SlideShare a Scribd company logo
1 of 24
Download to read offline
www.taxquotient.com
Indirect Tax Risk Management
An effective Enterprise Tax Risk Management (TRM)
13th October, 2015
Anthony Fernandes
Founder
Tax Quotient
Tax Risks
Tax risks are potential
outcomes that arise from
activities or events which
could lead to tax
adversities throughout the
life of an enterprise.
www.taxquotient.com
Tax Risks – The Indian Context
• Tax Risks are currently one of the most significant risks faced
by businesses and they are not “insurable”. Biggest business
risks – Lloyd’s survey 2013
• The Indian tax system, particularly the indirect tax system is
still evolving.
• There are 3 levels of indirect taxes, some over-lapping. The
tax system is complex, dynamic and overseen by an
aggressive tax administration. All these factors creates scope
for tax risks/difficulties.
• So how does one recognize the risks, assess and mitigate
them?
www.taxquotient.com
Tax Risks & Tax Opportunities
The nature of the
activity determines the
type of risks involved
www.taxquotient.com
The key therefore is to
understand the activity
and risks involved.
Litigation
Govt. Audits,
Investigations &
Notices
These activities are
misunderstood as merely
routine tasks. Bur are the
breeding ground for tax
disputes. This is where most
operations related risks emerge
which are usually invisible &
unvisited by Sr Mgmt
PREVENTRESOLVE
Only at this the risk begins
to get management
attention. In most orgs
even this is left to the Tax
Function
Litigation may go right up to
Supreme Court involving
high stakes uncertainties
and may include
prosecution.
How Tax Risks Emerge, Escalate & finally get
noticed
Operations
Business processes, SOPs, IT systems, Accounts,
documentation, declarations, returns, tax payments, internal
reviews & audits, outsourcing, agents etc.
Monitoring, Reviewing,
Assessing & Creating Awareness
Tax Legislations
& Frequent
legislative Changes
Transactions
& changes in
Policies
Tax Infrastructure
& Tax Accounting
and Compliance
Processes
Tax Assessments,
Tax Audits
Investigations
Tax Risks
Ability to identify tax risks across the spectrum
of business activities
Tax Risk Management (TRM)
• TRM is NOT about becoming RISK AVERSE. Its about :
– Risk awareness. Its not about avoiding all risks nor about grabbing every tax
opportunity blindly.
– Its about creating a risk conscious infrastructure with continuous risk
identification, assessment and mitigation
– Its about placing the right systems, processes & procedures in place to rein-
in risks within acceptable levels
– Its about being proactive. Preventing not resolving risks after they emerge
– Opportunity to consciously calibrate risks to match with risk appetite of an
enterprise.
– Avoiding all surprises! A known tax risk will never surprise!
• Not leaving it to chance! No surprises! Surprises are usually caused by
“flawed” behaviour.
www.taxquotient.com
BLIPS – Context & Contributory factors for tax
risks
• Behaviour – Risk appetite, attitude, conduct, focus,
documentation and priorities
• Legislations – The operations an enterprise is engaged with
determines the tax laws applicable
• Infrastructure for tax – Internal & External including CHA
legal counsels, tax authorities and communication channels
• Policy – companies policies on risks, disclosures and risk
mitigation
• Systems including IT systems for compliance
www.taxquotient.com
An ideal tax risk management system will work in tax
areas like the autonomous or involuntary nervous
system in a human body. A system which controls vital
life functions continuously, very silently without any
fuss.
The idea is to institutionalize it. Make it involuntary!
An Ideal Tax Risk Management
www.taxquotient.com
Types of Tax Risks
Transactional Risk
Operational Risk
Compliance Risk
Financial Risk
Reputational Risk
Litigation Risk
www.taxquotient.com
Types of Controls
Tax Control
Environment
Risk Assessment &
Mitigation
Standard Operating
Procedures
Financial Reports
Periodical monitoring
& Review
Review by Board &
Audit Committee
www.taxquotient.com
Changes in Law Some are historical
Introduction of VAT in 2005
Negative list based service tax from July 2012
Budget changes – This is an annual exercise
EXIM Policy changes – 5 years (Policy Annual Supplement)
Introduction of GST expected sometime in 2016?
Information Importance of information sharing with Tax
Audits Dealing with audit & investigation.
Sharing information
Declarations Risks related to misdeclaration, suppression of facts can lead
to deadly consequences
Examples of Risks from Operations - Generic
issues
www.taxquotient.com
Tax Engine
Procedures – New products/ services/ transactions
ERP/IT systems (erroneous changes in master data can lead to
disastrous consequences)
Who has to be informed about changes
Paying “right tax” and at the “right time”
Returns, declrns,
assessments
Filing correct returns
Making declarations (Employees, CHA)
Valuation – Related person
Import from related party. Global Purchase agreement
Sale of finished goods to related party
Set out Accountabilities
Examples of Risks from Operations – Generic
Issues
www.taxquotient.com
Disclosures & Risk
Assessment
Periodical review of pending tax proceedings at all levels,
including on-going audits and assessments. Classify into High,
Medium, Low and Frivolous items
Periodic Disclosures, Assertions and Provisioning to ensure
adequate disclosure of tax risks to stakeholders.
Mitigating risks
Ensuring right defense at all stages
All facts to be brought out at the first stage of adjudication
itself. Legal arguments can be introduced later also.
Provisional assessment can be a long term risk. it normally
continues for more than 5 years.
Examples of Operational Risks - Litigation
www.taxquotient.com
Unusual or one-off transactions create the greatest risks!
Setting up a new plant
Mergers & Acquisitions
Sale or purchase of assets
Entering into JV (consortium) to execute a contract
Starting a new product or service line
