To hear about tax planning and the things that need to change in the UK tax legislation Finance Monthly speaks with Adele Raiment, Director of the Tax Advisory team that specialises in entrepreneurial and privately owned businesses at Mazars LLP. Adele’s main area of expertise is working with privately owned businesses to develop and implement a succession plan, to ensure that any assets that the shareholders wish to retain are extracted in a tax efficient manner and she also works with all parties to assist in the smooth running of transaction.
What are the typical challenges faced by shareholders of entrepreneurial and privately owned businesses in the UK, in relation to the management of their finance?
I think the main concern on the horizon is the potential impact of Brexit on the UK economy and business confidence more widely. For privately owned businesses in the UK, many are still very cautious following the 2008/09 recession, and with the uncertainties surrounding Brexit, it is difficult to plan too far ahead. One of the main priorities of shareholders is ensuring that they have sufficient cash reserves to ride any potential downturn in the economy whilst recognising that they need to invest and innovate to thrive.
What is your approach when helping clients with tax planning?
My approach is to primarily understand the client’s commercial and personal objectives in priority to considering any tax planning. When planning for a transaction, I frequently find that the most tax efficient option isn’t always going to meet the key objectives of the shareholders or the business. It is important to consider the shareholders and the business as one holistic client, and therefore strike the right balance between personal, commercial and tax objectives. In respect of tax specifically, it is important to take all relevant taxes in to consideration whether it be corporate or personal. A good understanding of all taxes is therefore required.
My clients vary from FDs, to engineers, to self made entrepreneurs - all requiring different approaches. I believe that it is fundamental to get to know your client and adapt your approach to ensure that they understand you and what you are trying to achieve.
What are some of the day-to-day challenges of operating within tax planning? How do you overcome them?
As I predominantly work on transactions, I often work very closely with other professionals such as corporate finance professionals, lawyers and other accountants. The key challenge to this is making sure that the whole team is working collaboratively to achieve the best result for our client.
We are also under pressure to keep costs down, whilst ensuring that we provide quality advice. This can be difficult if the team has multiple transactions on the go at the same time and senior resource is constrained or if the project is wide-ranging, requiring several specialists to input in to the advice. The key to this is having a driven and supportive team, where teamwork and openness is pivotal to success. The working environment of my team at Mazars is incredible as we encourage open discussions on a variety of areas but one of the most useful ones is on technical uncertainties, which encourages consultation in times of uncertainty and technical development.
In your opinion, how could UK tax legislation be altered for the better?
Despite an exercise to ‘simplify’ UK tax legislation over more recent time, the legislation has increased in volume. A good example of this is that there are now two separate corporation taxes acts, when previously there was one. Having said this, the majority of the language used in more recent acts has made the legislation more user-friendly. However, there are still pockets of the legislation that seem to have been rushed through parliament and the practical use of the legislation was not considered fully prior to being enacted. This has resulted in several pieces of legislation being amended a year or two down the line. Although there does seem to be an element of consultation between Practice and HMRC prior to some legislation being enacted, I’m not always convinced that HMRC take on board the feedback. I therefore feel that a more rigorous consultation process should become standard to ensure that the commercial and practical elements of legislation are considered prior to enactment.
Contact details:
T: +44 (0) 121 232 9583/ M:+44 (0) 7794 031 399
Website: www.mazars.co.uk
Email: adele.raiment@mazars.co.uk
LinkedIn: http://uk.linkedin.com/pub/adele-raiment/13/693/360
Email: adele.raiment@mazars.co.uk
LinkedIn: http://uk.linkedin.com/pub/adele-raiment/13/693/360
Tajudeen Akande is Senior Partner at PKF Nigeria (PKF Professional Services) and a member of PKF International - a global network of legally independent accounting/business advisory firms bound together by a shared commitment to quality, integrity and the creation of clarity in a complex regulatory environment. Here, Mr. Akande tells us about the transformation of the tax system in Nigeria, as well as the challenges of providing tax advice in the African country.
What would you say are the challenges of providing effective accounting and tax advice in Nigeria?
The main challenges of providing effective accounting and tax services in Nigeria include:
- The Economic situation of the country, which has constrained people’s ability to pay for professional service, having to, in most cases, resort to use of quacks and unqualified people.
- Regulators – Professional accountants in Nigeria are regulated by the Financial Reporting Council of Nigeria (FRCN) as well as two professional accountancy organisations operating in the jurisdiction—the Association of National Accountants of Nigeria (ANAN) and the Institute of Chartered Accountants of Nigeria (ICAN), and of course there is the Chartered Institute of Taxation. The multiplicity of bodies saddled with the responsibility of regulating the practice of accounting and taxation is a challenge to practitioners in terms of proper monitoring and discipline of erring members.
- Challenges in the area of tax practice include:
- Lack of clarity on taxation powers of each level of government (There are three tiers of Government in Nigeria);
- Insufficient information available to taxpayers on tax compliance requirements thus creating uncertainty and non-compliance;
- Use of aggressive and unorthodox methods for tax collection by tax authorities;
- Failure by tax authorities to honour refund obligations to taxpayers.
How has the tax system in Nigeria transformed throughout the years?
