EMEA Dbriefs presents:

COVID-19: Deliver Value Through The

Indirect Tax Function
Gareth Pritchard, Bob Jones, Chiara Tomassetti, Pieter Van Hoecke and Adam Gray
3 June 2020 ©2020 Deloitte LLP.
Agenda

• Introduction

• COVID-19 – Respond. Recover. Thrive.

−Practical experiences to date
−Creating value through indirect tax
−Compliance, governance and operational excellence

• Questions and answers

©2020 Deloitte LLP.

 Introduction
COVID-19 – Managing indirect taxes in uncertain times
PROCESSES
• Explore automation where possible (data
extraction, VAT returns, EC Sales Listings,
Intrastats, reconciliations, import/export and
shipping documentation)
• Review master data quality/ERP VAT codes
• Potential for e-invoicing
• Review use of customs brokers and licenses
PEOPLE
• Use potential team capacity to progress:
− Horizon scanning for upcoming changes
− Training (via e-learning)
− Impact assessment of non-COVID-19
related technical developments
• Enhance cross-functional and key indirect tax
function (e.g. compliance) communication
• Ensure contingency planning in place for all
key indirect tax responsibilities
SHORT TERM
• Explore alternative delivery models (e.g.
outsourced or co-sourced compliance models)
• Review and, where necessary, document key
compliance processes mitigating key main
dependency risk
• Leverage technology to facilitate key functions
(e.g. compliance process) and team
communications in periods of home working
• Analyse impact of COVID-19 on supply chains
and global trade activities
MEDIUM TO LONG TERM
• Further document key compliance processes
and governance model/framework for indirect
tax function, leveraging lessons learned
• Perform tax audit readiness reviews – e.g.
post-COVID-19 audits covering remote
working periods
• Review non-standard transactions made in and
after remote working period for errors such as
under-recovery/over-payment of VAT
©2020 Deloitte LLP.
Introduction
(continued)
Operational Cash and Business
excellence liquidity continuity

VAT payments Cash position Customs and global

• Consider local tax authority • Review and prioritise local trade
COVID-19 measures and and foreign VAT refund • Explore potential for using or
easements (e.g. country claims extending import VAT deferral
specific deferrals) • Deploy analytics • Review use of warehousing
Deloitte COVID-19 Tax & technology to identify cash regimes/free trade
Fiscal Measures* opportunities e.g. over- zones/suspension
• Explore payment plan payment/under-recovery arrangements
options with tax authorities of VAT • Review product classifications
• Analyse monthly refund • Review Bad Debt Relief / valuations / preferences to
licenses provisions and timely optimise duties payments
• Manage/review VAT accruals recovery of VAT • Reduce guarantee positions
for potential to accelerate • Review VAT across all indirect taxes
recovery positions/recovery on M&A • Review use of tariff exclusions,
• Review potential to amend activity, real estate and exemptions and reliefs
invoicing arrangements capital expenditure
• Decrease customs compliance
(including timing) • Explore VAT grouping cost (e.g. brokerage fees)
• Review advanced payments potential/impact
• Review partial exemption
methodology
*See downloads and links ©2020 Deloitte LLP.
COVID-19 – Respond.
Recover. Thrive.
Practical experiences to date
Dealing with the pandemic
Emerging from the Respond phase, into the Recover phase

Deloitte’s work supporting tax leaders revealed five main areas of focus
in response to the acute phase of the pandemic:

1. Protect the workforce and business continuity

2. Assess the value of utilising new tax relief legislation

3. Identify and execute cash tax opportunities

4. Manage impact on tax and treasury structures

5. Support distressed debt and transaction cost management

©2020 Deloitte LLP.