Sale & purchase OR “job-work”?
Sale or licensing of intellectual property
Examples of Risks Emerging from Transactions
This is only illustrative & not an exhaustive list of likely issues
Customs duty
Capital goods
Imported capital goods. Eligible for Project Import and EPCG?
Which is better?
Pre & Post import conditions under Project Imports and EPCG.
Registering the contract for Project Import before actual import.
Valuation – know how/ technology, warranty, on-site services
for erection, commissioning etc. whether includible.
Agreements to be vetted for compliance
EXIM License for import (purchase from market)
Inputs
Advance Authorization or DFIA under EXIM
New FTP - EXIM Schemes : MEIS & SEIS - Transfer of license
possible
Examples of Risks from Transactions - Setting up
a new plant
www.taxquotient.com
Service Tax
Imported services
Vet contracts to ensure clarity on tax liability including
future tax liabilities
Compliance with reverse charge liability. Not only the
liability but also the “point of taxation” (when)
Ex. duty, sales tax & CST
Local purchase - capital goods Cenvat credit on ‘capital goods’ before registration
Local purchase - inputs &
services
Whether Cenvat and VAT credit available?
C forms and E1 sale in intra-State purchases
Finished product Various Union & State exemptions
Examples of Risks from Transactions - Review
before setting up a new plant
www.taxquotient.com
“Slump sale”
Conditions. A business undertaking sold as a “going
concern”. When its not a “slump sale”? Srei Infra (Del HC)
& Bharat Bijilee (Bom HC)
Sale of assets &
liabilities
Sales tax liability. Scope for overlap between service tax &
sales tax (lease) on the IPR.
Cenvat Credit
Cenvat credit balance. Liability on removal of inputs, CG
whether reversed
Project Import Project Import obligations
EXIM obligations EPCG and other authorizations ? Checks before transfer ?
Pending Litigation
Evaluating tax risks in pending litigation (incl notices) at all
levels
Examples of Risks from Transactions – M&A
www.taxquotient.com
Customs Hse Agt Background check, interview & clear ground rules.
Incorrect declaration by CHA can get goods seized. Create
financial and delay your project.
CHA’s are vulnerable. Can be pressured by Customs authorities.
Use of ICE code
Don’t allow use of company IEC code other than for company
purposes. Employees, etc.
Private Jetty
Private jetty. Wrong goods or number of packages are removed
without verifying.
Samples
Goods to be sampled for testing. Special attention needed to
ensure declarations are correct. Preserving samples drawn
Provisional
assessment
It is common to start provisional assessment but it normally
continues for not less than 5 years.
Examples of Operational Risks - Customs
www.taxquotient.com
Import of bulk
liquids
Quantity imported of liquids, the ullage quantity, the
shore tank quantity, what should be the value
Valuation
Related person. SVB Valuation.
Claim for deduction from post removal expenses from
the price
Valuation– “know how”/technology, warranty, on-site
services for erection, commissioning etc. Agreements
to be vetted for compliance
Inputs
Advance Authorization or DFIA under EXIM
New FTP - EXIM Schemes : MEIS & SEIS - Transfer of
license possible
Examples of Operational Risks - Customs
www.taxquotient.com
Summons and Searches
Direction of the investigation is moving
Stay calm but alert. Keep personal bias out. Keep an open mind, ears and eyes
Check if other companies also face a similar situation
Stay to the point. Don’t volunteer information. Don’t say or sign anything you don’t know.
Its okay to appear ignorant.
Be extremely polite, but don’t agree with something just to be polite.
Investigating officers sometimes summon Directors of Companies for routine information or
facts. Mainly to test and apply pressure. One should appear and state the facts.
Pressure on Senior Management usually to compel immediate deposits before completing
investigation / adjudication.
Don’t take a summons lightly. Summons and notices should be escalated to Senior
Management
Operational Risks - Investigations
www.taxquotient.com
Tax risk management is a combination of strategy and processes
adopted by the Company Board and Management to :
• set up infrasturcture, systems, processes to create risk
consciousness
• continuously identify,
• continuously assess, and
• continuously mitigate tax risks
to ensure tax risks are within acceptable risk appetite. Also to provide
periodical assurance that this objective is being achieved.
In short this will be a "Tax Control Framework"
www.taxquotient.com
Summarizing - TRM
Disclosure
• Duty to disclose – applications, declarations
• Mistake Vs. Misdeclaration and willful suppression,
• Intention – extended time limit, penalty and personal
penalties
Due diligence
• Involve tax staff in planning stage and when
implementing changes
• Formal risk assessment process and sign off
• Opinion from expert/ Senior Counsel
• Comply and pay all legitimate taxes
Responsiveness
• Be alert to pick signals that things are not ok.
• Watch out for queries, audit objections etc. and do
your due diligence
• Quick responses to queries silence suspicions
Summarizing - Tax Risk Management
Review • Conduct regular reviews to rectify gaps proactively
• Watchfulness about changes in law, processes etc.
www.taxquotient.com
24
Searches (Raids) & Seizure
Summons
Summarizing - Managing Tax Emergencies
• Prompt attention and action
• Analyze the facts and information fully before
parting. Find root cause
• Response to the point – don’t volunteer information
unless sure. “Don’t know” is good response
• Is it a “industry” issue or only your Company
• Handle with extremecare and caution.
• Be polite, circumspect and gather as much info on
exact cause of raid?
• Whether this is an industry wide issue?
• Don’t volunteer information check with tax
executive
• Immediately informall senior executives
• Ensure written receipt for all goods and records
seized
24
www.taxquotient.com