Nigeria’s tax system has evolved a lot over the years - from the pre-colonial era to the latest tax reform codified into a National Tax Policy.
In the traditional Nigerian society, the formalisation of taxation was practically non-existent. Citizens were only exposed to a variety of levies as dictated by paramount rulers and different traditional rulers created their different forms of taxes and levies.
To achieve conformity and uniformity in taxation, Raisman Commission was set up in 1958 by the colonial Government, which advised that basic income tax principles should be introduced and standardised across the country, which was accepted by the Government. Thus, direct taxation was incorporated into the constitution of the Federal Republic of Nigeria, after which the Companies Income Tax Act and Income Management Act of 1961 were established. This marked the foundation of Nigeria’s modern tax laws.
As a result of the increasing complexities in commercial transactions and glaring issues relating to practical interpretations of the laws, the Acts were repealed and reenacted giving rise to Companies Income tax Act CAP C21 LFN 2004 and the Personal Income tax Act CAP P8 LFN 2004, as well as other tax regulations which have changed the face of tax administration and practice in Nigeria.
Nigerian taxes are currently administered through the three levels of Government, as outlined in the Taxes and Levies (Approved List for Collection) Act (Amendment) Order of 2015.
The National Tax Policy (NTP) was first published in 2012, as part of the efforts to entrench a robust and efficient tax system in Nigeria. This was reviewed in 2016 in response to the rapidly changing commercial environment and persistent low tax to Gross Domestic Product (GDP) ratio.
Recently, Nigerian tax administration has been reshaped and expanded to focus on international tax. Various measures have been put in place to curb base erosion and profit shifting, so as to improve government revenue. Some of these measures include Transfer Pricing Regulations, Double Tax Treaties and Multilateral Agreements. Also, the tax payment system has been automated. Tax payers can now pay, generate receipts and even file tax returns and obtain Tax Clearance Certificate (TCC) online.
What are PFK Professional Services’ philosophy and top priorities towards its clients? How has this evolved over the years?
PKF is a global family of entrepreneurial minds working together, pooling our collective resources, experience and skillsets to add significant value to clients. We combine our understanding of local regulations, international perspectives and grasp of niche markets to create a simple, seamlessly executed approach. When you engage with PKF, you can be confident that the work will be carried out by dedicated and experienced professionals. We know the importance of having teams who have real sector experience.
The PKF ethos is about working together. We believe in giving teams the same encouragement as the individuals within them. We pursue a philosophy of shared responsibility and shared success. The most distinctive feature of PKF practice is our attitude towards our clients. Our people are good at building and developing relationships. This means getting to know our client’s organisation to understand their long-term needs.
Website: https://www.pkf.com/pkf-offices/africa/nigeria/pkf-professional-services-ng-lagos/
Luis Ugarelli is Managing Partner at Market Facilitators, an economic consulting facility with main offices in Lima, Peru. The company provides consulting services, advisory and economic studies for different sectors in key economic variables to foster competitiveness and development. Finance Monthly speaks to Luis about the Peruvian transfer pricing system.
Can you explain how the Peruvian transfer pricing system works? What type of documentation does a company have to prepare?
Arms’ length principles were incorporated in Peruvian Legislation in 2001. As the country is aspiring to join the OECD in the near future, Peru has been trying to follow OECD directives very closely. For instance, some of the BEPS actions have already been implemented. The size of the companies, measured by the level of sales (above US$3 million) plus the volume of controlled transactions (purchases plus sales above US$500 M), trigger the presentation of Local File. As of 2017, a condition to make deductible services received from related parties or tax heavens must pass the benefit test. Master Files apply for consolidated turnover of groups above US$27 million. CbC Reports would eventually reach around 10 Peruvian Multinational Groups only. BEPS reports in Peru are sworn informative declarations that may trigger voluntary or compulsory tax adjustments only when results prove to be detrimental for the treasury.
What are the potential penalties for companies if they fail to submit accurate information regarding transfer pricing? Is there an appeal process?
If company fails to present a Local File by due date each year (with the exception of this year, as taxpayers are expected to submit year 2016 in April 2018 and year 2017 in June 2018), fines for not complying are 0.6% of a company’s sales with a ceiling of US$32 thousand by report. The fines are the same if the filing is partial or inaccurate and applies to master files and CbC reports as well. There is a progressive fine reduction for voluntary filing as long as the taxpayer declares it before a transfer pricing audit is open. As conditions requested for the benefit test appear to be excessive, some companies are assuming that these expenses will be repaired on their income tax declaration. Resolutions as a result of transfer pricing audit may be appealed in three instances and may end up in the Tax Court.
What is the Peruvian Tax Authority’s current approach to transfer pricing? How often do they carry out audits?
Statute of limitations of tax obligations is five years. Although tax audits have not followed a particular pattern, some partial audits in transfer pricing have been carried out in the last three years, but have resulted in disputed items that may end up in the Tax Court. Since the government has observed a dramatic tax collection drop in the last five years, part of the blame goes to controlled transactions. Therefore, tax authorities are betting that the situation could be partially reversed with a closer attention and audits to transfer pricing matters. Parameters to define taxpayers under formal obligations have been raised and more revelation is asked, with the intention of focusing on a smaller number of taxpayers (a drop from 6,500 to 3,500) in material transactions with commodities and imports, particularly medicines, consumer goods, capital goods, grains; and in intra-group services and financial operations of all economic sectors.
