Tax authorities are going digital

Transcription

1 Tax authorities are going digital

2 Agenda Digital tax administration evolution, current state, trends Best practices and how EY can help Next steps Appendices

3 Digital tax administration evolution, current state, trends

4 Rapid digitization of tax administrations 157.9bn Penalties, in Brazilian reales, assessed on taxpayers for tax infractions Driving the shift to digital tax Budget deficits Search for new revenue sources Reliance on indirect taxes, reporting transparency and information-sharing between countries Technology advances 7 Countries participating in the OECD s SAF-T standards as of 1 January, 2018 From 26% to less than 10% Goal of reduction of VAT evasion through the use of electronic invoicing in Chile s 2015 tax reform Companies need to have visibility and structure around the data sources, formats and content delivered digitally to governments around the world. Failure to do so can lead to: risk of real-time audits and automatic assessments increased tax penalties refund denials or delays reputational and operational risks 37.5% Increase in budgeted tax collection, in inflation-adjusted pesos, in Mexico from 2012 to 2014 with no VAT or income tax rate increases 4 EY Digital Tax

5 Digital tax administration The evolution Ireland requires digital submissions of tax and financial data and uses data analytics to review and reconcile data provided France requires financial data under SAF-T (FEC) for audit purposes and also has mandatory BTG e-invoicing Ireland France ` Luxembourg requires submission of digital accounting /financial records under SAF-T (FAIA) upon request Luxembour g Poland Russia Russia has been in the process of modernizing and digitizing its tax administration since 2010: requiring detailed data on VAT and transfer pricing. It is also an active member of OECD. Poland is in the process of implementing a broad-based e-taxes program that will impact client s digital filing and reporting requirements Portugal Spain China Mexican Tax Authorities have advanced digital requirements enabling it to carryout E-audits Mexico Portugal is following EU and OECD in its approach to digital tax including implementation of SAF-T requirements India China initiated a 1000 Accounts Plan to accelerate its digital tax journey by focusing on large enterprises. Peru requires accounting records and e- Invoicing to be submitted to the tax authority Peru Brazil Spain recently introduced electronic invoice for VAT that includes detailed invoice related information thus eliminating VAT returns, India has recently mandated submission of detailed transactional level information including invoicing data in digital format as part of its GST process. Chile requires accounting data to be maintained and requires access to taxpayer ERP systems for audits Argentina requires e-invoicing from taxpayers and does analytics on invoices submitted Chile Argentina Brazil has detailed digital tax requirements including a public digital bookkeeping system directly through the tax authority Digitization level Level 1 E-file Level 2 E-accounting Level 3 E-match Level 4 E-audit Level 5 E-assess 5 EY Digital Tax

6 Digital tax administration trends LATAM (except Brazil) Pioneer in digital tax administration led by Mexico and Brazil Other countries following their lead Focused on e-invoicing and transactional level reporting Avoiding fraud and tax evasion is primary objective More pervasive approach Almost all of the filings and submissions to the tax authority are digital One of the most complex administrations due to broad application and depth of detail required BRAZIL SAF-T OECD guidance initiative Adopted by some countries in Europe However, each country implements a variation of the requirements and takes different enforcement approach Includes accounting data, transactional invoice data and other master data China s 1000 accounts plan is similar to the SAF-T reporting requirements Spain, India, Hungary have adopted variations of digital tax requirements focused on periodic reporting of detailed invoice data Others taking their own approach on digital tax administration, ranging from only e-invoicing to only e-accounting data ALL OTHERS 6 EY Digital Tax

7 Digital tax administration trends timeline 2017 India implemented new GST requirements to submit detailed transactional level data Spain implemented new requirement to submit daily invoice level detail Mexico updated layouts for invoice data (v3.3) Brazil updated layouts for (EFD-Contribuições, NFe, ECD and ECF)) Italy introduced B2B e- invoicing and updated quarterly VAT obligations with detailed invoice data. Costa Rica is scheduled to make e-invoicing mandatory for B2B transactions Norway plans to adopt and implement SAF-T requirements Brazil introduced new obligations for payroll (esocial) and EFD- REINF Hungary is in the process of introducing live invoice reporting requirements starting July 1, Malaysia plans to use analytics for E- Audits on payroll tax. UK s HMRC plans to implement MTD reporting for VAT in April 2019 Colombia plans on adding e-invoicing and e-accounting requirements UK s HMRC plans to introduce MTD for other taxes besides VAT in Australia s ATO plans to further digitize its tax administration through extensive use of analytics New Zealand is following suite with Australia in its move to digital tax administration 2020 Other DTA development Brazil is in the process of introducing federal e-invoicing for services Japan s tax authority announced plans to make tax administration smart over a ten year period using advanced analytics and AI. GCC countries plan to introduce requirements for replicated customer invoice data in a government system Several European countries have been having discussions around adoption of SAF-T requirements including Germany, Belgium, Finland, Romania and Slovenia, among others. 7 EY Digital Tax