Respond - Government responses
Examples in the indirect tax arena

• EU Commission legislates to facilitate supply chain

PPE equipment regulatory simplifications, duty and VAT reliefs
• Export authorisation requirement

• Various forms of VAT, customs and excise payment

Indirect tax relief deferrals through lockdown
measures
• Accelerated claim processing

Delay in • Proposal to defer DAC6 measures for three months

implementation of • Proposal to delay electronic commerce package by
legislation six months

Supply chain • Sympathetic rapid approval for

disruption extension/amendment of customs suspension
responses regimes and premises
• Relaxation of certain compliance time limits e.g.
supply of documentation for audits

©2020 Deloitte LLP.

Entering the ‘Recover’ phase
Supply chain disruption - indirect tax opportunities
Identifying and utilising the opportunities
Issue Implication and opportunity
Supply chain • Continue to seek access to any additional VAT deferral where offered
disruption - • Consider factoring VAT receivables
VAT
• Perform Special Regimes review – for example:
−The ‘Plafond’ system,
−Mandatory domestic reverse charge mechanisms
−Access to VAT warehousing systems
• Look for local opportunities (e.g. consider recovery of VAT
guarantees/insurance policies in Italy)
Supply chain • Continue to seek access to any additional customs duty deferral
disruption - where offered
Customs • If goods’ destination changed, or they are re-purposed, re-exported
or destroyed, consider possible duty claims
• If prices are reviewed downwards due to not meeting contract (e.g.
delayed, spoilt, destroyed or market conditions change), or not paid
for, consider whether customs transaction value may be reduced
and a reclaim made, including sometimes for transfer pricing
adjustments
©2020 Deloitte LLP.
Cash flow during difficult times
Monetisation of stocks?

Principal Sale and shipment Distributor

Stock buyback

Principal

Stock buyback

©2020 Deloitte LLP.

Poll question 1

Which of the below government responses have had the greatest impact on your
business? (Please select one answer only)

• PPE equipment
• Indirect tax relief measures
• Delay in implementation of legislation
• Supply chain disruption responses
• All of the above
• Don’t know/not applicable

©2020 Deloitte LLP.

COVID-19 – Respond.
Recover. Thrive.
Creating value through
indirect tax
Managing indirect taxes in uncertain times
Creating value through indirect tax

• As businesses are faced with an increasingly challenging global environment

in which to undertake business, there are some key indirect tax risks and
opportunities presented by, or as a result of, COVID-19

• Deloitte has a wealth of experience in the indirect tax space in assisting

indirect tax functions through periods of change, including:
−Supply chain (re)modelling
−Re-evaluation of historical import VAT and duty guarantees
−End-to-end process reviews and contingency planning, using bespoke
analytics to identify cash saving
−Opportunities or VAT overpaid/under-recovered, review of duty reliefs and
deferrals available, etc.

©2020 Deloitte LLP.

 Use of vouchers
Belgium
Summary
Issuance of a Multi Purpose Voucher (MPV) instead of an actual refund
Detail and commentary
Refund: Ease of Implementation

In case a sale is credited and the money is truly refunded to a

customer, this will logically result in a negative impact on
cashflow. As regards the VAT on the initial sale: this can be Client BTA
requested back from the tax authorities via the VAT return, but
should in principle also be reimbursed to the customer (as part Relevant for:
of the total refund to the customer)
All businesses, but
Issuance of a Voucher - SPV or MPV: specifically those
that need to credit
If your business is allowed (based on commercial law) to issue a initial sales
voucher in case a sale is credited, instead of reimbursing the
customer in cash, then this will limit the impact on your
business’ cashflow. The initial sale is then credited, but the
money is in fact allocated to a voucher. As regards the VAT on
the initial sale: this can be requested back from the tax
authorities via the VAT return. As regards the VAT on the
voucher: no VAT is due upon issuance of the voucher, if the Topic
voucher qualifies as a Multi Purpose Voucher. Hence, the initial
VAT collected from the customer can be kept, as VAT is only due Cashflow - Output tax
on a Multi Purpose Voucher at the moment it is redeemed,
which creates an additional cashflow improvement
©2020 Deloitte LLP.
Factoring of VAT receivables Italy
Summary
Disinvestment of VAT credits claimed for refund by factoring VAT receivables to
third parties leads to a very significant reduction of the timing needed to collect
the payment
Detail and commentary
Ease of Implementation
What we are looking at as an immediate impact of COVID-19
is a material decrease of the turnover combined with
deferment of payment terms which no longer guarantee a
sufficient cash flow in order to manage the enterprise, repay Client Revenue
the existing stock of debit and fulfil the financial covenants agency