How do you best help companies manage their transfer pricing issues and what services do you provide?
For Peruvian companies with significant transfer pricing operations, early advice and transfer pricing planning is by far the most effective approach for timely problem recognition and resolution – the sooner, the merrier, as I like to say. Companies do not need to act like they’re blindfolded regarding the market prices for specific material transactions they execute - for those purposes we do comprehensive benchmarking analysis of interest rates, royalties, rents, cost, etc. In some cases, an entire revamping of the controlled transactions is advisable, and this reshuffle can make wonders for the development of a streamlined operation and present a clear and transparent position before the tax authorities.
Contact details:
Email: luis.ugarelli@marketfacilitators.com
Website: www.marketfacilitators.com
With over 15 years’ experience assisting US individuals to navigate the complexities of the US and UK tax legislation, James Murray is currently a Director at Frank Hirth. James has a focus on those international US citizens and Green-card holders who have an interest in a non-US structure including those in the asset management sector.
Frank Hirth has over 140 tax professionals across London, New York and Wellington providing US and UK tax compliance and advisory services to individuals, partnerships, trusts and companies. Most technical staff are fully qualified to ‘dual handle’ both regimes, to provide global tax efficiency. Established over 40 years ago Frank Hirth is recognised as the leading tax accounting practice for assisting with international US tax matters outside of the US.
What are the headlines from recent US tax reform?
The main headline of President Trump’s Tax Cuts tellgamestop Jobs Act 2017 (‘tax reform’) signed into law in December 2017 was very much in the corporate arena with a reduction of the Federal tax rate from an eye watering 35% to a more globally competitive 21%; as well as a move to a territorial system of taxation for US companies.
Individual US citizens, greencard holders and residents continue to be subject to US Federal tax on their worldwide income, irrespective of where they physically reside. The top Federal tax rate has been reduced to 37%, however, they have also withdrawn a number of favourable deductions that were previously available – resulting in only a marginal change in the effective tax rate in many cases.
Unfortunately, some of the changes targeted at US corporations have had what may have been unintended, and certainly unexpected, results for our international US clients who have business interests overseas.
In what way has it impacted Americans doing business outside the US?
These changes can result in certain income within non-US companies being attributed to the US shareholders on an arising basis for US personal tax purposes, as opposed to upon receipt of funds by way of dividend. As a consequence the US and UK tax points and character may not align and therefore can result in double taxation.
We are already seeing that this will require those US individuals with a certain level of interest in a UK company needing to reconsider how to best structure their business and the best strategy for extracting funds tax efficiently.
Has there been a change in the number of Americans living in the UK as the result of the reform? Why is this?
It is too early to tell or measure, particularly given the general uncertainty in the UK with Brexit. Over the last few years there has been a general increase in the number of US citizens choosing to relinquish their US citizenship although again this may be down to several factors. For instance, the implementation of FATCA has been instrumental in identifying those US individuals living overseas who may not have appreciated the tax implications of holding such a status.
Do you have any advice for American taxpayers residing in the UK?
Yes. The key is to ensure that high quality, joined up advice is sought as soon as possible. Navigating two very complicated tax regimes is a challenge and mitigating double taxation is vital. There are a number of anti-avoidance and anti-deferral measures within both the US and the UK legislation which, without the appropriate guidance, can lead to mismatches and other issues. This is even more apparent for long term UK residents following the changes to the UK deemed domicile rules that became effective 6 April 2017 as they can no longer access the UK’s remittance basis.
Managing the US and UK tax systems requires a deep understanding not only of each jurisdiction’s legislation, but most importantly how they interact with one another, including the use of tax treaties. There are many myths out there that can often be dispelled following discussion with an expert. We find that more than ever having tax advisors working closely and collaborating with wealth managers and lawyers often results in the client obtaining rounded, and not siloed, guidance as to how best manage their affairs.
Are there any substantial changes you anticipate in the future, good or bad?
Many of the US tax reform changes are due to sunset in 2026 and so are not permanent. It will be interesting to see what, if any changes occur, especially if the US administration changes. At present there has been no indication that any amendments will be passed to correct errors. There will however be increasing pressure to do so.
Based in Germany, Westphal+Partner offers a wide range of independent tax, accounting and audit services, specialising in small and medium-sized foreign-owned enterprises doing business in Germany. Besides that, the firm acts as a controlling unit for the investor ensuring oversight. As CPAs, Westphal+Partner’s accounting operates risk-oriented detecting and avoiding misstatements during the accounting process, preventing changes at the annual financial statement. Finance Monthly speaks to Partner Ingrid Westphal-Westenacher, who tells us what clients expect from an accountant and shares the challenges that her firm faces.
From your experience, what do clients actually want from an accountant?