More Related Content

What's hot

Ppt on risk based internal audit
Ppt on risk based internal auditPpt on risk based internal audit
Ppt on risk based internal auditAmitaMistry2
 
Employee Fraud Prevention and Remedies
Employee Fraud Prevention and RemediesEmployee Fraud Prevention and Remedies
Employee Fraud Prevention and RemediesSSDlaw
 
Internal Financial Controls
Internal Financial ControlsInternal Financial Controls
Internal Financial Controlstarunmallappa
 
ETHICS03 - Equity Funding Scandal - Case Study
ETHICS03 - Equity Funding Scandal - Case StudyETHICS03 - Equity Funding Scandal - Case Study
ETHICS03 - Equity Funding Scandal - Case StudyMichael Heron
 
Chapter 2: Consolidation of Financial Information
Chapter 2: Consolidation of Financial Information Chapter 2: Consolidation of Financial Information
Chapter 2: Consolidation of Financial Information Abdulkadir Molla
 
Current Trends in Fraud Prevention
Current Trends in Fraud PreventionCurrent Trends in Fraud Prevention
Current Trends in Fraud PreventionBlackbaud
 
Fraud risk management and interrogation techniques part ii
Fraud risk management and interrogation techniques part iiFraud risk management and interrogation techniques part ii
Fraud risk management and interrogation techniques part iiEMAC Consulting Group
 
ISO 37001 Implementation - The Key to Protecting Your Company’s Reputation
ISO 37001 Implementation - The Key to Protecting Your Company’s ReputationISO 37001 Implementation - The Key to Protecting Your Company’s Reputation
ISO 37001 Implementation - The Key to Protecting Your Company’s ReputationPECB
 
Operational Risk Management & Strategic Planning
Operational Risk Management & Strategic PlanningOperational Risk Management & Strategic Planning
Operational Risk Management & Strategic PlanningEneni Oduwole
 
Enterprise risk management
Enterprise risk managementEnterprise risk management
Enterprise risk managementAnu Damodaran
 
Operational Risk for Bank
Operational Risk for BankOperational Risk for Bank
Operational Risk for BankRahmat Mulyana
 
Autonomy and Independence of Audit in Company Laws of Pakistan
Autonomy and Independence of Audit in Company Laws of PakistanAutonomy and Independence of Audit in Company Laws of Pakistan
Autonomy and Independence of Audit in Company Laws of PakistanSayyid Mansoob Hasan
 
Risk Management Essentials for Bankers
Risk Management Essentials for BankersRisk Management Essentials for Bankers
Risk Management Essentials for BankersDavid Vu
 
MITIGATING OPERATIONAL RISK: RISK TRANSFER SOLUTIONS
MITIGATING OPERATIONAL RISK: RISK TRANSFER SOLUTIONSMITIGATING OPERATIONAL RISK: RISK TRANSFER SOLUTIONS
MITIGATING OPERATIONAL RISK: RISK TRANSFER SOLUTIONSMichel Rochette
 
Manigent Aligning Risk Appetite And Exposure
Manigent Aligning Risk Appetite And ExposureManigent Aligning Risk Appetite And Exposure
Manigent Aligning Risk Appetite And ExposureAndrew Smart
 

What's hot (20)

Ppt on risk based internal audit
Ppt on risk based internal auditPpt on risk based internal audit
Ppt on risk based internal audit
 
Employee Fraud Prevention and Remedies
Employee Fraud Prevention and RemediesEmployee Fraud Prevention and Remedies
Employee Fraud Prevention and Remedies
 
Internal Financial Controls
Internal Financial ControlsInternal Financial Controls
Internal Financial Controls
 
Coso erm frmwrk
Coso erm frmwrkCoso erm frmwrk
Coso erm frmwrk
 
ETHICS03 - Equity Funding Scandal - Case Study
ETHICS03 - Equity Funding Scandal - Case StudyETHICS03 - Equity Funding Scandal - Case Study
ETHICS03 - Equity Funding Scandal - Case Study
 
Chapter 2: Consolidation of Financial Information
Chapter 2: Consolidation of Financial Information Chapter 2: Consolidation of Financial Information
Chapter 2: Consolidation of Financial Information
 
Corruption risk management
Corruption risk managementCorruption risk management
Corruption risk management
 
Current Trends in Fraud Prevention
Current Trends in Fraud PreventionCurrent Trends in Fraud Prevention
Current Trends in Fraud Prevention
 
Introduction to Forensic Accounting
Introduction to Forensic AccountingIntroduction to Forensic Accounting
Introduction to Forensic Accounting
 
Risk based auditing
Risk based auditingRisk based auditing
Risk based auditing
 
Fraud risk management and interrogation techniques part ii
Fraud risk management and interrogation techniques part iiFraud risk management and interrogation techniques part ii
Fraud risk management and interrogation techniques part ii
 
ISO 37001 Implementation - The Key to Protecting Your Company’s Reputation
ISO 37001 Implementation - The Key to Protecting Your Company’s ReputationISO 37001 Implementation - The Key to Protecting Your Company’s Reputation
ISO 37001 Implementation - The Key to Protecting Your Company’s Reputation
 
Operational Risk Management & Strategic Planning
Operational Risk Management & Strategic PlanningOperational Risk Management & Strategic Planning
Operational Risk Management & Strategic Planning
 
Enterprise risk management
Enterprise risk managementEnterprise risk management
Enterprise risk management
 
Operational Risk for Bank
Operational Risk for BankOperational Risk for Bank
Operational Risk for Bank
 
Autonomy and Independence of Audit in Company Laws of Pakistan
Autonomy and Independence of Audit in Company Laws of PakistanAutonomy and Independence of Audit in Company Laws of Pakistan
Autonomy and Independence of Audit in Company Laws of Pakistan
 
Risk Management Essentials for Bankers
Risk Management Essentials for BankersRisk Management Essentials for Bankers
Risk Management Essentials for Bankers
 
MITIGATING OPERATIONAL RISK: RISK TRANSFER SOLUTIONS
MITIGATING OPERATIONAL RISK: RISK TRANSFER SOLUTIONSMITIGATING OPERATIONAL RISK: RISK TRANSFER SOLUTIONS
MITIGATING OPERATIONAL RISK: RISK TRANSFER SOLUTIONS
 
Manigent Aligning Risk Appetite And Exposure
Manigent Aligning Risk Appetite And ExposureManigent Aligning Risk Appetite And Exposure
Manigent Aligning Risk Appetite And Exposure
 
Compliance Risk Assessment
Compliance Risk AssessmentCompliance Risk Assessment
Compliance Risk Assessment
 

Viewers also liked

531409_KPMG RPA_Bots_in_the_Back_Office_v8
531409_KPMG RPA_Bots_in_the_Back_Office_v8531409_KPMG RPA_Bots_in_the_Back_Office_v8
531409_KPMG RPA_Bots_in_the_Back_Office_v8David Neely
 