8 Not just tax data Typical digital submission data requirements are broader than the traditional tax return Data requirements* Master Data Transactional Data Operational Financial Taxpayer information Vendor details Customer details Banking information Broker details Related party details Invoice details Detail of invoices and transactions (per vendor, customer, jurisdiction, transaction types) Details of relationships with third parties including (banks, financial institutions, brokerages, Investments funds and other PEs) Foreign trade operations Profit sharing data Capital contributions Accounting statements Income Statement, Cash flow, Balance Sheet, Cash Flow Tariff information Tax rates FX rates and currencies Jurisdictions Payment details Tax regimes Intercompany transactions Customs declaration details Digital stamp certificates Banking transactions and related detail Import details and customs payments Electronic signatures Tax losses Blacklisted suppliers GL, Trial Balance, Journal Entries Statutory Chart of Accounts * This list is not all-inclusive. Additional transmission requirements would need to be determined based on jurisdiction and industry 8 EY Digital Tax

9 Digital tax administrations evolution Typical company response is reaching tipping point Shifting Response One-off responses at each jurisdiction Local Tactical & manual Compliance focused We are seeing an exponential shift in the pace companies need to respond to rapidly changing digital submission requirements and evolving audit techniques. Requirement review, risk and exposure Lack of visibility to: Tax requirements Global footprint Audit risk Insufficiently rapid audit response times Data quality Data is submitted to the authority before it is tested Concerns over system capacity to manage digital tax requirements Lack of consistency in local point solutions Operating model Need for sustainable, cost-effective processes Opaque stakeholder tax authority interactions Lack of process for monitoring new requirements Centralized Strategic Automated 9 EY Digital Tax

10 Why should companies care? Do they know the answers to these key questions? Subject Existing global risk & exposure Questions to have answers Do I fully understand my global tax footprint and where potential exposures exist? Potential Risk Surprise e-assessments or audits Stranded credits Agility to react to new requirements Am I consistently monitoring and have the ability to rapidly react to changing digital submission requirements? Missed or non-compliant filings Fire drill IT projects to be day 1 compliant Quality of information Am I confident in the data quality, completeness, and tax accuracy of the information being submitted in each jurisdiction? Incorrect data submitted to authorities Too much data submitted to authorities Sustainability of processes Do I have a lean process, with the proper global and local oversight, to timely provide the necessary submissions with high quality? Unclear roles and responsibilities leading to missed filings Cumbersome process leads to inefficiencies Speed and efficiency of compliance Audit readiness and information storage 10 EY Digital Tax How long is it taking to produce monthly submissions? Are there opportunities for automation techniques for increased speed and accuracy? Do I have the required audit-ready documentation, and stored securely for the required time period, to mitigate later audit risk? Too much time spent on reconciliation while missing opportunities to perform analytics Additional tax, penalties and interest due to not having proper audit documentation

11 Best practice and how EY can help

12 When and how to respond best practice Levels of maturity of digital administrations & response cadence Level 1 Level 2 Paradigm shift Level 3 Level 4 Disruptive Level 5 E-file E-accounting E-match E-audit E-assess Use of standardized electronic form for filing tax returns required or optional; other income data (e.g., payroll, financial) filed electronically and matched annually Submit accounting or other source data to support filings (e.g., invoices, trial balances) in a defined electronic format to a defined timetable; frequent additions and changes at this level Submit additional accounting and source data; government accesses additional data (bank statements), begins to match data across tax types and potentially across taxpayers and jurisdictions in real time Note: Not all governments collect the same information or treat it the same under this model. Further, the move to digitization is not necessarily linear. 12 EY Digital Tax Assess country readiness; Develop short & long-term plan; Monitor developments Execute long-term plans; Monitor country-level audit and data analytic trends; Manage global controversies efficiently L2 data analyzed by government entities and cross-checked to filings in real-time to map the geographic economic ecosystem; taxpayers receiving electronic audit assessments with limited time to respond Government entities using submitted data to assess tax without the need for tax forms; taxpayers allowed a limited time to audit governmentcalculated tax

13 EY s digital tax readiness assessment High level workplan and deliverables Work Products Deliverables External Assessment Criteria Global survey and interview results Digital Tax Country Profile Internal Global Inputs* Requirements, potential risk & exposures Systems, tools & data quality for digital tax Digital tax operating model effectiveness Qualitative analysis of current state based on 3 review criteria (including country-level classification and system & data fit-gap analysis**) Quantitative analysis of current state (Tax authority analytics and data tests for further risk review) Quantitative analysis of VAT data to identify risks and refund opportunities (for specified countries) Digital tax risk profile (including prioritized opportunity grids) Executive summary findings & recommendations*** Objective: Provide visibility into your global digital tax readiness, risks and remediation necessities; with insight into ensuring a sustainable future state model Provide recommendations *Global inputs include surveys, interviews and data. **EY s Global Data Dictionary will be leveraged during the system & data fit-gap analysis. ***EY s deliverable will include a report out at the local country level as well as a leadership summary. 13 EY Digital Tax Level 2-5 Countries Level 3-5 Countries