Our customers have decided to hire experts to solve a problem that has nothing to do with their core business. They want to focus on their business idea without losing sleep thinking about tax payments and accounting. Once entrepreneurs decide to outsource bookkeeping or get help from a tax advisory, they expect viable solutions enabling long-term success. And they are right to do so. An outsourced bookkeeping must be objectively and legally correct at any time, while also being up-to -date. Since corporate tax in Germany tends to be quite complex, especially for people with scant knowledge of the local tax codes, clients should expect their tax adviser to explain tax issues in a comprehensible manner, so they can make the right decisions.
How do you make sure to keep up with you clients’ expectations?
Communication - not just with the business owner, but with the management and the staff too.
What challenges would you say you and your firm encounter on a regular basis? How are these resolved?
One challenge that we face is knowing our clients’ business, plans, expectations, and needs. Only by knowing all of them, you are truly able to advise clients on a rational basis. One way to resolve this issue is to build a relationship of mutual trust. In order to do so, we firstly articulate what customers can expect from us, clearly defining our services and explaining our proceedings. With this certainty, customers know what to expect from us, so they can focus on their businesses without worrying about taxation or accountancy standards.
Foreign clients add a cultural dimension to the customer relationship - an aspect often underestimated and frequently resulting in underlying frictions. People from different parts of the world have different cultural preferences and backgrounds; i.e. some people from China have a different attitude when it comes to taxation, when compared to people from Germany. The essence of it is to avoid pointing out the differences, but instead, to make sure that both sides fully understand how the other side’s processes and systems work. To avoid any kind of misunderstandings, we not only pay close attention to these differences, but, for example, we also have colleagues in our team who are Chinese or have lived in China and are familiar with the culture.
How are these challenges set to change, in conjunction with the advent of technologies and the potential future needs of clients?
Both challenges will persist, even with the advent of technologies. However new technologies are already disrupting audit and bookkeeping. Today, clients can check the books at the end of the month online and see how their business performed. In the future, bookkeeping will be a fully automated process with real-time results, by the day, enabling better oversight and steering and even fewer costs due to AI-powered accounting software.
As a long-term former Chairwoman of the working group Quality Assurance SME at the Institute of Public Auditors in Germany (IDW), I’m convinced we will see significant changes in the field of auditing. Tool-based data analytics will enable us to read out process data and check them by sophisticated data algorithm. This will put auditors in an unrivalled position to consult the client on strategic decisions.
What’s your piece of advice to our readers?
When the decision to outsource bookkeeping has been made, try to hire an accounting firm run by CPAs. Accounting firms with a pure background in tax sometimes tend to disregard the code of commercial law, focusing narrowly on tax law; thereby causing problems with the mandatory preparation of the balance sheet under the German commercial law, and insofar causing unnecessary trouble and costs. Finally, trust your gut feeling when hiring an accounting company - it is very important to feel at ease and understood by your adviser. Be cautious of people hiding behind technical jarring.
Website: https://www.westphal-wp.de/
Finance Monthly speaks to James Butler – experienced practitioner, business adviser to SMEs and Consulting Partner at GBW – an Irish company that wants to make sure that a choice exists for those smaller businesses that require a more hands-on approach than that offered by the larger firms.
What are the key services that GBW offers to clients?
We are a mid-tier firm of accountants and business advisers with varying specialties and backgrounds. Our services range from assisting with Audit, Assurance, Taxation and Accounting, through to Business Advisory and Corporate Recovery. Our cross-border service offering, business approach and sector expertise is primarily designed to support Small and Medium-Sized Enterprises, or organisations of equivalent scale, with existing or planned international operations.
GBW is an independent member of TGS – a global accountancy and legal network of independent firms specialising in the provision of accounting, audit, tax, business advisory and commercial legal services.
Tell us more about TGS?
Not all networks that are part of the group are the same. TGS member firms are all independently owned and share an entrepreneurial approach to their own and clients’ businesses. We have a shared commitment to the highest levels of technical expertise and professional standards. Our clients enjoy a rapid access to quality assured in country experts across the world, via a single point of contact.
We recognise that every client is unique and our cost-effective solutions are tailored to our clients’ unique requirements. Whether they require a full suite of accounting and business solutions or a one-off specialist service, TGS Global can provide precisely what our clients require, no more and no less.
You have extensive experience in Insolvency & Corporate Restructuring, and have acted as liquidator in both creditor and member voluntary liquidations. What does your role within GBW entail?
In my role within GBW, I deal with banks and financial institutions in all areas concerning distressed property and non-performing loans. I’ve also been involved in debt management and refinancing for both companies and individuals.
Additionally, I am also an experienced practitioner in taxation and business advice for businesses in the area of the licensed trade, professional services and medical practitioners.
GBW’s Services:
Audit and Accounting
We aim to help our clients see the audit process as a benefit to their business, not just a cost.
Taxation
Our taxation department has expertise in all categories of taxation, both our corporate to personal clients.
Business Advisory Services
All businesses require planning – form start-ups to mature businesses. Our business advisory experts can assist with the planning and execution.
Accounting
Our Accounts department provides all types of assistance, whether be in-house or out sourced, we have the expertise.
Corporate Finance
If you are selling, buying or merging a business. If you are making an investment or raising finance – we can help with the decision making process.
