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We’ll help you navigate the global tax landscape
The business and tax landscapes have changed dramatically, and the pace and complexity of change continues to increase. Governments are tempering the need for revenue with increased competition for labor and capital. Tax authorities are adapting their enforcement strategies, focus and policies in response to the changing dynamics of business. Companies are balancing competing priorities, ensuring they maintain compliance while adding value.
We can assist you with these critical issues in today's tax environment, including:
- The Tangible Property Regulations: why comply?
After almost two years of analysis and commentary, the Internal Revenue Service released the final and re-proposed tangible property regulations in September 2013. The final rules provide welcome simplification in certain areas, as well as opportunities for taxpayers to obtain tax benefits, if interested. Certain rules apply to amounts paid or incurred in tax years beginning in 2014, while others also apply to transactions occurring before January 1, 2014. The most common questions we get are: Do these rules really affect me, and if so, what is the most efficient way to comply?
Who is affected?
The Regulations affect all taxpayers that own or lease tangible property. Unlike most regulations, these rules generally affect all industries and all types of taxpayers, including both domestic and foreign corporations, as well as pass-through entities.
As with most law changes, there are benefits associated with compliance and risks associated with noncompliance.
The benefits of implementation and compliance include:
- An opportunity to deduct certain costs, including repair and/or disposition costs
- Reasonable efforts to comply result in the following:
- An efficient tax provision and return review process considering annual elections and method changes
- No tax return disclosures
- Process changes to take advantage of simplified aspects of the regulations
- Reduced effort required during future IRS exam process
The risks of noncompliance include the following:
- Financial statement auditor may be unable to sign off on provision and/or internal control effectiveness, if material
- Possible FIN 48/ASC 740-10 liability assessment and related UTP disclosure
- Tax return preparer may be unable to sign 2014 tax return without disclosure on Form 8275-R for noncompliance with Regulations
It is essential for taxpayers to consider their individual facts and circumstances as they assess the impact of the regulations on their business, define their objectives in addressing the regulations and implement actions associated with those objectives. EY can help in every step of this process.
Final tangible property regulations: Executive summary
The Tangible Property Regulations: Why comply and how?
Tangible property regulations: A discussion about taxpayer considerations
- Operating in a shifting tax landscape
The global tax landscape continues to change in a dramatic fashion, with near-constant news hitting the headlines regarding shifting tax policy, increasing levels of enforcement and the growing potential of reputational risk.
Multinational companies now have to balance more competing priorities than ever before, ensuring they protect their business by monitoring and responding to changes in policy, legislation and tax enforcement, while at the same time ensuring they not only maintain the highest levels of compliance but also add value from the tax function.
Governments work to secure each tax dollar they're due
From a policy perspective, all governments want their country to be viewed as an attractive place to do business, to attract jobs and capital in an increasingly competitive globalized arena.
At the same time, they want to increase the amount of revenue they bring in. Governments are treading a fine line, constantly assessing how to secure the tax revenues they see as rightly theirs, while at the same time being in direct competition with other nations, making sure they do not scare off mobile capital.
Tax administrations for their part are adapting their enforcement strategies, focus and policies in response to the changing dynamics of business. They are working to ensure that their resources are being applied to the right issues and taxpayers. They share more leading practices and taxpayer information with their foreign counterparts, to help them collect every dollar due.
Disputes are on the rise
The result has been more frequent, complex and higher value disputes between taxpayers and taxing authorities — a trend that is only increasing as countries collaborate together and as emerging markets gain in stature and influence, taking a more sophisticated approach to taxation. Penalties are becoming more stringent and the threat of reputational risk has risen significantly in recent months.
We can help you to navigate a route through this complex landscape.
We can help you monitor and react to quickly-changing tax policy and assess the economic and fiscal impact.