14 EY s digital tax readiness assessment Standard readiness approach Our standard approach assesses your digital readiness using three critera 1. Assessing your ability to currently meet digital tax reporting requirements; potential risks & materiality levels and where to focus first 2. Assessing your source data quality and other tools used in digital reporting; recommending potential solutions with your IT function 3. Assessing your local country & global operating model; people, process, & efficiency recommendations for a sustainable digital compliance model Phases I Identify II Diagnose III Provide insights Requirements, potential risk & exposures Gather requirements needed for each country s tax types to properly comply Gather sample data from source systems currently used for electronic submissions Determine if requirements are currently met Perform sample test of data using analytic models developed in the local countries (vary by country) Test data to ensure completeness Validate outputs produced Provide data analytic outputs from EYDTAS analytic model Report potential audit, penalty, or reputational risks and their severity Recommend next steps for any remediation necessary Systems, Tools & Data Quality Identify source systems within digital tax process Identify outputs from source systems used Identify data flow from source to reporting Examine outputs and assess data quality used in submissions (e.g., if all fields are available and populated for invoices Assess effectiveness of any data or 3 rd party tools Report source system landscape & findings Report findings on data quality & gaps identified Determine severity of data gaps ; recommend solutions Perform cost-benefit analysis on recommendations Digital tax operating model effectiveness Identify local preparers of submissions Identify the review steps taken and competencies of preparers/reviewers Identify internal controls embedded Determine processes in place to meet submissions Determine amount of time taken per filing or FTE commitment to filing requirements Determine the effectiveness of the submission process Assess the competency of preparers/reviewers Determine internal control effectiveness & test Assess workload on FTE preparation Assess manual effort needed to complete submissions (e.g., data manipulation) Report findings on operating model effectiveness Provide insights into leading practice models Report on control effectiveness; any remediation necessary Report findings, root causes, and the level of severity Report opportunities for automation or FTE realignment/reduction in current process Duration 1 week 1-2 weeks 1-2 weeks 14 EY Digital Tax

15 How we can partner now for digital readiness Continuous monitoring Monitor and Inform service Innovative subscription delivery model Enabled with technology and processes Menu of services Client Active monitoring of each in-scope country s digital landscape: Update for changes or new laws and regulations Update to standard data element definitions Insight into data quality tests seen in the field, along with specific tax authority analytics Identify trending audit issues by country Access to EY s Digital Tax Administration Platform On-call communication via digital tax alerts through DTA Platform, , webcasts, and calls Selective access by resource/role Interactive insights into data transmitted to tax authorities, on request Access to EY Quarterly DTA Informational Series covering: New developments and requirements outlined by country Specific country issues/opportunities, as requested 15 EY Digital Tax EY DTAS CoE Powered by EY s Digital Tax Administration Platform Globally managed processes with local tax input

16 Next Steps

17 Next steps Responsible: Client Determine in-scope countries for assessment Responsible: EY Provide pricing proposal for assessment based upon agreed inscope countries EY Execute assessment Determine scope of deliverables (assessment only; add roadmap) Agree on deliverables to be provided for each country 3-5 weeks; scope dependent Agree on timing of deliverables Post-Assessment Walkthrough findings & recommendations 17 EY Digital Tax

18 Appendices

19 Appendix: Digital tax administration life cycle

20 Digital tax administration life cycle Level 1 Level 2 Paradigm shift Level 3 Level 4 Disruptive Level 5 E-file E-accounting E-match E-audit E-assess Use of standardized electronic form for filing tax returns required or optional; other income data (e.g., payroll, financial) filed electronically and matched annually Submit accounting or other source data to support filings (e.g., invoices, trial balances) in a defined electronic format to a defined timetable; frequent additions and changes at this level Submit additional accounting and source data; government accesses additional data (bank statements), begins to match data across tax types and potentially across taxpayers and jurisdictions in real time L2 data analyzed by government entities and cross-checked to filings in real-time to map the geographic economic ecosystem; taxpayers receiving electronic audit assessments with limited time to respond Government entities using submitted data to assess tax without the need for tax forms; taxpayers allowed a limited time to audit governmentcalculated tax Note: Not all governments collect the same information or treat it the same under this model. Further, the move to digitization is not necessarily linear. 20 EY Digital Tax

21 Appendix: Digital tax readiness assessment Requirements snapshot & trends

22 Digital tax readiness assessment LATAM requirements snapshot & trends Timeline Description Argentina L3 There has been turnover in tax authority and possible changes in policy, but no concrete information is yet available Brazil L4 Brazil has regular updates to formats & technical requirements (e.g. invoice format NFe 4.0) Brazil is introducing new obligations for payroll (esocial) and EFD-REINF Chile L4 Chile requires e-accounting and e-invoicing data Colombia L1 L3 After an unsuccessful e-invoiving pilot, Colombia plans to adjust requirements to possibly implement e-invoicing and e- accounting for 2019, no specific info yet Costa Rica L2 Costa Rica has made electronic invoicing mandatory starting 2017 for certain large taxpayers. Ecuador L2 There will no longer be real-time invoicing after December 31, 2017, only batch process invoicing Mexico L4 There are regular updates to file technical requirements without affecting level (e.g. moving to invoice format CFDI 3.3) Today EY Digital Tax