The possibility to disinvest the VAT credits claimed for refund Relevant for:
by factoring the VAT receivables to third parties is possible for
Companies in a natural VAT
both yearly and quarterly VAT refund claims
credit position
Factoring VAT credits is aimed at allowing very significant
reduction of the timing needed to collect the payment Entities with VAT claims
stalled – e.g. due to a
The process for completing the contractual framework and dispute with the local tax
having the VAT credit certified for the sale may be finalised authorities, delays in the
within a very rapid timeframe (15 days approx.) Collection of country making the VAT
the capital (net of the bank fee) immediately follows repayments, etc.
Topic
Rotating factoring agreements are possible
Customs and excise
©2020 Deloitte LLP.
 Business gifts versus samples
UK
Summary
Review VAT treatment of goods given away free of charge to ensure that VAT has
not incorrectly been charged
Detail and commentary
The gift of a business asset is a supply of goods. It is therefore Ease of Implementation
taxable unless the cost to the business making the gift or
acquiring or producing the goods, together with the cost of any
other such business gifts made to the same person in the same
year (defined as any period of 12 months that includes the day Client HMRC
on which the gift is made) is not more than £50
Relevant for:
However, in determining whether an output tax charge arises, it
should be noted that gifts provided to different individuals All businesses, but
having the same employer do not constitute gifts to the same specifically those that
person provide significant number
of business gifts and/or
Furthermore, the provision of samples, otherwise than for a
samples
consideration, is typically not liable to VAT, regardless of how
many samples are provided to any one recipient

A sample is a specimen of a product that is intended to promote

sales of that product, that allows the characteristics and
qualities of the product to be assessed without resulting in final Topic
consumption (other than when inherently required), and is not Output tax
limited to specimens presented in a form that are not available
for sale
©2020 Deloitte LLP.
 Duty reclaim review
UK
Summary
Review of business' import data to identify possible reclaims of duty overpaid
Detail and commentary
By analysing a business’ historical import data for a three Ease of Implementation
year period obtained from the relevant tax authority, it is
possible to determine whether there are opportunities to
make retrospective claims for overpaid duty
Client HMRC
Areas typically reviewed where we have been successful in
securing claims include: Relevant for:
Businesses that are
− Tariff classification significant importers of
− Unclaimed Preferential Origin (conferred on goods from goods. Typically consumer,
particular countries) manufacturing/energy
sectors. In respect of EU
Depending on level of review and number of countries tariff suspensions, importers
involved, the analysis may be carried out manually (possibly of raw materials / semi-
with use of Brexit Tool for the UK opportunity), or using processed goods that are
Deloitte’s Global Trade Radar tool for global scale/multiple subsequently processed /
jurisdictions manufactured in the UK.
Typically pharmaceutical,
Opportunities also exist to make retrospective reclaims under chemicals / manufacturing
existing EU tariff suspensions, which allow the duty free sectors
importation into the EU of raw materials, components and Topic
semi-finished products which cannot be sourced from within
the customs union Customs and excise
©2020 Deloitte LLP.
COVID-19 – Respond.
Recover. Thrive.
Compliance, governance and
operational excellence
Managing your indirect tax operations in uncertain times

Areas of operational focus Key trends from last 90 days

Indirect tax A drive to reduce the cost of the indirect tax

operating model function – particularly compliance activities

Indirect tax risk

management Limited impact on in-flight technology projects,
but renewed focus/scrutiny on the business
ERP and data cases that underpin them

Global compliance Deliberate reshaping of indirect tax processes to

and reporting address key person risk, increase
flexibility/agility, and introduce alternative
Indirect tax delivery models
automation

Other indirect tax Renewed appetite for automation and data-led

compliance value

©2020 Deloitte LLP.