What, Why and How of Governance in RPA
What, Why and How of Governance  in RPAWhat, Why and How of Governance  in RPA
What, Why and How of Governance in RPAMohit Sharma (GAICD)
 
Everest Group FIT matrix for Robotic Process Automation (rpa) technology
Everest Group FIT matrix for Robotic Process Automation (rpa) technologyEverest Group FIT matrix for Robotic Process Automation (rpa) technology
Everest Group FIT matrix for Robotic Process Automation (rpa) technologyUiPath
 
Robotic Process Automation: A Cohesive View
Robotic Process Automation: A Cohesive ViewRobotic Process Automation: A Cohesive View
Robotic Process Automation: A Cohesive ViewChristopher Manfredi
 
Applying Robotic Process Automation in Banking: Innovations in Finance and Risk
Applying Robotic Process Automation in Banking: Innovations in Finance and RiskApplying Robotic Process Automation in Banking: Innovations in Finance and Risk
Applying Robotic Process Automation in Banking: Innovations in Finance and Riskaccenture
 
Payroll Management System SRS
Payroll Management System SRSPayroll Management System SRS
Payroll Management System SRSShubham Modi
 

Viewers also liked (8)

Tax system and reformation
Tax system and reformationTax system and reformation
Tax system and reformation
 
531409_KPMG RPA_Bots_in_the_Back_Office_v8
531409_KPMG RPA_Bots_in_the_Back_Office_v8531409_KPMG RPA_Bots_in_the_Back_Office_v8
531409_KPMG RPA_Bots_in_the_Back_Office_v8
 
What, Why and How of Governance in RPA
What, Why and How of Governance  in RPAWhat, Why and How of Governance  in RPA
What, Why and How of Governance in RPA
 
Getting Robots Right
Getting Robots RightGetting Robots Right
Getting Robots Right
 
Everest Group FIT matrix for Robotic Process Automation (rpa) technology
Everest Group FIT matrix for Robotic Process Automation (rpa) technologyEverest Group FIT matrix for Robotic Process Automation (rpa) technology
Everest Group FIT matrix for Robotic Process Automation (rpa) technology
 
Robotic Process Automation: A Cohesive View
Robotic Process Automation: A Cohesive ViewRobotic Process Automation: A Cohesive View
Robotic Process Automation: A Cohesive View
 
Applying Robotic Process Automation in Banking: Innovations in Finance and Risk
Applying Robotic Process Automation in Banking: Innovations in Finance and RiskApplying Robotic Process Automation in Banking: Innovations in Finance and Risk
Applying Robotic Process Automation in Banking: Innovations in Finance and Risk
 
Payroll Management System SRS
Payroll Management System SRSPayroll Management System SRS
Payroll Management System SRS
 

Similar to Tax risk management_13th_oct_2015

Guidelines for post clearance audit in uae
Guidelines for post clearance audit in uaeGuidelines for post clearance audit in uae
Guidelines for post clearance audit in uaeAhmedTalaat127
 
TL_exec summary_2015_FINAL
TL_exec summary_2015_FINALTL_exec summary_2015_FINAL
TL_exec summary_2015_FINALRosamund Barr
 
Corporate Complience Management : A Risk Management
Corporate Complience Management : A Risk ManagementCorporate Complience Management : A Risk Management
Corporate Complience Management : A Risk ManagementPavan Kumar Vijay
 
PracticeLeague Tax Litigation Management System
PracticeLeague Tax Litigation Management SystemPracticeLeague Tax Litigation Management System
PracticeLeague Tax Litigation Management SystemParimal Chanchani
 
Telecom Revenue Assurance Workshop
Telecom Revenue Assurance WorkshopTelecom Revenue Assurance Workshop
Telecom Revenue Assurance WorkshopParcus Group
 
Oil And Gas Extraction Essay
Oil And Gas Extraction EssayOil And Gas Extraction Essay
Oil And Gas Extraction EssayJenny Smith
 
Sales and Use Tax Compliance: Filing Returns with Ease
Sales and Use Tax Compliance: Filing Returns with EaseSales and Use Tax Compliance: Filing Returns with Ease
Sales and Use Tax Compliance: Filing Returns with EaseNet at Work
 
03.03.2010 Taxation risks and their management, Prof. Tomas Balco
03.03.2010 Taxation risks and their management, Prof. Tomas Balco03.03.2010 Taxation risks and their management, Prof. Tomas Balco
03.03.2010 Taxation risks and their management, Prof. Tomas BalcoThe Business Council of Mongolia
 
Managing and automating the accounts payable process to realize savings, comp...
Managing and automating the accounts payable process to realize savings, comp...Managing and automating the accounts payable process to realize savings, comp...
Managing and automating the accounts payable process to realize savings, comp...Sovos
 
Designed the 80/20 fully Integrated tax system for South African Revenue Serv...
Designed the 80/20 fully Integrated tax system for South African Revenue Serv...Designed the 80/20 fully Integrated tax system for South African Revenue Serv...
Designed the 80/20 fully Integrated tax system for South African Revenue Serv...San-Mark Antonio Trimble
 
Maximising The Value of Analytics in Tax Compliance
Maximising The Value of Analytics in Tax ComplianceMaximising The Value of Analytics in Tax Compliance
Maximising The Value of Analytics in Tax ComplianceSAS Institute India Pvt. Ltd
 
14 August 2009 Short Fin48 Ppt Presentation
14 August 2009 Short Fin48 Ppt Presentation14 August 2009 Short Fin48 Ppt Presentation
14 August 2009 Short Fin48 Ppt Presentationdnerasmus
 

Similar to Tax risk management_13th_oct_2015 (20)

Guidelines for post clearance audit in uae
Guidelines for post clearance audit in uaeGuidelines for post clearance audit in uae
Guidelines for post clearance audit in uae
 
TL_exec summary_2015_FINAL
TL_exec summary_2015_FINALTL_exec summary_2015_FINAL
TL_exec summary_2015_FINAL
 
Corporate Complience Management : A Risk Management
Corporate Complience Management : A Risk ManagementCorporate Complience Management : A Risk Management
Corporate Complience Management : A Risk Management
 