23 Digital tax readiness assessment LATAM requirements snapshot & trends (contd.) Panama Peru Uruguay L2 L3 L2 Timeline Description Panama is in the process of introducing e-invoicing requirements Existing file requirements have been increasing in mandatory adoption Uruguay has requirements for e-invoicing and certain operational data. Today EY Digital Tax

24 Digital tax readiness assessment Asia-Pacific digital requirements snapshot & continuing trends Timeline Description China L3 China requires detailed transactional and accounting data under its 1000 Accounts Plan that focuses on large enterprises. Indonesia L2 Indonesia has reporting requirements for e-vat Invoices for sales information Vietnam L1 Vietnam has announced plans to introduce mandatory e- invoicing requirements Japan L1 Japan s tax authority has announced plans to make tax administration smart over a ten year period using advanced analytics and AI Australia L1 L4 Australia s ATO plans to further digitize its tax administration through extensive use of analytics New Zealand L1 L4 New Zealand is following suite with Australia in its move to digital tax administration Toda y EY Digital Tax

25 Digital tax readiness assessment EMEIA SAF-T digital snapshot & trends Timeline Description Austria L2 France requires submission digital accounting data upon request under the SAF-T (FEC) requirements since France L3 France requires submission digital accounting data upon request under the SAF-T (FEC) requirements since Lithuania L2 Lithuania requires submission of digital transactional data under SAF-T upon request with mandatory reporting of VAT invoice information monthly - since Norway L1 L2 Norway plans to adopt and implement SAF-T requirements starting January Poland L3 Poland has adopted the SAF-T framework to require detailed transactional data since There are 5 reports that need to be maintained. 4 are on-request and 1 is required monthly. Portugal L2 Portugal requires submission of digital transactional data under SAF-T (SAF-T (PT)) upon request with mandatory reporting of VAT invoice information monthly - since Luxembourg L2 Luxembourg requires submission of digital transactional data under SAF-T (FAIA) upon request since Today EY Digital Tax

26 Digital tax readiness assessment EMEIA East Europe and India digital snapshot & trends Timeline Description Czech Republic L3 Digital VAT ledgers that are automatically cross-checked Implementation of E-invoices in phases by industry sector. Hungary L2 L2 Submission of transactional data Introduction of live invoice reporting requirements starting July 1, Russia L4 Detailed transactional data for VAT purposes that is actively cross-matched against returns and payments. Slovakia L3 Transactional data that is matched against the VAT return using data analytics Turkey L3 Turkey has implemented an e-invoice, e-book, e-archive, e-file, and a VAT monitoring system. Ukraine L3 Submission of e-invoices with automatic real-time risk analysis being performed on that data India L2 New GST requirements to submit detailed transactional level data mandated as of July, Today EY Digital Tax

27 Appendix: Country tax digitization overviews* * The following overviews are for discussion purposes only.

28 Argentina Tax digitization overview Overview Argentine Federal Tax Authorities (Administración Federal de Ingresos Públicos or AFIP) has implemented electronic Invoices (e-invoicing) for business transactions. Analytics is performed by the tax authority on the electronic invoicing information submitted by taxpayers. Most of the other tax filing activities currently require use of PDF forms that are uploaded to the tax authority s website. Argentina has also signed an agreement to adopt OECD s BEPS Country by Country reporting framework and is in the process of defining specific implementation approach. Digitalization Level (1 through 5) Level 3 Definition (of Level 3): Detailed accounting and transactional data is provided to the tax authority. This data is then analyzed using data analytics and reconciled by the tax authority against tax filings. Required submissions: * Type Filing Requirement Frequency Transactional Electronic Invoices (E-Invoicing) Bank Account Transaction Tax Real-time Corporate Income Tax Income Tax return minimum Presumed Income Tax Transfer Pricing Local requirement Value Added Tax (VAT) VAT returns Monthly Customs and Global Trade Tax on gross income Ad-hoc Withholding Tax SICORE (Income Retention Liquidation) Semi-monthly * This list is not all-inclusive. Additional transmission requirements would need to be determined based on business scenarios. 28 EY Digital Tax

