Tax Knowledge

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John CurryDirector – Tax Transformation & TechnologyKPMG in Ireland

t: +353 1 700 4242m: +353 87 050 4242 e: john.curry@kpmg.ie

Ethna KennonDirector – Indirect Tax – VAT & CustomsKPMG in Ireland

t: +353 1 410 1703m: +353 87 744 1703e: ethna.kennon@kpmg.ie

Keith LoughmanDirector – Indirect Tax – VAT & CustomsKPMG in Ireland

t: +353 1 410 1731m: +353 87 744 1731e: keith.loughman@kpmg.ie

David DuffyPartner – Indirect Tax – VAT & CustomsKPMG in Ireland

t: +353 1 700 4152m: +353 87 050 4152e: david.duffy@kpmg.ie

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What will we cover today?Trends impacting VAT compliance

VAT compliance – Challenges & potential solutions

Technology – Driving & supporting VAT compliance

Current & future VAT developments impacting compliance

Questions and answers session

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Poll

What do you see as the biggest VAT compliance challenge for your business?

Technical complexity of VAT rules Managing foreign VAT obligations Systems/Data limitations Keeping up to date with changing requirements Internal challenges e.g. resource constraints

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Trends impacting VAT compliance

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What’s driving VAT policy?• Significant VAT Gap / VAT fraud in EU• New technologies available to tax authorities• Macroeconomic environment and shocks (e.g. Covid-19)• Aim to reduce complexity for business

What are we seeing in response to those influences?• Significant reforms proposed at an EU level• Many countries introducing additional VAT reporting obligations• Extended audits/interventions using e-audit • Changes in VAT rates

What are the impacts for business?• Additional and more complex reporting obligations• Increasing need for better data and systems integration• In many cases a need to consider overseas as well as in-country obligations

Trends impacting VAT compliance

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VAT compliance -Challenges & potential solutions

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• Complex VAT rules

• VAT recovery - non deductibles, partial VAT recovery

• Capturing reverse charge VAT

• Audits

• Statistical returns, Annual Return of Trading Details

• Keeping up with VAT rule changes e.g. temporary rate changes

• New products/new markets

• New delivery models /Brexit

• Timelines• Budget constraints• Technology costs• Covid issues

• Systems often not integrated

• Time spent extracting data

• Difficulties in reconciling data

• Manual adjustments

• Future proofing

• Inconsistencies

• Different registration, reporting & filing requirements

• VAT refunds & deadlines

• Invoicing requirements

• Audits

VAT compliance challenges

Irish VATCompliance

Managing International VAT

Obligations

Pace of Change

Systems Limitations

Internal Challenges

VATCompliance

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Potential improvements and solutions

Inhouse solutions Resource: People Resource: Infrastructure:

o Improving existing systems & reporting tools o Control environmento Tax engines

Outsourced solutions Ongoing capability & support

o Domestic VAT reportingo Multi jurisdictional VAT reporting

Technical assurance Free up resources

Obtain support when required e.g. VAT health checks, tax authority audit support Added value analytics e.g. cashflow saving opportunities Best practice benchmarking e.g. Record to Report review of processes

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ASPAC Delivery Centre — 2020

Hungary (39 countries)

LATAM 2020

North AmericaIndia Delivery Centre

MESA

Outsourcing - KPMG's VAT compliance centres

Hungary (39 countries)

Ireland (Domestic)

JHB Africa Centre

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Technology – Driving & supporting compliance

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Record to Report

Detective controlsPreventative controls

Reporting, Reconciliation &

ValidationTransaction processing Post-transactional

adjustmentsMaster data Tax determination logic

Output VATG/L

account

Input VATG/L

account

VAT controlG/L

account

SalesprocessingO

rder

en

try

Ord

er

entr

y Purchase processing

Credit notesBad debts

Credit notesaccruals

Customer master data

Product data

Supplier master data

AR VAT logic

AP VAT logic

End-to-end process

13Te

chno

logy

enab

lers

Systems &platforms

Processes

Compliance

ERP Tax sensitisation(tax engine, blue printing, tax masterdata)

Dat

a

Tax data management & intelligence (tax data strategy, tax insights & datawarehouse

deployment)

Process & controls(end-to-end process review/improvement, tax control

framework)

Compliance automation(compliance readiness check, datapreparation)

Tax savings & risk/compliance insights(health-checks/reverse audits,etc.)

People

Foun

datio

nDa

ta-e

nabl

edpr

opos

ition

s

Tax transformation

Tax transformation through data-driven solutionsIndirect Tax function enablers Technologies Data-driven improvement areas

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2001 2002 2007 2008 2009 2010 2011 2013 2014 2015 2016 2017 2018 2019 2020

Audit files (standard Audit File-Tax VAT books)

Periodic

On demand

Real-time Reporting

Making Tax Digital

E-invoicing

B2G

B2B

Other

Overseas developments - Pace of change

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Future developments impacting compliance

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Brexit – VAT & Customs compliance issues

Supply chains & systems• Impact on your ERP/finance systems• Review supply chains, customer

agreements, Incoterms, master data

Compliance• EORI number, filing customs declarations –

inhouse or customs broker • Dealing with import VAT• Consider classification rules, valuation and

origin, potential tariffs, import/export controls etc

• Reliefs and simplifications - customs warehousing etc

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Managing overseas VAT compliance

Do I need to register for VAT/GST overseas?• Map supply chain• Check customer status (business or consumer, VAT registered if EU based?)• Registration threshold?

Registration process Fiscal representative required? Bond/security? Local bank account needed?

Filings Frequency Online/real time Interactions with local tax authorities Records

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Source - KPMG LLP “Taxation of the digitalized economy” – updated 11 August 2020

Legislation Enacted

No Development

Draft Legislation/Public Announcement

Digital economy – Indirect Tax developments

Increase in Indirect Tax registration & compliance

obligations

B2C digital services

Online sales of goods

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Keeping up to dateApp Store/Google Play: “KPMG Digital Economy Tax Tracker”

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July 2021 - Changes affecting online sellers & marketplaces• B2C sales of goods to consumers within the EU & B2C sales of goods to consumers imported from

outside the EU • Obligation to charge VAT in consumer’s country and/or additional VAT reporting requirements• Platforms facilitating B2C sales of goods

2024 – Payment Service Providers (PSPs)• Rules regarding collection and analysis of data from PSPs in effort to detect and eliminate VAT fraud

Impact on Compliance• Simplification?• Increased obligations and complexity?• Systems Issues – charging VAT in multiple jurisdictions, VAT rates, different VAT treatment depending

on goods value, filing & record keeping requirements

Forthcoming EU VAT changes

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Q&A

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Next in lunch and learn series –Maximising R&D Tax Credits on 1 September 2020

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