Design and implement

Design and implement

Wednesday, November 23, 2016

A cost efficient way to submit SAF-T files and perform risk management

To support the development of this guidance the OECD has laid out the Standard Audit File for Tax Purposes (SAF-T). This guidance establishes the standard to be used for the exchange of tax data between companies and tax authorities. 

The aims of the CFA guidance are to simplify tax compliance and audit requirements by clarifying the information required from business and accounting systems for tax reporting. As a result SAF-T is intended to give tax authorities easier access to the tax relevant company data (corporate income tax and VAT) in a consistent format leading to more efficient control and audit of tax regulations. 

Every company with a SAF-T-requirement is now facing the challenge of finding an easy and reliable way to deliver the required data. Multinationals have the further challenge of providing a range of country-specific information in a controlled and efficient manner. Efficient use of technology lowers costs of data collection and compliance. 

As a result more and more tax administrations around the world are implementing electronic auditing of business’s financial records and systems as part of their compliance regime. Countries might have their own specific local SAF-T requirements but in case the basic required data are covered in the OECD framework it could be managed with country specific variants. 

You can compare it with the EU VAT requirements: EU Directive as framework with some country specific rules based on the options in the EU Directive. Taxpayers will be obliged often to submit the SAF-T format:
  • - on request in the case of a preliminary tax inquiry, a tax audit and tax proceedings;
  • - monthly mandatory VAT SAF-T
The SAF-T VAT file should reconcile with the numbers of the VAT return to avoid a higher risk of a VAT audit. Often I hear that the on request is given a lower priority. Be aware that audit defence is an important building block for a sound tax strategy.

Although it is an 'on request' obligation it is important to run this requests regularly and archive. This data will be used by the tax authorities for a tax audit to check whether tax positions taken in the tax reporting and /or rulings closed (corporate income tax and VAT) actually reflect the data in the SAF-T files.

It is critical that your in-house tax department has sufficient time to assess the 'on request' data for any unacceptable tax risks. I recommend use this functionality in-house as a pre-audit prior to the law being in force.

A SAF-T SAP add-on solution developed together by 'Tax Assurance and certified SAP add-on specialists' is now available for Poland, Lithuania and Norway and is scalable. The SAP add-on is extendable to countries that uses the OECD framework as the basis for SAF-T reports.

Note that countries might have their own specific local requirements but in case the basic required data are covered in the OECD framework it could be managed with country specific variants. Certain countries such as France, Portugal, Austria, Luxembourg, etc. - have already SAF-T in force.

Richard H. Cornelisse, Tax Assurance specialist - access PowerPoint for further explanation

Thursday, November 17, 2016

Innovation and tax audits

Tax authorities, due to technological innovations, have become increasingly better in executing their tax audit. The probability that the Tax Authorities will issue additional assessments and penalties in the near future because errors in indirect tax are detected, increases by the day.

The OECD has issued in May 2005 a guidance note on the development of Standard Audit File –Tax (SAF-T) and recommends the use of SAF-T as a means of exporting accurate tax accounting data to tax authorities in such way that can it can be analyzed easily.

Mandatory data filing gives food for thought. Looking to the future The submission of the SAF-T file means that a taxpayer has to provide specific data to the tax authorities every month. From a tax controversy strategy it is common practice that before information is provided to the authorities, a company performs a risk assessment and determines the worst case scenario to avoid unforeseen tax risks.