29 Brazil Tax digitization overview Overview Taxing authority regulations in Brazil has been a in a state of flux in the past several years. Brazil has a complex digital tax administration environment where taxes are administered by varying levels of taxing authorities at the Federal, State and Municipal level where each authority is competing with each other for tax revenue. Information required by the different authorities might have overlapping requirements, however file transmission formats might differ from one another. Electronic invoicing and digital book-keeping are required by the tax authority to track and monitor all transactions. Due to the administration of taxes performed by different taxing authorities, digital impacts and readiness of certain taxes can be considered more advanced than others. Digitalization Level (1 through 5) Level 4 Definition (of Level 4): Detailed accounting and transactional data is analyzed by the tax authority and cross-checked against filings in real-time to map the geographic economic ecosystem. Taxpayers receive electronic audit assessments with limited time to respond to assessments Required submissions: * Type Filing Requirement Frequency Transactional/Accounting Data All taxes Corporate Income Tax Electronic Invoices (E-Invoicing) Company Chart of Accounts (COA) mapped official COA, Trial Balance Digital Books and Records Income Tax Return Journal entries with reference to electronic invoices Statutory Financial Statements Informational Returns Income Tax Prepayments Transfer Pricing BEPS Country-by-Country Reporting Certain transactional data Periodic monthly, quarterly, annually and real-time Monthly Value Added Tax (VAT) VAT filings for Federal and State Informational returns Monthly Customs and Global Trade Detailed Transactional data Electronic Shipping records * This list is not all-inclusive. Additional transmission requirements would need to be determined based on business scenarios. 29 EY Digital Tax Electronic Invoices Monthly

30 Chile Tax digitization overview Overview Chile s tax authority has started its efforts on the path to digitize its tax administration, following suit with other taxing authorities in the LATAM region. The authority requires electronic invoicing (for enterprises with revenues over $100,000) using a software provided by the authority s website. There are also pre-defined requirements defined by the authority to standardize the invoices. Most of the declarations and tax returns need to be filed online using the tax authority s website and electronic accounting records are required to be maintained by taxpayers. During audits, the tax authority requires access to the electronic accounting information as well as access to financial systems. Digitalization Level (1 through 5) Level 4 Definition (of Level 4): Detailed accounting and transactional data is analyzed by the tax authority and cross-checked against filings in real-time to map the geographic economic ecosystem. Taxpayers receive electronic audit assessments with limited time to respond to assessments Required submissions: * Type Filing Requirement Frequency Transactional / Accounting Data All taxes E-Accounting Electronic Invoices (E-Invoicing) Corporate Income Tax Income Tax Return Transfer Pricing BEPS Country-by-Country Reporting (under implementation) Value Added Tax (VAT) / Customs and Global Trade Tax Returns Real-time Monthly Monthly Periodic * This list is not all-inclusive. Additional transmission requirements would need to be determined based on business scenarios. 30 EY Digital Tax

31 China Tax digitization overview Overview China s tax authority has rapidly prompted its digitization journey with the enhancement of 1000 Accounts Plan program by standardizing the administrative measures and implementation procedures from State of Tax Administration ( SAT ) and provisional tax bureau level. This program is targeted at large enterprises and aims at getting access to detailed transactional level information from clients to account for all tax types. China also has a comprehensive E-Invoicing system that requires taxpayers to generate and issues invoices real time with relevant information needed to comply and track for tax purposes. In addition, the tax authority has launched a comprehensive digital tax system - Golden Tax III to build up a unified tax platform with almost all tax covered so that the centralized information processing and information exchange could be realized for SAT and the local tax bureaus. There are also initiatives currently underway for increased collaboration between the different tax authorities. Digitalization Level (1 through 5) Level 3 trending Level 4 Definition (of Level 3): Detailed accounting and transactional data is provided to the tax authority. This data is then analyzed using data analytics and reconciled by the tax authority against tax filings. Required submissions: * Type Filing Requirement Frequency Transactional/Accounting Data All taxes Corporate Income Tax Transactional detail (1000 Accounts Plan) Electronic Invoices (E-Invoicing) Withholding Tax Returns Income Tax Return Informational Returns Income Tax Prepayments Transfer Pricing BEPS Country-by-Country Reporting Periodic monthly, quarterly, annually and real-time Monthly Value Added Tax (VAT) Tax Returns Monthly Customs and Global Trade Customs declarations Periodic * This list is not all-inclusive. Additional transmission requirements would need to be determined based on business scenarios. 31 EY Digital Tax

32 France Tax digitization overview Overview France s tax authority requires all tax returns to be filed electronically. France follows the OECD s guidelines around a Standard Audit file for Taxes (SAF-T) and requires companies to maintain their financial records in a specified format termed Fichier des Escritures Comptables" (FEC). These records need to be maintained in French GAAP and provided to the authority upon request for an audit. Quick turnaround is expected on this request and non-compliance results in penalties. Tax authority uses this information to reconcile back to the returns filed. France also has an initiative in place to implement e-invoicing for B2G transactions by 2020 starting with large companies in This is operational in nature and impact on tax submissions is unclear. Digitalization Level (1 through 5) Level 3 Definition (of Level 3): Detailed accounting and transactional data is provided to the tax authority. This data is then analyzed using data analytics and reconciled by the tax authority against tax filings. Required submissions: * TypeC Filing Requirement Frequency Transactional/Accounting Data All taxes Electronic Invoices (E-Invoicing) Accounting Records (SAF-T) Intrastat DEB Reports Periodic monthly, annually and real-time Corporate Income Tax Income Tax Prepayments Income Tax Return Quarterly Transfer Pricing Transfer Pricing Declaration BEPS Country-by-Country Reporting, Master file and Local file Value Added Tax ( VAT) VAT returns Monthly, Quarterly Customs and Global Trade Single Administrative Document (SAD) Periodic * This list is not all-inclusive. Additional transmission requirements would need to be determined based on business scenarios. 32 EY Digital Tax

