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International indirect tax guide - Audit, Tax & …

International indirect tax guide201601 Ready to respond: Managing complexity and change in indirect taxation 05 Customs duty 08 indirect tax overview Africa09 Botswana11 Egypt13 Kenya17 Mauritius21 Morocco25 Mozambique29 South Africa33 Tunisia37 Zambia41 Zimbabwe46 indirect tax overview Americas47 Argentina51 Brazil55 Canada59 Chile63 Costa Rica67 Mexico69 Panama73 Peru77 Puerto Rico83 United States87 Uruguay90 indirect tax overview Asia Pacific91 Australia95 Bangladesh99 Cambodia105 China111 Hong Kong113 India119 Indonesia123 Japan127 Malaysia131 New Zealand135 Pakistan139 Philippines145 Singapore149 South Korea153 Taiwan157 Thailand161 Vietnam 166 indirect tax overview Europe167 Albania171 Armenia175 Austria181

International indirect tax guide 1 Ready to respond: Managing complexity and change in indirect taxation Indirect taxation is becoming ever more complicated, varied between jurisdictions and prone to

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1 International indirect tax guide201601 Ready to respond: Managing complexity and change in indirect taxation 05 Customs duty 08 indirect tax overview Africa09 Botswana11 Egypt13 Kenya17 Mauritius21 Morocco25 Mozambique29 South Africa33 Tunisia37 Zambia41 Zimbabwe46 indirect tax overview Americas47 Argentina51 Brazil55 Canada59 Chile63 Costa Rica67 Mexico69 Panama73 Peru77 Puerto Rico83 United States87 Uruguay90 indirect tax overview Asia Pacific91 Australia95 Bangladesh99 Cambodia105 China111 Hong Kong113 India119 Indonesia123 Japan127 Malaysia131 New Zealand135 Pakistan139 Philippines145 Singapore149 South Korea153 Taiwan157 Thailand161 Vietnam 166 indirect tax overview Europe167 Albania171 Armenia175 Austria181

2 Belgium189 Channel Islands Jersey193 Croatia199 Cyprus205 Czech Republic211 Denmark217 Estonia223 Finland227 France231 Germany237 Greece243 Hungary249 Iceland253 Ireland259 Israel263 Italy269 Kazakhstan273 Republic of Kosovo277 Latvia279 Liechtenstein283 Lithuania289 Luxembourg295 Macedonia303 Malta309 Netherlands315 Poland321 Portugal327 Romania335 Russia339 Serbia343 Slovakia349 Slovenia355 Spain361 Sweden367 Switzerland371 Turkey375 Ukraine379 United Kingdom386 indirect tax overview Middle East387 Gulf Cooperation Council387 Bahrain387 Kuwait387 Oman387 Qatar387 Saudi Arabia387 United Arab Emirates389 ContactsContentsThis information has been provided by Grant Thornton member firms within Grant Thornton International Ltd as of April 2016 and is for informational purposes only.

3 Grant Thornton International Ltd cannot guarantee the accuracy, timeliness or completeness of the data contained herein. As such, you should not act on the information without first seeking professional tax advice from one of the contacts at the rear of the indirect tax guide 1 Ready to respond: Managing complexity and change in indirect taxationIndirect taxation is becoming ever more complicated, varied between jurisdictions and prone to government tinkering. And, the bar for compliance is rising all the time. Getting on top of the complexity and change is not only vital in avoiding mistakes, audits and disputes, but also enabling your business to move into new markets and manage cash flows efficiently. So how can your business put management of indirect tax onto a sustainable footing? It s now five years since the landmark Hudson Highland Group settlement in the US that was indicative of the transformation of the ground rules for sales and use tax (SUT), value added tax (VAT), goods and services tax (GST) and other indirect tax compliance.

4 The Securities and Exchange Commission (SEC) had moved against Hudson Highland because of what it deemed to be the company s failures to maintain appropriate internal controls and underlying lack of accounting software capable of calculating the amounts of sales taxes owed .1 Up until then, the authorities had primarily focused on whether the amounts of indirect tax being collected, paid and reclaimed were reasonable. The SEC order took regulatory demands to a new level by not only requiring companies to justify the numbers if challenged, but also demonstrate that the data, systems, processes and controls for carrying out the calculations are fit for purpose. Many other governments, regulators and tax authorities quickly followed the US lead, for example Senior Accounting Officer (SAO) rules in the UK. And ten years on, the impact of these new demands still reverberates around indirect tax teams across the globe.