Forensic and Litigation Support
In today’s changeable economic environment, business disputes are becoming more frequent and litigation is on the increase. At GBW, we draw on the firm’s wide expertise of our accounting professionals to advise our clients in claims assessment and provide independent expert accounting witness services.
Recovery and Restructuring
We are leaders in the provision of insolvency and restructuring services. Our team comprises of insolvency experts, forensic specialists and support staff who work together to provide a comprehensive and complete solution to any restructuring or insolvency project.
Website: http://gbw.ie
To hear about tax in Romania, Finance Monthly reached out to Florica Cira who is the Managing Partner and Founder of FinACo -an accounting and tax advice company.
Have there been any recent/upcoming updates or changes to tax rules in Romania?
There have been quite a few changes in Romania in the last few years. Some of them were needed, but others, in my opinion, simply increased the bureaucracy.
2017 was a very dynamic year in regards to changes in the tax rules in Romania. An amendment was published almost every month so tax advisers, accountants, managers, as well as business owners had a busy year.
A lot of things changed in labour taxation:
- The increase of minimum gross salary per economy to 1,450 RON. The previous change was made in May 2016, from 950 RON to 1,400 RON, therefore in less than 1 year, an increase of 50% affected several industries.
- The increase of Pension insurance for salaries higher than €3,000 a month.
- The employers pay additional tax for the part-time labour contracts.
- Stricter rules for the time sheet evidence and labour contracts conditions were activated. At the same time, the penalties increased.
- The disability fund paid by the companies was increased by 100%.
- Due to a new regulation published in November, as of January 2018, a new social security system will be applied by transferring the employer cost with social security to the employees. The employer will still be obliged to withhold on payroll the employees’ social security.
The main modifications refer to:
- Increase the employee social security from 16.5% to 35% and decrease the income tax from 16% to 10%.
- Decrease the employer taxes on labour from 22.75% to 2.25%.
The actual labour cost will not change much. However, in some sectors like IT and R&D, where the employees are exempted of income tax, this transfer of taxes will decrease the net salaries with around 7%.
This major change could have a negative impact on companies considering that the budget for the next year was approved beforehand.
In the long run however, these changes could be very beneficial for Romanian social security, since individual insurance will increase. Furthermore, the public funds for future payments to social security could be managed much better.
Still, business managers and owners ask themselves whether the Government guarantees to keep the labour taxation to 2.25% in the next few years.
The period of time for implementation, software updates, discussions, negotiations between employer and employees is very short and involves efforts by both sides.
Additionally, there have also been recent changes in regards to VAT - the so-called “split payment” of VAT which set-up a new method to follow-up collection and VAT payment, starting in 2018. The system implies that VAT tax payers will have the obligation to open a new bank account for managing only VAT payments. The companies are forbidden to withdraw cash or use this funds for anything that’s not VAT payments. The fines and penalties are extremely high if the rules are not respected.
The Government’s main objective is to increase the level of collection and reduce VAT fraud. However, specialists note that this measure will increase operating cost and cause cash flow issues.
The business sector firmly rejects this new form of bureaucracy and economic experiment, hoping it will not be applied.
As of 1st January 2018, there will be some major changes in regards to corporate tax too. Companies with a total in revenues under € 1mil per year, will pay tax on revenues:
- 1%, if it has employees.
- 3% if it does not have employees.
In the last five years, the threshold for this type of taxation has increased from € 65,000 in 2013, € 100,000 in 2016, € 500,000 in 2017 to € 1 mil, as of 1st January 2018.
Because this form of taxation is mandatory, it could have a negative impact on industries with EBITA lower than 6%, as well as on investment projects, where the operating expenses cannot be deducted from the operating profit in the current year or in the next fiscal years.
What would you say are the advantages of setting up a business operation in Romania, in terms of tax?
Even though there have been many changes in tax regulations in the last few years, which has created challenges in setting-up a business strategy, there are still some fiscal advantages which are worth mentioning:
-Developers and employees from R&D projects are exempted of income tax on salary. This facility can decrease the labour cost.
-Small companies with a turnover under €1 mil, which report EBITA over 7% has an advantage by paying only 1% to their revenue.
-Companies which invest in equipment are exempted on tax on profit for the value of the investment.
What are some of the key challenges of helping clients with tax, accounting and payroll?
The SME sector have grown very quickly in the last years, partially because of the investments made with European Funds. Our role is to assist and help our customers with their goals and to be more competitive and dynamic in a market influenced that is more and more by new technologies, data volume and high speed of reaction. At the same time, a challenge that we face is ensuring that the accounting and reporting standards are respected as well as that the taxes are correctly assessed.
We assist our clients with finding new better solutions to optimise their activity. Some of our projects that we work on include:
-Assisting with setting up ERP systems in compliance with the local accounting and fiscal standards. The challenge is to localise the system, ensure that the reporting criteria is fulfilled, and ensure that the automatic processes are correctly set.
-A lot of small companies have gone through mergers or have split to better organise their activity or to sell the business. Such a project implies team work from managers, lawyers, accountants and advisers.
-Assisting and representing our clients to fiscal audits performed by Tax Authorities on field like: corporate tax, transfer pricing, labour tax, VAT.