PracticeLeague Tax Litigation Management System
PracticeLeague Tax Litigation Management SystemPracticeLeague Tax Litigation Management System
PracticeLeague Tax Litigation Management System
 
Telecom Revenue Assurance Workshop
Telecom Revenue Assurance WorkshopTelecom Revenue Assurance Workshop
Telecom Revenue Assurance Workshop
 
Tax Issues for Multinationals
Tax Issues for MultinationalsTax Issues for Multinationals
Tax Issues for Multinationals
 
Oil And Gas Extraction Essay
Oil And Gas Extraction EssayOil And Gas Extraction Essay
Oil And Gas Extraction Essay
 
AMCA Company profile
AMCA Company profileAMCA Company profile
AMCA Company profile
 
Audit Services in Dubai
Audit Services in DubaiAudit Services in Dubai
Audit Services in Dubai
 
Sales and Use Tax Compliance: Filing Returns with Ease
Sales and Use Tax Compliance: Filing Returns with EaseSales and Use Tax Compliance: Filing Returns with Ease
Sales and Use Tax Compliance: Filing Returns with Ease
 
03.03.2010 Taxation risks and their management, Prof. Tomas Balco
03.03.2010 Taxation risks and their management, Prof. Tomas Balco03.03.2010 Taxation risks and their management, Prof. Tomas Balco
03.03.2010 Taxation risks and their management, Prof. Tomas Balco
 
VAT in the UAE
VAT in the UAEVAT in the UAE
VAT in the UAE
 
Doing Business Index
Doing Business IndexDoing Business Index
Doing Business Index
 
Managing and automating the accounts payable process to realize savings, comp...
Managing and automating the accounts payable process to realize savings, comp...Managing and automating the accounts payable process to realize savings, comp...
Managing and automating the accounts payable process to realize savings, comp...
 
Designed the 80/20 fully Integrated tax system for South African Revenue Serv...
Designed the 80/20 fully Integrated tax system for South African Revenue Serv...Designed the 80/20 fully Integrated tax system for South African Revenue Serv...
Designed the 80/20 fully Integrated tax system for South African Revenue Serv...
 
Maximising The Value of Analytics in Tax Compliance
Maximising The Value of Analytics in Tax ComplianceMaximising The Value of Analytics in Tax Compliance
Maximising The Value of Analytics in Tax Compliance
 
CV Presentation
CV PresentationCV Presentation
CV Presentation
 
EliteRecoveriesBrochure
EliteRecoveriesBrochureEliteRecoveriesBrochure
EliteRecoveriesBrochure
 
14 August 2009 Short Fin48 Ppt Presentation
14 August 2009 Short Fin48 Ppt Presentation14 August 2009 Short Fin48 Ppt Presentation
14 August 2009 Short Fin48 Ppt Presentation
 
Customs Management
Customs ManagementCustoms Management
Customs Management
 

Recently uploaded

CXO 2.0 Conference (Event Information Deck | Dec'24-Mar'25)
CXO 2.0 Conference (Event Information Deck | Dec'24-Mar'25)CXO 2.0 Conference (Event Information Deck | Dec'24-Mar'25)
CXO 2.0 Conference (Event Information Deck | Dec'24-Mar'25)CXO 2.0 Conference
 
A Case Study On SQUARE GROUP Bangladesh.pdf
A Case Study On SQUARE GROUP Bangladesh.pdfA Case Study On SQUARE GROUP Bangladesh.pdf
A Case Study On SQUARE GROUP Bangladesh.pdfmeftaul987
 
Streamlining Your Accounting A Guide to QuickBooks Migration Tools.pptx
Streamlining Your Accounting A Guide to QuickBooks Migration Tools.pptxStreamlining Your Accounting A Guide to QuickBooks Migration Tools.pptx
Streamlining Your Accounting A Guide to QuickBooks Migration Tools.pptxPaulBryant58
 
"InShorts: A Game-Changer in the Digital News Age"
"InShorts: A Game-Changer in the Digital News Age""InShorts: A Game-Changer in the Digital News Age"
"InShorts: A Game-Changer in the Digital News Age"Adharsh45
 
EPC Contractors aspects Presentation.pdf
EPC Contractors  aspects Presentation.pdfEPC Contractors  aspects Presentation.pdf
EPC Contractors aspects Presentation.pdfGiuseppe Tommasone
 
PHX Corporate Presentation March 2024 Final
PHX Corporate Presentation March 2024 FinalPHX Corporate Presentation March 2024 Final
PHX Corporate Presentation March 2024 FinalPanhandleOilandGas
 
Dashboards y paneles - CP Home - Area de Operaciones
Dashboards y paneles - CP Home - Area de OperacionesDashboards y paneles - CP Home - Area de Operaciones
Dashboards y paneles - CP Home - Area de OperacionesLPI ONG
 
Benihana of Tokyo case study11111111.pdf
Benihana of Tokyo case study11111111.pdfBenihana of Tokyo case study11111111.pdf
Benihana of Tokyo case study11111111.pdfjavenxxx01
 
Reframing Requirements: A Strategic Approach to Requirement Definition, with ...
Reframing Requirements: A Strategic Approach to Requirement Definition, with ...Reframing Requirements: A Strategic Approach to Requirement Definition, with ...
Reframing Requirements: A Strategic Approach to Requirement Definition, with ...Jake Truemper
 
10 Tips for Great Teams CSUN Conference 2024
10 Tips for Great Teams CSUN Conference 202410 Tips for Great Teams CSUN Conference 2024
10 Tips for Great Teams CSUN Conference 2024Nate Evans
 
pitchdeck ORPC 2019 data info turine.pdf
pitchdeck ORPC 2019 data info turine.pdfpitchdeck ORPC 2019 data info turine.pdf
pitchdeck ORPC 2019 data info turine.pdflebob12
 
Project Work on Consumer Behavior in Fast Food Restaurants. Their behavior to...
Project Work on Consumer Behavior in Fast Food Restaurants. Their behavior to...Project Work on Consumer Behavior in Fast Food Restaurants. Their behavior to...
Project Work on Consumer Behavior in Fast Food Restaurants. Their behavior to...BilalAhmed717
 