33 India Tax digitization overview Overview The Indian Tax Authorities have been early adopters of Information Technology (IT). The IT systems implemented so far have helped direct tax payers apply for tax registrations online, e-payment of taxes, reconciliation and e-viewing of tax credits, e-filing of tax returns, e-processing of returns and refunds by authorities, etc. For indirect tax as well, with advent of GST all compliances, payments, credits matching are proposed to be administered online. The Tax Authorities have used IT systems as a risk management tool to pick up returns/consignments (in the case of Customs) for scrutiny. Also, recognizing the value of data available in electronic form, the Tax Authorities have initiated data warehousing and business intelligence projects, which would help them to detect patterns and in plugging leakages. Digitalization Level (1 through 5) Level 1 trending Level 2 & 3 Definition (of Level 1): Tax filings / returns are required by the tax authority to be submitted electronically. Underlying detail and supporting workpapers are required to be maintained by the taxpayer and provided up request or an audit. Required submissions: * Type Filing Requirement Frequency Transactional/Accounting Data Documents for customs clearance Transaction based Corporate Income Tax Income Tax return and related certifications Withholding Tax return Income, withholding tax payments Quarterly Transfer Pricing Certification of arms length price for related party transactions Excise duty/value Added Tax (VAT)/Service Tax Excise/VAT/Service Tax returns GST (Proposed) Invoice wise/transaction wise data to be entered in an online tax platform for sales, purchases and GST credit distribution. E-filing of returns and e-payment of taxes. * This list is not all-inclusive. Additional transmission requirements would need to be determined based on business scenarios. 33 EY Digital Tax Monthly, Quarterly Half-yearly Monthly Quarterly

34 Ireland Tax digitization overview Overview Ireland s Revenue Commissioners (Revenue) requires taxpayers to file tax returns as well as financial data electronically. Additionally detailed transactional information for VAT and Customs may also be required by Revenue to be provided electronically. Revenue has been using data analytics extensively on digital submissions to perform reconciliations since However, Revenue has recently increased their focus, efforts and capability by creating a dedicated Analytics Group who extensively use analytics for risk/anomaly identification and audit targeting. When performing e-audits, Revenue issues a standard Electronic Records Request which is a very detailed list of fields to be extracted from the system at transaction level. Digitalization Level (1 through 5) Level 3 Definition (of Level 3): Detailed accounting and transactional data is provided to the tax authority. This data is then analyzed using data analytics and reconciled by the tax authority against tax filings. Required submissions: * Type Filing Requirement Frequency Transactional / Accounting Data All taxes Corporate Income Tax Value Added Tax (VAT) Customs and Global Trade Trading details (VIES and Intrastat) Financial Statements Corporate Income Tax Return (Third Party) Informational Returns VAT return VAT on ecommerce Customs traders procedures Export returns Excise returns 1 The regularity can be set either according to specific revenue or trader requirements * This list is not all-inclusive. Additional transmission requirements would need to be determined based on business scenarios. 34 EY Digital Tax Cargo manifests Import/Export Declarations Income Tax Prepayments VAT return of trading details Periodic monthly, quarterly, annually and real-time Monthly Bi-Monthly, Quarterly, ly Periodic 1

35 Luxembourg Tax digitization overview Overview While Luxembourg allows for e-filing to tax returns electronically, its focus on digitization has primarily been on the VAT, which is in-line with the larger EU approach. The tax authority in Luxembourg also follows the OECD SAF-T guidelines and has created a requirement for taxpayers to provide upon request the SAF-T (FAIA) file with detailed accounting and transactional information including master data for customers and suppliers. Luxembourg s tax authority has also recently implemented an electronic platform (ecdf) for gathering of digital data related to the various electronic filings requirements. Its main purpose is to provide a central and neutral platform for the preparation, the validation and the electronic transmission over the Internet.tu Digitalization Level (1 through 5) Level 2 Definition (of Level 2): Accounting or other supporting data for required tax return / filings is submitted to the tax authority in a pre-defined electronic format. Required submissions: * Type Filing Requirement Frequency Transactional/Accounting Data All taxes Corporate Income Tax Electronic Invoices (E-Invoicing) Standard Chart of Accounts Income Tax Return Tax Prepayments SAF-T (FAIA) Transfer Pricing BEPS Country-by-Country Reporting Value Added Tax (VAT) VAT Returns EC Sales List Customs and Global Trade Single Administrative Document (SAD) * This list is not all-inclusive. Additional transmission requirements would need to be determined based on business scenarios. Periodic ad-hoc, Quarterly Monthly, Quarterly, Yearly Ad-hoc Periodic 35 EY Digital Tax