-Project-based accounting and management reporting is requested more and more even by small companies, to optimise their cost, to measure and increase their performance.
What differentiates FinACo from its Romanian competitors?
We provide integrated services to our clients for projects regarding: accounting, budgeting, consultancy, and tax-related issues.
Where do you see the company in 2-3 years?
New technology will challenge us to find a new way of using our knowledge. Booking routine works will be taken over by machines. We must be prepared for new methods like cloud accounting, and learn to be more than an accountant and become an adviser on business environment.
Website: http://www.finaco.ro/
To hear about taxation in India, this month Finance Monthly reached out to Shipra Walia – Managing Partner at W S & Co. With her experience in Corporate Taxation & Advisory spanning over 12 years, Shipra is experienced in opining on international tax issues, valuations, ICDS, FATCA, interpretation of treaties, group reorganization options, transfer pricing issues, due diligence, inbound/outbound options and expat taxation. Her tax compliance work includes representation before the tax authorities, including settlement commission.
International organisations continue to spend more time and resources managing tax liabilities in both their local and overseas markets. What tax efficient structures are available in India to businesses with international interests?
There are many forms of incorporation in India as per which a person can enter into Indian market:
- Branch Office
- Project Office
- Company
- Partnership Firm
- Joint Venture
- Association of Persons or
- A foreign company can incorporate a subsidiary in India.
All of these structures have their different tax forms. Further, India has recently laid down rules and framework for the foreign tax credit adjustments as per which the person doing business in India or with India or Indian entity doing business in other parts of the world will be able to claim hassle free credit / setoff[1] of the taxes paid in other different countries.
Is the India’s tax regime more suited to particular types of business? If so what are they and what makes them suited to India?
India is already a hub for the Services Industry. Currently, with the focus of the Indian Government on the concept “Make in India” and with the various time-to-time relaxations provided in the Foreign Direct Investment norms, all businesses have a scope in India.
How do you help your clients mitigate their tax liability whilst remaining fully compliant with tax laws?
Planning from the initiation of the transaction is key. It is our foremost intention to keep our clients updated of the new events, news or any changes happening which helps them with planning their business strategy.
Can tax saving initiatives be kept up-to-date, especially in light of changing legislation? What happens if a current tax plan is no longer viable because of legislative changes?
Yes, any legislative change gives you enough time to act and adjust accordingly.
However, there may be times when certain changes are made without room for profitable amendments in the on-going initiatives. In such cases, we make sure to help clients with understanding the most profitable option or finding the best way possible.
If you could, what would you change about the tax legislation in India?
India’s tax legislation is 60 years old and in my opinion, there are numerous major issues which are either settled by the Apex court or are being amended. However, as India is pacing with the world’s economy, as well as the laws and legislations prescribed by various international authorities, thankfully, the legislation itself keeps on changing almost every year.
Website: www.wsco.in
[1] Subject to the conditions provided and Double Taxation Avoidance Agreement between countries
The VAT House is a respected and trusted EU VAT specialist based in Belgium. It is internationally known and works for large multinational companies, smaller companies that are expanding their businesses on a global scale, as well as accounting firms. Frank Borger, Partner and lecturer on VAT at several major institutions, tells us about The VAT House’s beginnings, principal services and priorities towards their clients.
What is the history behind The VAT House?
Established in 1997, The VAT House has a rich history of advising and supporting large companies and SME’s across Belgium and other European countries. We also assist accounting firms with VAT questions of their clients, large non-profit organisations, and government bodies.
It’s a tough task for businesses to remain up-to-date with domestic VAT laws, European VAT directives and jurisprudence, and the domestic VAT laws in other countries. Managing VAT issues and bringing businesses into line with all the different VAT obligations requires a high level of experience and knowledge.
The VAT House’s mission is to help our clients with this difficult task. It has now 5 partners, which all have a deep knowledge of VAT and an experience of 25-30 years on both national and international level.
What are the principal services the company provides and its priorities towards clients?
We have a wide and comprehensive range of services: advice on VAT, negotiations with national and European VAT authorities, performing VAT audits, supervising the implementation of ERP packages for VAT, e.g. helping to determine VAT codes, organising internal VAT training courses for companies and organisations. We are experienced in almost every business sector.
Additionally, we can assist our clients in VAT compliance matters (e.g. VAT registration in Belgium and/or other countries, filing VAT returns in Belgium and/or other countries, filing Intrastat returns, filing VAT refund applications).
Our daily goal is providing our clients with practical solutions at an outstanding price/quality level.
Have there been any recent updates or changes to VAT rules in Belgium and the EU?
VAT rules are constantly changing. An important trigger is the so-called VAT gap, which is the overall difference between the expected VAT revenue and the amount actually collected. The VAT Gap measures the effectiveness of VAT enforcement and compliance measures in each EU Member State. It estimates revenue loss due to fraud and evasion, tax avoidance, bankruptcies, financial insolvencies as well as miscalculations. For the EU28 the VAT gap is 12.8 % and amounts €152 billion, of which cross-border fraud is estimated on €50 billion. These figures are a strong motivator for governments to take policy measures to improve VAT compliance and enforcement. The European Commission has recently come up with proposals for a far-reaching reform of the EU VAT system. The proposed VAT reform would also make the system more modern, robust and simpler to use for companies and businesses alike.