AirOxi - Pioneering Aquaculture Advancements Through NFDB Empanelment.pptx
AirOxi -  Pioneering Aquaculture Advancements Through NFDB Empanelment.pptxAirOxi -  Pioneering Aquaculture Advancements Through NFDB Empanelment.pptx
AirOxi - Pioneering Aquaculture Advancements Through NFDB Empanelment.pptxAirOxi Tube
 
NVIDIA's overall business overview Presentation.pptx
NVIDIA's overall business overview Presentation.pptxNVIDIA's overall business overview Presentation.pptx
NVIDIA's overall business overview Presentation.pptxKrutik Rakade
 
HOW TO START EARNING WITH AFFILIATE MARKETING
HOW TO START EARNING WITH AFFILIATE MARKETINGHOW TO START EARNING WITH AFFILIATE MARKETING
HOW TO START EARNING WITH AFFILIATE MARKETINGNATHAN SPEAKS
 
Shopclues: Failure & Solutions in Business Model
Shopclues: Failure & Solutions in Business ModelShopclues: Failure & Solutions in Business Model
Shopclues: Failure & Solutions in Business ModelBhaviniSharma12
 
Importance of Commercial Vehicle Insurance.pptx
Importance of Commercial Vehicle Insurance.pptxImportance of Commercial Vehicle Insurance.pptx
Importance of Commercial Vehicle Insurance.pptxBonano Insurance
 
The 10 Most Influential Women Making Difference In 2024.pdf
The 10 Most Influential Women Making Difference In 2024.pdfThe 10 Most Influential Women Making Difference In 2024.pdf
The 10 Most Influential Women Making Difference In 2024.pdfInsightsSuccess4
 
NewBase 14 March 2024 Energy News issue - 1707 by Khaled Al Awadi_compress...
NewBase  14 March  2024  Energy News issue - 1707 by Khaled Al Awadi_compress...NewBase  14 March  2024  Energy News issue - 1707 by Khaled Al Awadi_compress...
NewBase 14 March 2024 Energy News issue - 1707 by Khaled Al Awadi_compress...Khaled Al Awadi
 

Recently uploaded (20)

CXO 2.0 Conference (Event Information Deck | Dec'24-Mar'25)
CXO 2.0 Conference (Event Information Deck | Dec'24-Mar'25)CXO 2.0 Conference (Event Information Deck | Dec'24-Mar'25)
CXO 2.0 Conference (Event Information Deck | Dec'24-Mar'25)
 
A Case Study On SQUARE GROUP Bangladesh.pdf
A Case Study On SQUARE GROUP Bangladesh.pdfA Case Study On SQUARE GROUP Bangladesh.pdf
A Case Study On SQUARE GROUP Bangladesh.pdf
 
WAM Corporate Presentation Mar 12 2024.pdf
WAM Corporate Presentation Mar 12 2024.pdfWAM Corporate Presentation Mar 12 2024.pdf
WAM Corporate Presentation Mar 12 2024.pdf
 
Streamlining Your Accounting A Guide to QuickBooks Migration Tools.pptx
Streamlining Your Accounting A Guide to QuickBooks Migration Tools.pptxStreamlining Your Accounting A Guide to QuickBooks Migration Tools.pptx
Streamlining Your Accounting A Guide to QuickBooks Migration Tools.pptx
 
"InShorts: A Game-Changer in the Digital News Age"
"InShorts: A Game-Changer in the Digital News Age""InShorts: A Game-Changer in the Digital News Age"
"InShorts: A Game-Changer in the Digital News Age"
 
EPC Contractors aspects Presentation.pdf
EPC Contractors  aspects Presentation.pdfEPC Contractors  aspects Presentation.pdf
EPC Contractors aspects Presentation.pdf
 
PHX Corporate Presentation March 2024 Final
PHX Corporate Presentation March 2024 FinalPHX Corporate Presentation March 2024 Final
PHX Corporate Presentation March 2024 Final
 
Dashboards y paneles - CP Home - Area de Operaciones
Dashboards y paneles - CP Home - Area de OperacionesDashboards y paneles - CP Home - Area de Operaciones
Dashboards y paneles - CP Home - Area de Operaciones
 
Benihana of Tokyo case study11111111.pdf
Benihana of Tokyo case study11111111.pdfBenihana of Tokyo case study11111111.pdf
Benihana of Tokyo case study11111111.pdf
 
Reframing Requirements: A Strategic Approach to Requirement Definition, with ...
Reframing Requirements: A Strategic Approach to Requirement Definition, with ...Reframing Requirements: A Strategic Approach to Requirement Definition, with ...
Reframing Requirements: A Strategic Approach to Requirement Definition, with ...
 
10 Tips for Great Teams CSUN Conference 2024
10 Tips for Great Teams CSUN Conference 202410 Tips for Great Teams CSUN Conference 2024
10 Tips for Great Teams CSUN Conference 2024
 
pitchdeck ORPC 2019 data info turine.pdf
pitchdeck ORPC 2019 data info turine.pdfpitchdeck ORPC 2019 data info turine.pdf
pitchdeck ORPC 2019 data info turine.pdf
 
Project Work on Consumer Behavior in Fast Food Restaurants. Their behavior to...
Project Work on Consumer Behavior in Fast Food Restaurants. Their behavior to...Project Work on Consumer Behavior in Fast Food Restaurants. Their behavior to...
Project Work on Consumer Behavior in Fast Food Restaurants. Their behavior to...
 
