Worldwide: Preparing For Financial Compliance Curveballs

Last Updated: 19 June 2019
Article by TMF Group
Most Read Contributor in Netherlands, September 2019

CFOs can't foresee every challenge when entering a new market but they can set themselves up to face them head-on.

Global accounting and tax regulators have been making moves towards uniformity and harmonisation. Transparency initiatives such as the OECD's international exchange of Country-by-Country Reports (CbCR) are in place in over 77 jurisdictions. And approximately 90 countries have fully conformed with International Financial Reporting Standards (IFRS). However, unpredictability reigns for a chief financial officer looking to establish operations in a new market.

Countless operational differences exist in cross-border business and rigid local requirements, frequently-changing local laws and the adoption of digital reporting can throw curveballs.

A deadline is a deadline

One of the fixed rules that businesses come up against are deadlines for tax and statutory filings. These due dates cannot be extended in 63% of the 76 jurisdictions surveyed for the Global Business Complexity Index -  a report which measures the relative difficulty – or ease – of business environments around the world.

"These deadlines put a lot of pressure on companies, because they need to collect the necessary financial information and report it on time," explains Emine Constantin, Global Head of Accounting & Tax at TMF Group. "To do this, they must have the right locally-compliant software systems and processes in place."

The unwillingness of financial authorities to extend filing deadlines is linked to the increasing desire for data from companies in real-time. "There is a global drive to reduce tax evasion and fraud, and the demand for taxpayers to participate in real-time reporting helps authorities to stamp this out," she continues.

Going digital

The digital revolution sweeping through the global accounting and tax landscape is not new, but jurisdictions vary greatly in their digitisation maturity. Take Brazil, whose digital reporting is very advanced after pioneering the use of technology to standardise tax reporting and enhance foreign investment. It's ranked third most complex for business in the GBCI behind Indonesia (2) and Greece (1).

"Brazil began its digitisation journey in 2000, so it has had time to improve its systems and adapt them to various challenges that arose," says Constantin. Other jurisdictions are just beginning to go digital. "Usually, it starts with the introduction of e-invoicing. Italy and Hungary are two European countries that have just recently made this mandatory. We typically then see electronic reporting extended to other areas of tax collection."

Digitisation is important, but not the key factor in determining a jurisdiction's business complexity score from a financial compliance perspective. If it were, Brazil would arguably be ranked much lower than third most-complex in the world. "Complexity depends on many factors" says Constantin. "You can say that when you report your data digitally in a jurisdiction, it makes things much simpler, particularly after the headache of the initial set-up stage. However, business complexity doesn't just relate to the way data is reported to the authorities. It's also about how often laws change and more specifically, what notice companies are given of the change."

A changing playing field

Constantin explains that countries which tend to be ranked higher in the GBCI are those with very frequent, last-minute law changes that often catch companies by surprise. "The notice periods are so short, they leave businesses with zero time to adapt, implement and understand the impact of the change on their operations."

One factor driving Greece's place at the top of the GBCI is the tax rate variation between islands. Frequently changing and conflicting laws make it difficult for businesses to know what to comply with. In some cases, VAT refunds in Greece are subject to different tax treatments depending on the individual office a company deals with. On occasion, identical dividend declarations have been taxed at rates varying by more than 10%.

China, ranked ninth in the Index, has differing laws at federal and provincial level – and even between cities. Constantin: "However, the third phase of the Government's 'Golden Tax' project will simplify the electronic tax return submission process and this should make things easier for companies operating in China."

Don't overlook the details

When putting together business expansion plans and making risk assessments, Constantin believes that CFOs can often be guilty of neglecting key administrative issues. "We see it with some of our clients.  They're understandably hyper-focused on the operational side of things and fail to factor in company registrations, incorporations, in-country accounting and tax obligations." Constantin stresses that it's important for a CFO to understand the cost of these essential processes, the challenges they're going to face and formulate a plan of attack. "It makes sense to seek out accounting and tax partners with local knowledge and expertise in the countries they're moving in to, to help them mitigate the risk."

Explore the complexity profiles of key jurisdictions in the Global Business Complexity Index.

Need more information? Contact us today.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
3 Oct 2019, Webinar, Rotterdam, Netherlands

To view this Webinar in full click here

24 Oct 2019, Business Breakfast, London, UK

Join TMF Group and ACCA for breakfast and a briefing session dedicated to the latest VAT changes and how they affect the UK.

21 Nov 2019, Conference, Shanghai, China

Retail remains a significant growth opportunity even as GDP slows, but the challenge of recruiting and retaining quality staff must never be underestimated and managing these issues successfully can define the winners and losers. TMF Group’s 2019 Annual Retail Summit in Shanghai brings together industry professionals to share opinions on the key differentiators that can lead to achieving growth targets and maintaining momentum for your retail business in China.

 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions