Impact of BEPS Developments on Tax Technologies

Impact of BEPS Developments on Tax Technologies

Background 

Abbreviation of BEPS has been the most used one among the international tax professionals in last years. It is an international plan developed by the OECD aiming to prevent the base erosion and profit shifting (BEPS) of company profits to low tax or no-tax countries as a result of tax avoidance strategies that exploit gaps and mismatches in tax rules.

The Action Plan makes amendments in many taxation topics.  The OECD BEPS Action Plan brought the project outcome with a view to changing the rules of taxation in a coordinated way on an international level.

With the enforcement of the Action Plan, not only international taxation rules but also local tax legislation have been amended. In addition, with multilateral instrument, some of the items in the current double taxation agreements are also collectively updated.

It covered 15 different actions in many topics from digital economy to permanent establishments and from intangible properties to the abuse of tax treaties. The Action Plan is based on the understanding of substance over form in taxation, and also on issues of coherence and transparency.

The countries that directly participate in the BEPS works possess 84% of the world’s economy. When all countries are taken into consideration, 90% of the world economy supports the Action Plan.

Impact of BEPS Project on the Multinationals

The BEPS Action Plan had an impact on many areas, from financing methodologies to operational structures of multinational companies. It has been decided that companies are subject to certain restrictions in terms of borrowing, including financing from 3rd parties.

The Action Plan actually required changes in the structures of multinational companies, including holding companies. The permanent establishment concept was amended while, on the other hand, the exceptions regarding the existing of permanent establishment due to certain activities of companies were narrowed. Particularly with respect to transfer pricing, significant obligations have been imposed on the companies with regard to documentation.

All of these changes required companies to re-organize their operational models. The amendments to double tax treaties will bring changes to the tax burden of multinational corporations and the risk of double taxation will increase in the post-BEPS period. 

An obligation to notify tax authorities prior to tax planning are also introduced by countries (e.g. Netherlands). Particularly to ensure automatic exchange of information, companies need to notify the tax authorities about their operations all around the world.

BEPS and Tax Technologies

A number of obligations imposed on tax issues in recent years by the OECD and G-20 countries have led many multinational companies to seek tax- technology based solutions. For example, the requirement of Country-by-Country Reporting (CbCR) filing obligation in more than 80 countries increased the need for technology-based tools. Actually, BEPS accelerated the development of tax technologies as tax and finance executives currently need to handle much more complicated compliance requirements. 

In practice, collecting and analysing the financial and tax data of a large number of companies in a multinational group is carried out by manual processes. This creates a lot of workload for companies and their managers. Excel-based data collection and analysis from a large number of companies and/or countries result in time consuming and operational cost for multinational companies.

In the case tax executives do not have a tool developed in-house and allowing real-time monitoring of their entire operation, it is highly possible for such people to misevaluate the commercial activities of the related companies in their multinational groups. In this sense, a tax tool develop solely for tax purposes could make a serious contribution to the strategic decision-making of senior executives and make their daily work easier.

Tinvento: Highly Advanced Tax Management Platform

Based on BEPS developments all over the world, it is inevitable that senior executives of MNEs will need such tax tools for their critical management decisions. They may either develop a tax technology or adapt an easy adaptable technology into their system. For the first option, it requires project cost and high involvement of executives from many countries. Otherwise, an effective tool cannot be easily developed. Alternatively, they may adapt their system into an advanced technology.

Tinvento is a good option for multinationals and saves them from heavy project costs and time-consuming. Primary purpose of Tinvento is to automate business processes of your business in order to make it more efficient. Your businesses may also need to integrate its ERP system with tax function. 

Tinvento Platform can be integrated with your ERP system (e.g. SAP) on a project basis. We also develop new features to make Tinvento Platform to fully comply with your own system. This means Tinvento Platform has no borders to make your business more efficient.

Also, users can prepare templates in excel format and import them into Tinvento Platform with one click. It is also quite easy to convert any data into smart charts and graphics with the advanced dashboards.

It helps you to create powerful reports, compare your entities financial information over years with graphical representation. Within our tools, you can easily choose which ratios you want to calculate and visualize. It includes map views, scatter diagrams with trendlines, bar charts and pie charts. Choose ratios, countries, regions, years, entities from drop-down menus and checkboxes, click “Show Results” button, and Tinvento Platform will do the rest!

It is also quite easy to convert any data into smart charts and graphics with the advanced dashboards. For instance, through the solutions of CbCR Manager, you can;

  • Easily track your subsidiaries’ CbCR status, 
  • Prepare CbCR tables on a country-by-country basis and aggregate them
  • Convert CbCR tables into OECD’s XML format
  • Export CbCR tables and report them to relevant tax authorities, 
  • Analyse CbCR data with data visualisation tools
  • Evaluate potential CbCR risks and understand tax audit risk based on the CbCR data

In the post BEPS age, Tinvento will be your tax and finance team with high end solutions for finance, tax, transfer pricing, CbCR, intra group services and documentation needs of multinationals.

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