In the meantime, it is expected that every EU Member State will take internal action to reduce the VAT gap. Businesses must be aware of that and keep an eye on their VAT position.
What are the key issues that your clients face in relation to managing VAT?
One of the main hurdles is definitely the complexity of VAT. As a consumption, tax VAT sits on the skin of the economy. As we know, commercial transactions have become more and more international and complex due to globalisation. VAT rules are moreover not necessary adapted at the same speed as economic life evolves. In that context our clients are happy that they can rely on our knowledge and can trust on our assistance.
What are your recommendations for effective management of VAT?
Always keep ahead of problems. In our practice, clients often call for help when transactions occur. In some cases, it is easy to apply the correct VAT solution. But in some cases, it isn’t and it disturbs the commercial relation between trade partners and the tax position of the company can be influenced.
What upcoming VAT changes should companies operating in Belgium and the EU be aware of?
One should keep up-to-date with the progression of Brexit talks, as well as the major VAT reform that has been proposed by the European Commission.
Contact details:
Email: tvh@vat-house.com
Website: www.vat-house.com
Katia Delfin Diaz is the Managing Director of Brussels-based OmniVAT Consulting. She has been passionate about Tax Law for years and her current role is to assist Belgian and foreign companies to be in line with this complex matter or to optimise the impact of VAT in their business. After working for a few of the Big Four companies, Katia started her own consultancy firm, specialising in VAT, in January 2011. Today, OmniVAT Consulting assists clients from a wide range of sectors in Belgium and across Europe. Finance Monthly speaks with Katia about VAT trends and her tips for effective VAT management.
As an expert with 24 years of experience in VAT matters, what are your recommendations for successful management of VAT?
The best piece of advice that I could give is to be up-to-date with this complex and ever-changing matter. VAT regulations evolve quickly and some updates are absolutely necessary. A good VAT manager must follow the evolution of VAT, both on national and European level. It is crucial for companies to be aware of future changes of regulations and laws, in order to amend their internal processes accordingly.
Considering that VAT is a European tax, I recommend following the European Jurisprudence that offers a respectable interpretation of the law through the ECJ cases.
In addition to OmniVAT Consulting, we also organise regular seminars through our VAT Academy. The aim is to update practitioners on direct and indirect tax laws, customs matters and Incoterms. The main sessions are French, but we also organise intra-company seminars in English, Dutch and Spanish upon request.
Can you update us on any recent or upcoming updates or changes to VAT rules in Belgium?
This year has been eventful in terms of VAT updates in Belgium. In addition to some slight amendments to the VAT legislation, a few administrative decisions and VAT notes were published in order to help individuals and companies interpret and apply VAT legislation.
One interesting Belgian decision, published this autumn, concerns the application of the VAT exemption on “claims settlement services” rendered by a third party in the name and on behalf of an insurance company. This decision was taken by the Belgian Tax Authorities after the ECJ Court made their decision on the Aspiro case (see C-40/15 arrest dated 17 March 2017).
As of 1st January 2018, the Belgian point of view will follow the conclusion of the ECJ Court - “claims settlement services” made by a subscribing agent in the name and on behalf of a counterparty (insurance company, other subscribing agent, etc.) will have to be subjected to the standard rate of VAT, provided that these are not part of the integrated services. Indeed, Belgian Authorities accepted that the VAT exemption was applied for this kind of services. Furthermore, a transitional period is planned to allow the sector to adapt to the VAT treatment of these services.
The Belgian Tax Authorities underlined that when an individual claim occurs, for example, after 31st December 2017, its assignment to a claims manager will not be exempt from VAT anymore.
What are OmniVAT’s mission and key priorities towards its clients?
Typically, clients come to us when they face a VAT problem within the company or during a VAT inspection. Clients also reach out to us when they need a VAT audit of their transactions or when they would like to receive a confirmation of the VAT treatment on a new sales scheme. The optimisation of VAT transactions is an important concern of our clients. They may also have questions on customs regulation or on Incoterms.
Our key priority is the satisfaction of our clients and we do our best to serve them the best way possible. We keep them informed on important VAT changes and we do our best to keep on top of their needs or questions. I’d say that good communication is essential for a successful relationship with customers.
Website: http://www.omnivat.be
To hear about taxation in Cyprus, this month Finance Monthly reached out to Panicos G. Loizou, a Board Member at KPMG in Cyprus. After obtaining an Honors degree in Economics from the University of Salford, he trained with a big eight practice in Manchester and became a member of the English Institute of Chartered Accountants and subsequently a Fellow member. Panicos has also attended a crash management Course at Wharton School, University of Pennsylvania, Philadelphia. He is a member of the Institute of Taxation by examinations, and a member of STEP and was recently elected as a member of the Council of STEP, taking full responsibility in January.
What are currently the hottest topics being discussed in relation to tax in Cyprus?