AirOxi - Pioneering Aquaculture Advancements Through NFDB Empanelment.pptx
AirOxi -  Pioneering Aquaculture Advancements Through NFDB Empanelment.pptxAirOxi -  Pioneering Aquaculture Advancements Through NFDB Empanelment.pptx
AirOxi - Pioneering Aquaculture Advancements Through NFDB Empanelment.pptx
 
NVIDIA's overall business overview Presentation.pptx
NVIDIA's overall business overview Presentation.pptxNVIDIA's overall business overview Presentation.pptx
NVIDIA's overall business overview Presentation.pptx
 
HOW TO START EARNING WITH AFFILIATE MARKETING
HOW TO START EARNING WITH AFFILIATE MARKETINGHOW TO START EARNING WITH AFFILIATE MARKETING
HOW TO START EARNING WITH AFFILIATE MARKETING
 
Shopclues: Failure & Solutions in Business Model
Shopclues: Failure & Solutions in Business ModelShopclues: Failure & Solutions in Business Model
Shopclues: Failure & Solutions in Business Model
 
Importance of Commercial Vehicle Insurance.pptx
Importance of Commercial Vehicle Insurance.pptxImportance of Commercial Vehicle Insurance.pptx
Importance of Commercial Vehicle Insurance.pptx
 
The 10 Most Influential Women Making Difference In 2024.pdf
The 10 Most Influential Women Making Difference In 2024.pdfThe 10 Most Influential Women Making Difference In 2024.pdf
The 10 Most Influential Women Making Difference In 2024.pdf
 
NewBase 14 March 2024 Energy News issue - 1707 by Khaled Al Awadi_compress...
NewBase  14 March  2024  Energy News issue - 1707 by Khaled Al Awadi_compress...NewBase  14 March  2024  Energy News issue - 1707 by Khaled Al Awadi_compress...
NewBase 14 March 2024 Energy News issue - 1707 by Khaled Al Awadi_compress...
 