36 Mexico Tax digitization overview Overview The Mexican Tax Authority has taken a leading-edge approach to digitization of tax filings and data submissions from taxpayers. It requires 100% compliance with maintenance and transmission of tax as well as detailed transactional information in electronic format. In addition to information provided by taxpayers, the tax authority also uses information from tax authorities of treaty countries and other governmental agencies. Using this detailed transactional level data, the Mexican Tax Authority performs real-time analysis to monitor tax filings, manage payments & refunds and perform analytical tests to issue e-audits and assessments. Digitalization Level (1 through 5) Level 4 trending Level 5 Definition (of Level 4): Detailed accounting and transactional data is analyzed by the tax authority and cross-checked against filings in real-time to map the geographic economic ecosystem. Taxpayers receive electronic audit assessments with limited time to respond to assessments Required submissions: * Type Filing Requirement Frequency Transactional/Accounting Data All taxes Corporate Income Tax Transfer Pricing Electronic Invoices (E-Invoicing) Electronic Accounting Records Income Tax Return Informational Returns BEPS Country-by-Country Reporting Certain transactional data Third party relationships Periodic monthly, quarterly, annually and real-time Monthly Value Added Tax ( VAT) VAT returns Informational returns Monthly Customs and Global Trade Customs Declarations Periodic * This list is not all-inclusive. Additional transmission requirements would need to be determined based on business scenarios. 36 EY Digital Tax

37 Peru Tax digitization overview Overview Peruvian tax Authority (SUNAT), has implemented e-books ( El programa de libros electrónicos - PLE ) for bank information, inventory, balance sheet, fixed assets and sales. Additionally, they have also implemented e-invoice requirements. Peru is also in the process of adopting BEPS country by country reporting requirements. Digitalization Level (1 through 5) Level 3 Definition (of Level 3): Detailed accounting and transactional data is provided to the tax authority. This data is then analyzed using data analytics and reconciled by the tax authority against tax filings. Required submissions: * Type Filing Requirement Frequency Transactional/Accounting Data All taxes Electronic Invoices (E-Invoicing) Cash and bank (E-book) Inventory (E-Book) Periodic monthly, quarterly, annually and real-time Corporate Income Tax Electronic Accounting Records Income Tax Return Income Tax Prepayments Monthly Transfer Pricing Transfer Pricing informative return and Transfer Pricing study (current) BEPS Country-by-Country Reporting (implementing for 2018) Transfer pricing tax return which includes a transfer pricing study Value Added Tax ( VAT) VAT returns Informational returns Monthly * This list is not all-inclusive. Additional transmission requirements would need to be determined based on business scenarios. 37 EY Digital Tax

38 Poland Tax digitization overview Overview Poland s tax authority has initiated a broader e-taxes Programme to implement legislation and enabling systems to assist the authority in effectively administering different taxes. Implementation of this program has already begun and is scheduled to be completed by The eventual goal of this initiative is for the tax authority to collect all accounting records related to taxes from taxpayers and eventually provide to taxpayers pre-filled tax returns for review and documentation submission. Poland allows for E-filing of ca. 40 tax return forms among others the VAT Return with the Standard Audit File for Tax (SAF- T (PL)) obligatorily filed electronically since 2016 (large enterprises), 2017 for SME and 2018 for the remaining. The SAF-T includes detailed accounting information as well VAT, invoices and other structures (listed below). The VAT structure (SAF-T for VAT) needs to be submitted monthly while the remaining structures including invoices upon request by the tax authorities. The purpose of implementation of SAFT is to streamline a tax inspection and lower the level of audit detail but also to identify the key areas of incompatible tax reporting (prior to an inspection) which is expected to increase tax revenue. Digitalization Level (1 through 5) Level 3 trending Level 5 Definition (of Level 3): Detailed accounting and transactional data is provided to the tax authority. This data is then analyzed using data analytics and reconciled by the tax authority against tax filings. Required submissions: * Type Filing Requirement Frequency Transactional/Accounting Data All taxes Corporate Income Tax FATCA and CRS compliance data SAF-T (PL) files for: invoices, bank account statements, accounting books, inventory turnover Income Tax return Income Tax Prepayments * This list is not all-inclusive. Additional transmission requirements would need to be determined based on business scenarios. Withholding tax returns Transfer Pricing BEPS Country-by-Country Reporting Declaration Value Added Tax (VAT) Customs and Global Trade 38 EY Digital Tax VAT returns including for EU transactions Split payment mechanism is considered Single Administrative Document (SAD) for each transaction SAF-T for VAT registers Upon request (other) Monthly Monthly / Daily Monthly, Quarterly Periodic