5 When we recently asked members of our VAT Club what s keeping you awake at night , they said that their number one worry is a lack of appropriate systems or controls for VAT/GST (see Figure 1).1 SEC Accounting and auditing enforcement Release No. 3226 10 January 20112 International indirect tax guideFigure 1 What indirect tax issues keep you awake at night? (%)Lack of appropriate systems or controls for VAT/GSTLack of visibility of global indirect tax complianceAudits from tax authoritiesChanges in VAT/GST rulesImplementation of new VAT/GST regimesNew VAT/GST reporting requirementsHistoric liabilities and penaltiesChanges in VAT/GST ratesSource: 50 companies taking part in the Grant Thornton VAT Club Survey 2015 State of fluxThe complications of indirect tax compliance have been further heightened by the frequent shifts in rates, rules and how they re applied.

6 Many governments have been lowering corporate tax in a bid to attract inward investment, while raising indirect tax rates to compensate for the loss of revenue. The rapid growth in the digital economy and ever more extended global supply chains have in turn increased the number of countries in which even relatively small companies have a taxable presence. With this presence or nexus comes the need not only to register for indirect tax, but understand the vagaries of the local rules and ensure appropriate systems and controls are in place to calculate and report the right amounts at the right self-assessmentNow we re at a fresh watershed as the focus of taxation as a whole shifts from where goods and services are sourced to where they re consumed. This is reflected in recently endorsed new OECD International VAT/GST Guidelines. Within indirect taxation, this trend is already reflected in the growing adoption of reverse charge mechanisms (sometimes referred to as tax shift or self-assessment ), both for domestic and International business-to-business transactions.

7 Under this approach, the receiving business calculates and pays the indirect tax on behalf of the supplier. Reverse charge mechanisms can ease the compliance burden on companies that supply a number of different markets by reducing the amount of jurisdictions in which they have to register and report. But there is often an accompanying compliance burden to evidence that the reverse charge can indeed apply, eg obtaining, validating and retaining customer VAT numbers. In addition, the companies they sell to face more complex and extended calculation, monitoring and self-assessment. And now that the OECD s Base Erosion and Profit Shifting (BEPS) Action Plan has recommended that more jurisdictions introduce a reverse charge mechanism for cross-border business-to-business transactions2, the direction of travel is to respond12222428384042182 OECD/G20 Base Erosion and Profit Shifting Project Addressing the Tax Challenges of the Digital Economy Action 1: 2015 Final ReportInternational indirect tax guide 3 Feeling the strainThe result is an indirect tax landscape in which change is the only constant.

8 Our VAT Club survey not only highlights the pressure on systems and controls, but also participants concerns over the lack of visibility of global indirect tax compliance and the risk of audit by tax authorities. indirect tax has generally been managed by country or regional teams. But they may lack the scalable skillsets and capabilities needed to deal with new market entry and changing legislation or the bird s eye view of the organisation-wide requirements to proactively manage the compliance and reputational risks. In turn, enterprise resource planning (ERP) systems can often struggle with the frequency of registrations and modifications, especially as the hundreds of code changes needed every year have to be identified and generally inputted manually by IT resources. Firm foundationsSo how can your business create the capabilities needed to manage this myriad of fast-changing demands?

9 Drawing on our survey findings, our work with clients and analysis of the trends in indirect tax regulation, we believe there are five key steps to getting compliance on track:1. Central team to anticipate changes and develop proactive responseA central teams of indirect tax specialists can liaise with business units to prepare for new market entry and identify upcoming changes in the tax rules. Some organisations are moving indirect tax into shared service centres to reduce costs and speed up reporting. Others are setting up dedicated centres of excellence. Either way, central co-ordination is vital. Teams on the ground will still be necessary in some larger markets, but the general compliance and strategic tax policy work can be streamlined and centralised. The advantages of a centralised approach include more systematic compliance, focused use of resources and closer alignment with business strategy.

10 Centralised team can also identify, share and apply best practices from around the organisation. 2. Augment ERP with dedicated toolsBolting dedicated indirect tax management tools onto ERP systems can make it easier to manage changes and new registrations across multiple jurisdictions, while reducing the need for manual to respond4 International indirect tax guide3. Workflow management tools to plan and track paymentsWith so many moving parts, it s important to have visibility over what s required, when, and whether the demands are being met on time. The advantages not only include more assured compliance, but also improved cash flows through closer alignment between payments and refunds. 4. Close co-operation with sales teamsSales teams often hold some of the most important indirect tax sensitive data such as VAT/GST registration numbers, exemption certificates, contractual term, and address information.


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