Tax risk management_13th_oct_2015

  • 1. www.taxquotient.com Indirect Tax Risk Management An effective Enterprise Tax Risk Management (TRM) 13th October, 2015 Anthony Fernandes Founder Tax Quotient
  • 2. Tax Risks Tax risks are potential outcomes that arise from activities or events which could lead to tax adversities throughout the life of an enterprise. www.taxquotient.com
  • 3. Tax Risks – The Indian Context • Tax Risks are currently one of the most significant risks faced by businesses and they are not “insurable”. Biggest business risks – Lloyd’s survey 2013 • The Indian tax system, particularly the indirect tax system is still evolving. • There are 3 levels of indirect taxes, some over-lapping. The tax system is complex, dynamic and overseen by an aggressive tax administration. All these factors creates scope for tax risks/difficulties. • So how does one recognize the risks, assess and mitigate them? www.taxquotient.com
  • 4. Tax Risks & Tax Opportunities The nature of the activity determines the type of risks involved www.taxquotient.com The key therefore is to understand the activity and risks involved.
  • 5. Litigation Govt. Audits, Investigations & Notices These activities are misunderstood as merely routine tasks. Bur are the breeding ground for tax disputes. This is where most operations related risks emerge which are usually invisible & unvisited by Sr Mgmt PREVENTRESOLVE Only at this the risk begins to get management attention. In most orgs even this is left to the Tax Function Litigation may go right up to Supreme Court involving high stakes uncertainties and may include prosecution. How Tax Risks Emerge, Escalate & finally get noticed Operations Business processes, SOPs, IT systems, Accounts, documentation, declarations, returns, tax payments, internal reviews & audits, outsourcing, agents etc. Monitoring, Reviewing, Assessing & Creating Awareness
  • 6. Tax Legislations & Frequent legislative Changes Transactions & changes in Policies Tax Infrastructure & Tax Accounting and Compliance Processes Tax Assessments, Tax Audits Investigations Tax Risks Ability to identify tax risks across the spectrum of business activities
  • 7. Tax Risk Management (TRM) • TRM is NOT about becoming RISK AVERSE. Its about : – Risk awareness. Its not about avoiding all risks nor about grabbing every tax opportunity blindly. – Its about creating a risk conscious infrastructure with continuous risk identification, assessment and mitigation – Its about placing the right systems, processes & procedures in place to rein- in risks within acceptable levels – Its about being proactive. Preventing not resolving risks after they emerge – Opportunity to consciously calibrate risks to match with risk appetite of an enterprise. – Avoiding all surprises! A known tax risk will never surprise! • Not leaving it to chance! No surprises! Surprises are usually caused by “flawed” behaviour. www.taxquotient.com
  • 8. BLIPS – Context & Contributory factors for tax risks • Behaviour – Risk appetite, attitude, conduct, focus, documentation and priorities • Legislations – The operations an enterprise is engaged with determines the tax laws applicable • Infrastructure for tax – Internal & External including CHA legal counsels, tax authorities and communication channels • Policy – companies policies on risks, disclosures and risk mitigation • Systems including IT systems for compliance www.taxquotient.com
  • 9. An ideal tax risk management system will work in tax areas like the autonomous or involuntary nervous system in a human body. A system which controls vital life functions continuously, very silently without any fuss. The idea is to institutionalize it. Make it involuntary! An Ideal Tax Risk Management www.taxquotient.com
  • 10. Types of Tax Risks Transactional Risk Operational Risk Compliance Risk Financial Risk Reputational Risk Litigation Risk www.taxquotient.com
  • 11. Types of Controls Tax Control Environment Risk Assessment & Mitigation Standard Operating Procedures Financial Reports Periodical monitoring & Review Review by Board & Audit Committee www.taxquotient.com
  • 12. Changes in Law Some are historical Introduction of VAT in 2005 Negative list based service tax from July 2012 Budget changes – This is an annual exercise EXIM Policy changes – 5 years (Policy Annual Supplement) Introduction of GST expected sometime in 2016? Information Importance of information sharing with Tax Audits Dealing with audit & investigation. Sharing information Declarations Risks related to misdeclaration, suppression of facts can lead to deadly consequences Examples of Risks from Operations - Generic issues www.taxquotient.com
  • 13. Tax Engine Procedures – New products/ services/ transactions ERP/IT systems (erroneous changes in master data can lead to disastrous consequences) Who has to be informed about changes Paying “right tax” and at the “right time” Returns, declrns, assessments Filing correct returns Making declarations (Employees, CHA) Valuation – Related person Import from related party. Global Purchase agreement Sale of finished goods to related party Set out Accountabilities Examples of Risks from Operations – Generic Issues www.taxquotient.com
  • 14. Disclosures & Risk Assessment Periodical review of pending tax proceedings at all levels, including on-going audits and assessments. Classify into High, Medium, Low and Frivolous items Periodic Disclosures, Assertions and Provisioning to ensure adequate disclosure of tax risks to stakeholders. Mitigating risks Ensuring right defense at all stages All facts to be brought out at the first stage of adjudication itself. Legal arguments can be introduced later also. Provisional assessment can be a long term risk. it normally continues for more than 5 years. Examples of Operational Risks - Litigation www.taxquotient.com
  • 15. Unusual or one-off transactions create the greatest risks! Setting up a new plant Mergers & Acquisitions Sale or purchase of assets Entering into JV (consortium) to execute a contract Starting a new product or service line Sale & purchase OR “job-work”? Sale or licensing of intellectual property Examples of Risks Emerging from Transactions This is only illustrative & not an exhaustive list of likely issues
  • 16. Customs duty Capital goods Imported capital goods. Eligible for Project Import and EPCG? Which is better? Pre & Post import conditions under Project Imports and EPCG. Registering the contract for Project Import before actual import. Valuation – know how/ technology, warranty, on-site services for erection, commissioning etc. whether includible. Agreements to be vetted for compliance EXIM License for import (purchase from market) Inputs Advance Authorization or DFIA under EXIM New FTP - EXIM Schemes : MEIS & SEIS - Transfer of license possible Examples of Risks from Transactions - Setting up a new plant www.taxquotient.com
  • 17. Service Tax Imported services Vet contracts to ensure clarity on tax liability including future tax liabilities Compliance with reverse charge liability. Not only the liability but also the “point of taxation” (when) Ex. duty, sales tax & CST Local purchase - capital goods Cenvat credit on ‘capital goods’ before registration Local purchase - inputs & services Whether Cenvat and VAT credit available? C forms and E1 sale in intra-State purchases Finished product Various Union & State exemptions Examples of Risks from Transactions - Review before setting up a new plant www.taxquotient.com
  • 18. “Slump sale” Conditions. A business undertaking sold as a “going concern”. When its not a “slump sale”? Srei Infra (Del HC) & Bharat Bijilee (Bom HC) Sale of assets & liabilities Sales tax liability. Scope for overlap between service tax & sales tax (lease) on the IPR. Cenvat Credit Cenvat credit balance. Liability on removal of inputs, CG whether reversed Project Import Project Import obligations EXIM obligations EPCG and other authorizations ? Checks before transfer ? Pending Litigation Evaluating tax risks in pending litigation (incl notices) at all levels Examples of Risks from Transactions – M&A www.taxquotient.com
  • 19. Customs Hse Agt Background check, interview & clear ground rules. Incorrect declaration by CHA can get goods seized. Create financial and delay your project. CHA’s are vulnerable. Can be pressured by Customs authorities. Use of ICE code Don’t allow use of company IEC code other than for company purposes. Employees, etc. Private Jetty Private jetty. Wrong goods or number of packages are removed without verifying. Samples Goods to be sampled for testing. Special attention needed to ensure declarations are correct. Preserving samples drawn Provisional assessment It is common to start provisional assessment but it normally continues for not less than 5 years. Examples of Operational Risks - Customs www.taxquotient.com
  • 20. Import of bulk liquids Quantity imported of liquids, the ullage quantity, the shore tank quantity, what should be the value Valuation Related person. SVB Valuation. Claim for deduction from post removal expenses from the price Valuation– “know how”/technology, warranty, on-site services for erection, commissioning etc. Agreements to be vetted for compliance Inputs Advance Authorization or DFIA under EXIM New FTP - EXIM Schemes : MEIS & SEIS - Transfer of license possible Examples of Operational Risks - Customs www.taxquotient.com
  • 21. Summons and Searches Direction of the investigation is moving Stay calm but alert. Keep personal bias out. Keep an open mind, ears and eyes Check if other companies also face a similar situation Stay to the point. Don’t volunteer information. Don’t say or sign anything you don’t know. Its okay to appear ignorant. Be extremely polite, but don’t agree with something just to be polite. Investigating officers sometimes summon Directors of Companies for routine information or facts. Mainly to test and apply pressure. One should appear and state the facts. Pressure on Senior Management usually to compel immediate deposits before completing investigation / adjudication. Don’t take a summons lightly. Summons and notices should be escalated to Senior Management Operational Risks - Investigations www.taxquotient.com
  • 22. Tax risk management is a combination of strategy and processes adopted by the Company Board and Management to : • set up infrasturcture, systems, processes to create risk consciousness • continuously identify, • continuously assess, and • continuously mitigate tax risks to ensure tax risks are within acceptable risk appetite. Also to provide periodical assurance that this objective is being achieved. In short this will be a "Tax Control Framework" www.taxquotient.com Summarizing - TRM
  • 23. Disclosure • Duty to disclose – applications, declarations • Mistake Vs. Misdeclaration and willful suppression, • Intention – extended time limit, penalty and personal penalties Due diligence • Involve tax staff in planning stage and when implementing changes • Formal risk assessment process and sign off • Opinion from expert/ Senior Counsel • Comply and pay all legitimate taxes Responsiveness • Be alert to pick signals that things are not ok. • Watch out for queries, audit objections etc. and do your due diligence • Quick responses to queries silence suspicions Summarizing - Tax Risk Management Review • Conduct regular reviews to rectify gaps proactively • Watchfulness about changes in law, processes etc. www.taxquotient.com
  • 24. 24 Searches (Raids) & Seizure Summons Summarizing - Managing Tax Emergencies • Prompt attention and action • Analyze the facts and information fully before parting. Find root cause • Response to the point – don’t volunteer information unless sure. “Don’t know” is good response • Is it a “industry” issue or only your Company • Handle with extremecare and caution. • Be polite, circumspect and gather as much info on exact cause of raid? • Whether this is an industry wide issue? • Don’t volunteer information check with tax executive • Immediately informall senior executives • Ensure written receipt for all goods and records seized 24 www.taxquotient.com