Integrating Vertex with SAP Ariba: An Overview
Episode 13 of Tax Today: Procurement
Listen Time 16 mins
The Organization for Economic Co-operation and Development’s (OECD’s) Action Plan on Base Erosion and Profit Sharing (“the BEPS Action Plan”) outlines 15 specific compliance requirements. One of these requirements, the country-by-country reporting (CbCR) template, will add new challenges and additional complexity to what many tax executives currently identify as their function’s toughest data management issue: the disconnect between financial reporting systems and the required income tax reporting process.
The CbCR requirement calls for multinational companies (MNCs) to report their income, taxes paid, and other indicators of economic activity on a country-by-country basis through the use of a common template. CbCR marks an extremely important component of the BEPS Action Plan for two reasons:
OECD and G20 countries representing 42 of the largest economies in the world have expressed public support for CbCR. As a result, the OECD has been fast-tracking its CbCR initiative, and the recommended template is expected to be finalized by September 2014.
There is an overall consensus by global thought leaders that CbCR will:
The existing financial reporting systems for many MNCs simply are not in a legal entity format. In other words, many financial reporting systems are substantially disconnected from the required income tax reporting process. As a consequence, it is not uncommon for MNCs to have to manually compute their “legal entity book income” (which includes intercompany transfer pricing), by relying on a combination of excel spread sheets and manual processes.
CbCR will soon place much greater stress on this disconnection between the financial systems and the income tax reporting process.
*This post is adapted from an article written by Bill Brennan, published in the May 2014 issue of International Tax Review, which is available here.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.
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