The actions indirect tax functions are taking

Work Worker Workplace

How does work get What capabilities are What enablers and tech are
done? required? needed?
• Reassessing compliance • Clarifying indirect tax roles • Establishing that all systems be
operating models to and responsibilities so that accessed and used remotely. If
further reduce cost to the there are no gaps in the not, how is this critical
business of core delivery model – who can do dependency managed?
activities – who? how? the work required? • Assessing the technologies that
where? • Establishing alternative can be leveraged to enhance
• Implementation of resources that can be drawn remote or reduced workforce-
flexible delivery models upon (e.g. external are these generic or specific to
for compliance and providers, SSC) if needed indirect tax?
advisory activities • Ensuring there is there a • Checking that indirect tax
• Reviewing ‘in-flight’ robust governance model for priorities are still being
projects to understand indirect tax decision making addressed if changes are being
impacts and value – are - how might it be adjusted made to in-flight projects (e.g.
these still the right for staff absence? ERP implementations)?
activities in a post • Accelerating the use of • Leveraging technology to drive
COVID-19 world? technology to add capability, additional value through indirect
• Strengthening processes bandwidth and flexibility to taxes (e.g. claims analysis) and
and controls to remove the resource model, with help to reduce business cost
key-person dependencies tactical deployment to key (e.g. compliance automation) so
• Leveraging indirect tax process areas (e.g. data that indirect tax function
processes to support collection and wrangling) contributes to wider
broader business goals organisational needs
©2020 Deloitte LLP.
Technology as an indirect tax value-driver
Indirect tax automation
There has never been
more choice available for
indirect tax functions –
from tactical fixes to
holistic solutions:
• Indirect tax compliance
automation software
• Data wrangling
technology
• Indirect tax decision-
making technology
(e.g. tax engines and
AP decision making)
• Excel and Alteryx
solutions
Leveraging ERP Data and content
ERPs continue to be key Leveraging indirect tax
value-drivers for the data and content to drive
indirect tax function. The value is key where we
themes we are seeing are: have seen increased
activity:
• Push to cloud solutions
– not just core ERP • Quick and accurate
quantification of claims
• Use of dedicated
indirect tax models (e.g. • Strategic view on
S/4 HANA Tax content across all
Compliance) to drive platforms to reduce
automation cost (e.g. SII, SAF-T,
etc.)
• Consideration around
the ‘opportunity cost’ for • Additional insights that
tax drive bottom line value
(e.g. PE method
• Agile delivery models modelling)
(e.g. SAP central
finance) • Reduction in data-led
errors
©2020 Deloitte LLP.
Poll question 2

Which of the below has been your top operational priority over the last 90 days?
(Please select one answer only)
• Ensure compliance activities remain unaffected
• Adapt indirect tax operating model to allow for flexible delivery
• Reduce the cost of the indirect tax function
• Explore opportunities to drive additional value from the function
• Something not on this list
• Don’t know/not applicable

©2020 Deloitte LLP.

Questions and answers
Thank you for joining today’s webcast
To view the archive, visit
www.emeadbriefs.com

©2020 Deloitte LLP.

Contact information

Gareth Pritchard Adam Gray

+44 2920 26 4294 +44 20 7007 3927
gpritchard@deloitte.co.uk ajgray@deloitte.co.uk

Pieter van Hoecke Chiara Tomassetti

+ 32 3 800 86 74 +39 0648990930
pivanhoecke@deloitte.com ctomassetti@sts.deloitte.it

Bob Jones
+44 20 7007 5627
bobjones@deloitte.co.uk

©2020 Deloitte LLP.

Join us on 5 June at 14:00 BST/15:00
CEST as our Global Mobility And
Employment Taxes series presents:

The Future Of The UK Coronavirus

Job Retention Scheme

©2020 Deloitte LLP.

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