Where tax policies might create an impediment to your business that is unintended by policy makers, we can help you to collaborate – either solely, or as part of a broader grouping of companies who share a common objective – with government to:
- Explain the impediment
- Develop alternative policy choices which are logical and well thought out
- Model the potential outcomes
- Deliver an alternative choice to the government in a form with which policy makers can comfortably work
We also help you address your global tax controversy, enforcement and disclosure needs.
We focus on pre-filing controversy management to help you properly and consistently file your returns and prepare the relevant back-up documentation.
Where a controversy has already occurred, our professionals leverage the network's collective knowledge of how tax authorities operate, and increasingly work together, to help resolve difficult or sensitive tax disputes. To ensure that continuous performance improvements are instigated after a controversy, we work with EY's other tax professionals to ensure that similar events are less likely to occur.
Below you can access our views and analysis of some of the substantial policy and enforcement trends and issues at play today.
- Seizing the opportunity in Global Compliance and Reporting
Global Compliance and Reporting (GCR) is at a tipping point. Many companies distribute responsibility for GCR processes throughout their organization creating a patchwork. The results are suboptimal. Our recent survey shows a need for a new approach.
Due to the combination of evolving business models, transforming finance functions and an increasingly complex regulatory landscape. There are new opportunities to better optimize efficiency, control and value, to help mitigate risk and improve performance.
What is Global Compliance and Reporting?
GCR comprises the key elements of a company's finance and tax processes that prepare statutory financial and tax filings as required in countries around the world. These duties include:
- Statutory accounting and reporting
- Tax accounting and provisions
- Income tax compliance
- Indirect tax compliance
- Governance and control of the above processes
GCR activities reside in the middle of a broader set of so-called record-to-report (R2R) processes. R2R is the intersection between any company's finance and tax departments and is used to capture, process and store information that is essential to statutory accounting, tax compliance and reporting. Any change to R2R processes, information, finance systems, roles and responsibilities will have a direct impact on GCR processes.
Risk on the rise
GCR risks are on the rise. Local jurisdictions are rewriting regulations, focusing more intently on the collection of tax revenues and sharing more taxpayer information across borders. At the same time, the global financial crisis has driven companies to redesign their finance operating models to remain competitive and to take advantage of opportunities for growth.
Our new report Seizing the opportunity in Global Compliance and Reporting investigates the significant developments taking place as multinational companies determine the best way to meet financial reporting and tax obligations worldwide.
Our case study highlights how we helped leverage an array of external providers
Helping you achieve meet the new GCR demands
Fast changing compliance and reporting requirements are more demanding on tax and finance functions today than ever before. So how do you improve control and quality, manage risk, create efficiency and drive value?
Our market-leading approach combines standard and efficient processes, highly effective tools and an extensive network of local tax and accounting subject matter professionals.
See more on how we can help you meet the demands of today's tax landscape
- Rapid Security Analyzer
- The Global Withholding Tax Reporter
- PFIC Analyzer
- Seizing the opportunity in Global Compliance and Reporting
- VAT and GST: Managing the multinational burden
- The intersection of VAT and shared service centers
- Building effective supply chains
Today’s business environment for large, global companies is more fluid and complex than ever before. Companies are adapting their supply chains to respond to increasingly competitive market conditions and to deliver higher revenue and greater value to their shareholders and customers.
Now, more than ever, multinational companies are expanding their global footprint, to both seek new markets and to capture cost efficiencies. As part of this drive, they are increasingly expanding their supply chains.
With every development in the supply chain comes new costs and new risks to factor in
Alongside the advancement into new markets, leading companies are also further developing their existing supply chains to drive cost efficiencies and boost margins in their mature market operations.
Leading companies recognize the need for comprehensive, proactive planning
But whether it is to enter new markets or to drive efficiencies in existing markets, the new leading companies have one shared characteristic – they fully recognize that carrying out comprehensive, proactive planning across the new supply chain model can maximize the opportunities and mitigate the risks as much as possible.
Only with a truly holistic approach can all supply chain costs - including taxes - be assessed and managed.
