Tax Ideas that Work for Both SUT & VAT

Transcription

1 Tax Ideas that Work for Both SUT & VAT Barbara Hoffmann President B. Hoffmann & Associates Ltd. Toronto, Ontario Carlos Hernandez Senior Manager EY Chicago, Illinois

2 Tax Ideas That Work for Both SUT and VAT Points of Discussion: Introduction Common Concepts Differences in SUT and VAT and overcoming them in Global Management system Planning Considerations Key Drivers 2017 IPT s Value Added Tax Symposium 2

3 Tax Ideas That Work for Both SUT and VAT Introduction Moving toward one worldwide tax determination software Potential for cost savings Pressure on resources Potential for increased planning Potential for costly errors 2017 IPT s Value Added Tax Symposium 3

4 Common Concepts: Transaction Level Data Every sales or purchase transaction is assessed to determine tax treatment. What is it? Who is buying it? Who is selling it? Where is it going Where did it come from? What is the value? 2017 IPT s Value Added Tax Symposium 4

5 Common Concepts: Transaction Level Data Data Required includes: TPP vs services vs intangibles Invoice/ Contracts data Tax rates & Codes Product classifications System configurations Incoterms (UCC for US) Sales price/cost price Promotions Bundling Place of supply details 2017 IPT s Value Added Tax Symposium 5

6 Common Concepts: SUT v. VAT SUT Master Data System Configurations Pricing Product Descriptions Contract data Goods movement VAT 2017 IPT s Value Added Tax Symposium 6

7 Data Analysis: A Step Process Potential Analytic Reports Tax Overview Trend Analysis AP Spend/Legal Entity Tax by Jurisdiction Procurement/Tax by Vendor Procurement/Tax by GL Description Summary of Expense and Jurisdictional information By country, province, department, goods, etc. Period over period analysis Analysis for tax paid to vendors 2017 IPT s Value Added Tax Symposium 7

8 Cost Saving Synergies-The Supply Chain For VAT For SUT Deferment of VAT Tax Elimination Drop Shipments Registration? Toll v Contract Manufacturing Non-resident Importer considerations Timing of VAT liabilities Registration? Nexus review Lease vs. Buy 3 rd party contractors Registration? 2017 IPT s Value Added Tax Symposium 8

9 Pricing-How much tax is owed? Are there efficiencies to be gained? Tax is calculated on the price charged to the customer. Consider: Non-taxable components Single v multiple supplies of goods/services Promotions/rebates/other incentives Finance charges Delivery charges Discounts Contract Terms 2017 IPT s Value Added Tax Symposium 9

10 Input Tax Credits, Reclaims and Overpayments VAT Commercial Activity/ Taxable business Eligibility of Recovery-paid or payable Documentary Requirements Timing of Recovery Reverse Audits SUT Resale/Manufacturing/R&D/ Enterprise Zones/C&I Purchaser/AP/TDM Education and Updates Contract/PO Language, Books, Records Statute of Limitations Reverse Audits 2017 IPT s Value Added Tax Symposium 10

11 Planning: Classification and Rates Procedures for classifying goods and services important for determining correct rates under VAT Complexity around the place of supply rules Issues with multiple parties to an agreement Food Products Rates of VAT vary between 0-27%; Canada also has concept of exempt (as opposed to zero-rated) 2017 IPT s Value Added Tax Symposium 11

12 Planning: Classification and Rates Procedures for classifying goods and services important for determining correct taxability under Sales/Use Tax Goods are taxable unless specifically exempt or excluded Many services are exempt/excluded Issues with true object test CA example of software vs. goods segregation Rates of sales/use tax vary between % (Chicago) 2017 IPT s Value Added Tax Symposium 12

13 Planning: Intercompany Transactions Mitigating VAT for Supplies between related companies: Section 156 election Section 150 election VAT Grouping Cost Sharing groups Parent/Branch Transactions 2017 IPT s Value Added Tax Symposium 13

14 Planning: Intercompany Transactions Mitigating Sales Tax for Supplies between related companies: Resale certificate Related party exemption (some states) Management fees Other 2017 IPT s Value Added Tax Symposium 14

15 Planning: Bad Debts and Refund Claims VAT Bad debt relief for VAT previously remitted on invoices not paid by the customer Conditions for bad debt relief Time frames for claiming bad debt relief Cash refunds v offsets for VAT collected Partial write-offs Recovery of bad debts 2017 IPT s Value Added Tax Symposium 15

16 Planning: Bad Debts and Refund Claims Sales/Use Tax Bad debt relief for sales/use tax previously remitted on invoices not paid by the customer Conditions for bad debt relief Time frames for claiming bad debt relief Cash refunds v offsets for sales/use tax collected Partial write-offs Recovery of bad debts 2017 IPT s Value Added Tax Symposium 16

17 VAT Key Drivers SUT - Periodic nexus reviews to determine compliance responsibilities - Periodic manufacturing/r&d reviews - Use of exemption certificates when applicable - Periodic bad debt reviews 2017 IPT s Value Added Tax Symposium 17

18 Questions? 2017 IPT s Value Added Tax Symposium 18