39 Portugal Tax digitization overview Overview Portugal s tax authority has been on a path to digitize its tax administration in accordance with some of the EU and OECD regulations. Tax returns are required to be e-filed using digital data transmission and the authority monitors on a regular bases certain pre-identified taxpayers (primarily large and complex enterprises) for potential audit purposes. Tax authority also requires submission of a standard audit file modified for Portugal (SAF-T (PT)), that includes detailed company financial information in addition to requiring E-Invoices for sales invoices using approved invoicing programs. Additionally, the tax authority has recently enacted requirements to comply with the OECD BEPS Country by Country reporting requirements that includes a number of financial and operational information to be submitted. Required submissions: * Type Filing Requirement Frequency Transactional/Accounting Data All taxes Corporate Income Tax Electronic Invoices (E-Invoicing) - Operational Standard Audit File for Tax (SAF-T (PT)) Income Tax Prepayments Supporting Accounting Tax Data Transfer Pricing BEPS Country-by-Country Reporting Value Added Tax (VAT) VAT returns Declaration Withholding tax returns Income Tax Return Declaration Intrastat declarations EU Sales List Digitalization Level (1 through 5) Level 2 trending Level 5 Definition (of Level 2): Accounting or other supporting data for required tax return / filings is submitted to the tax authority in a pre-defined electronic format. Periodic real-time and monthly Quarterly Customs and Global Trade Single Administrative Document (SAD) Periodic real-time and monthly * This list is not all-inclusive. Additional transmission requirements would need to be determined based on business scenarios. 39 EY Digital Tax Monthly (until the 10th or 15th day of the first month, after the end of the month/quarter, respectively) Monthly (until the 20th day of the first month, after the end of the month/quarter) Monthly (until the 15th day of the first month after the end of the month) (15th of July following the end of the calendar year if fiscal year is equal to civil year)

40 Russia Tax digitization overview Overview The Russian Tax Authorities has taken a significant step on the digitization path during the last several years. Currently the Russian Tax Authorities requires taxpayers not only to submit in electronic formats the most part of reporting and supporting documents but also implemented a new procedure for electronic interaction with taxpayers in special xml format in regard to previously submitted data. The Russian Tax Authorities actively carry out cross-checks of data provided by different parties of transactions. Moreover the Tax Authorities actively match data from various reporting types. In particular the Russian Tax Authorities currently tend to process real-time cross-checks between VAT and Customs reporting in order to line up payment and supply chains from importers to final consumers. Digitalization Level (1 through 5) Level 4 Definition (of Level 4): Detailed accounting and transactional data is analyzed by the tax authority and cross-checked against filings in real-time to map the geographic economic ecosystem. Taxpayers receive electronic audit assessments with limited time to respond to assessments Required submissions: * Type Filing Requirement Frequency Transactional/Accounting Data All taxes Corporate Income Tax Transfer Pricing Value Added Tax ( VAT) Customs and Global Trade Trial Balance Statutory Financial Statements Income Tax Return Withholding tax calculations Bank statements for foreign transfers Cash register receipts Transfer Pricing report with great detalization (more than 30 analytics) on each controlled transaction VAT returns Detailed source data from purchase and sales ledger ly In real time Quarterly Quarterly In real time Electronic cargo customs declarations with great detalization (more than 50 analytics) on each imported/exported item In real time * This list is not all-inclusive. Additional transmission requirements would need to be determined based on business scenarios. 40 EY Digital Tax

41 Spain Tax digitization overview Overview The Resolution dated January 27, 2017, of the General Directorate of the STA, approving the general guidelines on the General Tax Control Plan for 2017 highlights the systematic use of new information that the Spanish tax authorities will receive by means of the National Plan of Information Gathering, from the different instruments in international mutual assistance and the implementation of the e-books for VAT purposes of the new Immediate Submission of Information (ISI) system. This requirement by the tax authority significantly reduces the VAT return filing obligations by taxpayers. Any person (whether physical or legal) is provided with an electronic mailbox direction (DEH) for notifications. Spainish tax authority (Agencia Tributaria) has also signed the multilateral competent authority agreement on the exchange of CBCR in January/16. Digitalization Level (1 through 5) Level 5 Definition (of Level 3): Detailed accounting and transactional data is provided to the tax authority and requirement to file tax returns is reduced / eliminated as result. Tax authority analyzes data submitted against tax filings and third party information using data analytics. Required submissions: * Type Filing Requirement Frequency Corporate Income Tax Transfer Pricing Value Added Tax (VAT) Customs and Global Trade Income Tax return Interim CIT payments BEPS Country-by-Country Reporting BEPS Country-by-Country Reporting notification of reporting entity and its jurisdiction e-book (starting July/17) with invoices issued/received Informational returns Import SAD Export SAD * This list is not all-inclusive. Additional transmission requirements would need to be determined based on business scenarios. Any other application to be submitted to apply for a customs arrangement April, October, December Monthly real time At the time the import/export is performed 41 EY Digital Tax

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