The implementation of standards and regulations about exchange of information like CRS and Country by Country reporting, increased the taxpayers’ desire for a last time tax amnesty, aligned with many other jurisdictions. Instead, the Cyprus House of Representatives introduced new legislation which incorporates special arrangements for the settlement of overdue taxes. The legislation has induced a number of tax payers to come forward and declare income and assets not previously reported in their tax returns.
What amendments have been made to the tax regulation recently?
Apart from the aforementioned legislation referring to the settlement of overdue taxes, recent amendments include mainly provisions relating to transfer pricing, as well as amending the tax residency definitions for individuals and non-domiciled individuals. These amendments have already arose increased interest by wealthy individuals and families, who are taking necessary steps in order to comply with the provisions of the new legislation. In this way, they will become Cyprus tax residents and at the same time they would be registered with the Tax Authorities for the Non-Dom status.
It is important to pay attention for the revised definition, meaning that the foreign national who is physically present in Cyprus for more than 183 days within a calendar year, will be considered as a Cyprus tax resident and he/she will be subject to taxation in Cyprus on his/her worldwide income. The definition has been amended to also provide that, an individual who does not stay in any other country, for one or more periods exceeding in aggregate 183 days in the same tax year and is not tax resident in any other country for the same year, is deemed as a resident in the Republic in that tax year, if all of the following conditions are met: (i) the individual stays in the Republic for at least 60 days in the tax year, (ii) exercises any business in the Republic and/or is employed in the Republic and/or holds an office with a Cyprus tax resident person at any time during the tax year, and (iii) maintains (by owning or leasing) a permanent residence in the Republic.
Do you believe there is potential for further significant legislative development in the tax field in Cyprus?
Yes, indeed, as the Cyprus Government is already fostering the efforts to prepare the new legislation concerning the audiovisual industry. Just to be on the same line, the forms of audiovisual communication include television advertising, sponsorship, teleshopping, product placement, on-demand audiovisual media services and radio broadcasting, which aim the provision of programs in order to inform, entertain or educate the general public. Bound by certain criteria, there would be a number of tax incentives such as “Cash Rebate”, “Tax Credit”, tax reduction for infrastructure and equipment investments and VAT return over eligible expenditure. Moreover, special attention is given by the Authorities to the benefits in kind provisions.
In terms of tax structures, what are the advantages for foreign companies wanting to establish a business operation in Cyprus?
Corporate tax of Cyprus tax resident companies is currently imposed at the rate of 12,5% for each year of assessment on the taxable income, derived from sources both within and outside Cyprus. In arriving at the taxable income, deductions on such income and exemptions must be taken into account. All relevant expenses incurred wholly and exclusively for the production of that income are deductible expenses whereas dividends, capital gains or profit from the sale of shares and other securities constitute tax exempt income. Expenses that directly or indirectly relate to tax exempt income are not tax deductible.
What actions has Cyprus taken towards remaining competitive as a financial centre?
In the current fluent, economic and political environment, Cyprus takes all appropriate measures to remain competitive as a financial centre. That includes, considering the measures adopted by other competitive countries and undertaking measures in order to attract business and investments through the implementation of tax incentives.
Website: https://home.kpmg.com/cy/en/home.html
New rules to help prevent tax avoidance via non-EU countries were agreed at the recent meeting of the Economic and Financial Affairs Council. The Commission welcomes this agreement which will prohibit multinational companies from escaping corporate tax by exploiting differences between the tax systems of member states and those of non-EU countries (so-called 'hybrid mismatches').
Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs said: "Today is yet another success story in our campaign for fairer taxation. Step by step, we are eliminating the channels used by certain companies to escape taxation. I congratulate the member states for agreeing on this tangible measure to clamp down on tax abuse and install a fairer tax environment in the EU."
The new provisions build on the Anti-Tax Avoidance Directive (ATAD) agreed last July, which sets out EU-wide anti-abuse measures against tax avoidance. Hybrid mismatches occur when countries have different rules for the tax treatment of certain income or entities, which multinational companies can abuse to avoid being taxed in either country. The agreement reached today (ATAD 2) will ensure that hybrid mismatches of all types cannot be used to avoid tax in the EU, even where the arrangements involve third countries. Today's agreement comes less than four months after the Commission put forward its proposal.
The new rules will come into force on January 1st 2020, with a longer phasing-in period of 2022 for one article (Art. 9a).
The binding measures agreed today build on the extensive work done over the past two years to tackle corporate tax avoidance and ensure fair and effective taxation in the EU.
Major initiatives put forward by the Juncker Commission to boost tax transparency and reform corporate taxation are already reaping results. Member states agreed on the ambitious Anti-Tax Avoidance Directive last July, ensuring that anti-abuse measures will apply throughout the EU from 2019. Member states also agreed – in record time – Commission proposals to increase transparency on tax rulings and on multinationals' tax related information. The proposal for public Country-by-Country Reporting by large companies is being negotiated by Council and the European Parliament, as is a proposal to strengthen the Anti-Money Laundering Directive.
A number of other substantial corporate tax reforms have also been proposed, notably the re-launch of the Common Consolidated Corporate Tax Base (CCCTB) in October 2016. Member states are also working on a common EU list of third country tax jurisdictions that do not conform to international tax good governance standards. The list should be ready by the end of the year.
(Source: EU Commission)