The challenge of change
Every day companies face decisions about how to change their operations on a global basis.
The challenge in making such decisions is to look at the problem holistically, considering all facets of the problem. Tax consequences should be a part of the analysis because the tax impact of any business change may be very large and lead to a different result than an operations only analysis.
Often, companies will bring tax planning into the process only after the operational opportunities or alternatives have been narrowed and defined, limiting the effectiveness of the planning. Instead by integrating international tax planning at an earlier stage, different alternatives or operating models may emerge as the most effective overall.
With the integrated approach of our Tax Efficient Supply Chain (TESCM) practice, we can often unlock benefits that would not have been possible if such integration had not been present from the beginning.
- Managing mobile workforce risk
In today's globally integrated, tightly regulated and increasingly competitive business environment, one critical success factor stands out: people. People represent an organization's most significant investment and offer a tremendous opportunity to gain a competitive advantage.
Where the leading companies are focusing their efforts
- Attracting and retaining the right people
- Global talent deployment and mobility
- HR and payroll effectiveness
- Risk, governance and compliance
Managing the risks of mobile employees
While optimizing the competitive advantage of your people has long been a core objective, a more recent set of trends in the tax landscape means that large companies with an internationally mobile workforce are at a higher risk of tax noncompliance and resulting controversy than ever before.
The business and tax landscapes that have changed so much over the last few years continue to shift. The pace of globalization is increasing, and the global financial crisis has acted as a catalyst to both globalization and business transformation, with many emerging markets now seeing faster growth than before the crisis.
Alongside these megatrends, a variety of underlying issues are converging, resulting in a growing set of risks for multinationals who have globally mobile employees. While companies may closely define and execute their formal expatriate assignment policies, business travelers outside the scope of such formal policies are widely accepted to be creating a new set of risks for companies to manage.
Unintended tax compliance obligations
These travelers are increasingly creating unintended tax compliance obligations, and the resulting risks are not just personal. They are increasingly felt at the corporate level, with the corporate tax function often unaware of the extent of the spreading problem. Tax administrations are becoming increasingly aware of the issue, however, and are very effectively using new technology to identify where a tax obligation has arisen. In a rising tax enforcement landscape, this issue has significant potential to grow.
Managing these risks should be a burning platform issue for multinational companies.
A burning platform?
What may start as a relatively simple personal income tax compliance issue can quickly create a ripple effect, with risks such as the creation of a permanent establishment, an employment tax audit or the payment of a significant related penalty all occurring at the corporate level.
At the same time, the pace of legislative change (such as the increasing enforcement of permanent establishment) is actually speeding up. Countries are using this type of legislation to increase overall levels of tax revenue.
As governments continue to look for ways to widen the tax base, they are likely to learn from one another in fora such as the OECD's Forum on Tax Administration, CIAT, CIOT and SGATAR and quickly replicate the processes and technologies used. As they do so, we will likely see penetration of this issue into a broader number of companies of smaller size.
Companies, recognizing the spectrum of reputational, personal and financial risks related to tax, are making strong efforts to be compliant. There is an increasing acceptance that such issues are becoming increasingly urgent from both a reputational and a financial perspective.
How we are helping companies
Our Human Capital network embeds processes and technology that will help companies to identify and manage STBT-related risks before they occur. Where controversy has already arisen, EY's global Tax Controversy network can use our insights into the culture and processes and relationships with each key tax administration to remediate issues. With prior year issues being rapidly unearthed, and with tax administrations focusing on this issue more than ever before, the time to act is now.
- The Affordable Care Act: more than health care
For employers, the Affordable Care Act (ACA) is more than a benefits law. It’s a tax law that has far-reaching impact on U.S. companies of all industries, geographies and sizes.
The compliance time is short, and our team of professionals is ready to begin working with companies to address the critical issues that must be addressed throughout the company. Employers need to make smart decisions now that will mitigate costs, avoid unforeseen tax liabilities and retain a productive workforce. We can help.
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