Transforming business tax reporting with technology

Generally, overwhelm is common among Tax Managers. Namely, the struggle to understand and remain up-to-date with all the applicable compliance requirements for the business. In addition, they likely also find it difficult to get buy-in from the wider Finance department to prioritise automated compliance.

In this blog, we discuss the key obstacles for Tax Managers and the available solutions to digitise business tax reporting.

Running a global organisation in today’s environment requires agility and flexibility to adapt according to individual market needs. This has become especially relevant when it comes to the business approach to data processing and its use of technology.

Tax Managers are overwhelmed with new requirements to comply with. Global tax policy, such as Pillar Two, introduces significant shifts in how businesses are taxed on international operations. Tax authorities are also increasingly switching to automated digital processes for more accurate access to source data and to ensure compliance. This increase in real-time tax reporting requirements (also known as Continuous Transaction Controls, CTC) and eInvoice mandates impose an administrative challenge for Tax Managers.

The tax function cannot continue to be blindsided by these upcoming changes and must find a sustainable way to ensure efficiency and compliance. Teams of senior decision-makers that do not pay enough attention to tax processes will increase risks to the business. Without this buy-in from the wider business, the Tax Manager must present a course of action that highlights and addresses the urgency to assign the necessary resources for compliant tax processing.

The age of CTC and eInvoicing is upon us. The European Union, for example, has become a spearhead in the implementation of new business tax reporting regulations.

International tax authorities are cracking down on their respective VAT gaps. This stood at a staggering 93 billion euros across Europe in 2020. CTC and stricter regulation of business transactions seeks to address this VAT shortfall.

Countries such as Spain, France, Germany, and Poland are either in the process of implementing, or already have implemented, tax reporting mandates. The EU initiative, VAT in the Digital Age (ViDA)** is set to standardise tax reporting across the EU, making e-invoicing the default method by January 2028.

Pillar 2 is another directive being adopted by tax authorities worldwide to establish a global minimum taxation. The Organisation for Economic Co-operation and Development (OECD) developed this directive to apply a minimum 15% tax rate to organisations with over 750 million euros in consolidated revenue. EU member states unanimously adopted this directive, to commence from January 2024. Other tax authorities, such as in the UK, have also confirmed compliance with this directive in 2024.

Technology available to tackle these challenges expands beyond addressing compliance with global business tax reporting regulations. If the right solution is implemented, Tax Managers will be able to better predict the cost of compliance and support greater efficiency across the entire finance department.

The tax function is often hindered by sequential processes. Daily, the tax team deals with different business units, regulatory jurisdictions, and systems. The variation in processes required across these can result in manual workarounds and subsequent errors regarding compliance and reporting. So, the value of eInvoice solutions really lies in automating these time-consuming and repetitive manual tasks.

As with most business departments, and given the emerging global changes, Tax Managers are often under pressure to do more with less. Therefore, the ROI, reliability and scalability that digital transformation brings is most welcome. Common features of solutions available include automated compliance, integrated data flows, paper-to-digital, analytics and archiving.

For forward-thinking businesses embracing digital transformation, the technology available has acted as a springboard to address inefficiency across other business functions. However, onboarding with an unsuitable solution will have the opposite effect…

At Transalis, we recommend exploring a combination of different solutions to offset the cost of compliance. Automation solutions that transform processing within the Accounts Payable and Accounts Receivable functions, provide a return of 60-80%. We offer a transparent service, with clear costs and no hidden fees. Our knowledgeable team will assess the business need and lean on our offering of flexible and scalable solutions to ensure the best solution is implemented.

One of our clients, a multi-national health and beauty retailer, needed to simultaneously comply with e-invoice requirements in Italy and Turkey. In addition to the compliance requirements, this client needed to tackle inefficiency in their manual Accounts Payable processes, as they scaled business operations across Europe. In this scenario, all B2B invoices needed to be submitted to a government portal so that the VAT could be captured. Previously, the client was receiving invoices from suppliers in several different formats and having to rekey them manually into the relevant systems.

To resolve these challenges, Transalis implemented a solution that considered all of the client’s needs, by concentrating on simplifying the routing of information with integrations. As a result, the solution facilitated connections to the required tax authority portals, extracted the invoice information, transformed it into the required format, and attributed the invoice data to the correct entities in order to be paid. In terms of overall benefits, efficient invoice processing and payment meant that the client could also take advantage of prompt payment discounts– especially significant when considering invoices in the hundreds of thousands and above.