International client tax calculation & reporting: How …...2019/09/03 · 1 International client...

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International client tax calculation & reporting:

How to deal with multiple jurisdictions and increasing client demands

Prepared for TCFI - Tax Congress for Financial Institutions – 3 – 4th September 2019

Mathias Wegner - Director at BearingPoint

September, 2019

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Content

C L I E N T D E M A N D

K E Y D R I V E R S F O R T A X R E P O R T I N G

P R E S E N T S T A T U S A N D T R E N D S

S T R A T E G I E S O F F I N A N C I A L I N S T I T U T I O N S

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Client demands and expectations for tax reporting are increasing …

(Almost) onshore tax coverage

Electronic format support (if applicable)

Accurate country-specific tax report

Simulations (if possible in real-time)

Offshore banking clientsare expecting

More and more tax support from the bank

Tax reclaim

Matching tax values with CRS data

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… due to key drivers …

CRS & AEOI

Tax Amnesties and political pressure

Legal changes and obligations



Key drivers



Offshore Banking Clients are expecting


Tax reclaim

Values of tax reporting inline with CRS data

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… requiring banks and tax solution providers to react

CRS & AEOI

Tax Amnesties and political pressure

Legal changes and obligations

Tax solution providers

needs to deal with bankingclient and banks expections



Key drivers



Offshore Banking Clients are expecting


Banks

Tune/ adopt theirOperating and IT Model

Tax reclaim

Values of tax reporting inline with CRS data

Need to deal with bankingclient expections

Digitali-sation

Costpressure

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Content

C L I E N T D E M A N D S




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French client

Bank in Singapore

French Tax Authority

Filing of tax declaration

(based on OECD CRS)

French tax report (taxation based on French tax rules)

Tax Authority Singapore

HOW TAX REPORTING WILL WORK

The two main market drivers for taxation on income and wealth – 1. CRS

Consequence:

• Clients are tax transparent

• Client without declaration are

required to react

• Tax honesty is increasing

• Client requests support from

bank to deliver tax reports and

more

Automatic transmission of data

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The two main market drivers for taxation on income and wealth – 2. Tax Amnesties

0%

20%

40%

60%

80%

100%

2012 2013 2014 2015

Example of a tax amnesty

in Spain• Tax amnesties are arising

globally

• Tax amnesties have

considerable impact on the

percentage of disclosed clients

AnonymousDisclosed

Own calculation comparing disclosed and anonymous assetsin Europe (Base: ESTV EUZ Statistics)

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Source: hhttps://dergipark.org.tr/download/article-file/365354

Tax Amnesties in the world

In the past years, there have been multiple Tax Amnesties carried out in various countries

2010 – 2014

2015 – 2017

After 2017

2000 – 2009

• The chart shows tax

amnesties of the last

twenty years

• Global Possibilities for Self

Declarations

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-8 -6 -4 -2 0 2 4 6 8 10 12

DE

BE

US

IT

CH

DK

ES

FR

NL

PT

AU

AR

FN

ID

[IN]

CL

ZA

LU

GR

MX

BR

TR

IL

RU

Years to Pass until EasyTax Country Module Introduction Log. (Years to Pass until EasyTax Country Module Introduction)

Approx 1 year

2019

2018

2018

2017

2017

2017

2016

2016

2016

2016

2016

2014

2013

2013

2013

2012

2011

2009

2009

2004

2004

Time to market for the implementation of a country specific tax engine

Example BearingPoint’s EasyTax Year of Tax amnesty

Difference - year of tax amnesty compared to year of module implementation

Tax solution speed to market:

1. Timely request for countries when

tax amnesty is occuring

2. Provider become more and more

successful to deliver in a timely

manner

• Delay

• <2010 more than 6 years

• <2014: ~2-4 years

• Fast reactions in the last three

years

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Content





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Key questions to be answered by Banks and Financial Institutions when the question of providing tax reporting services is answered

What kind of tax reporting support?▪ Country specific versus generic tax

reporting▪ Additional tax support like

− Tax reclaim− Tax simulation and − Electronic reporting

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Do outsourcing or inhouse in full or partially?▪ Consequences on other demands (CRS,

make and buy)

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What is the Operating model / IT Model?▪ Centralised versus decentralised in

regards of− Operation team− Data storage− Functional architecture− Cloud and SaaS− Onshore versus offshore

▪ Relocation of clients▪ Core banking system solution

versus vendor solution

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Country-specific Reporting versus Generic Reporting

Strategies of Financial Institutions

Transaction list reporting(0% tax law coverage)

Importance of client

(size of clients)

+

+

-- Importance of market

(volume of clients)

Generic Capital Gain Reporting

Country-specific Reporting (>95% tax coerage)

▪ Standard (core markets): Country specific reporting as

▪ competitive advantage and

▪ attractive and valued support for client

▪ Enables additional levels of client tax support

1. Tax reclaim

2. Tax Simulation

▪ after tax performance vs. performance before taxes → only for core markets

▪ Instrument categorization in regards of tax attractiveness

3. Electronic reports

▪ Generic for non-core markets (less operation costs)

1. Tax Reclaim2. Country-spec simulation reports3. Electronic reports

Trend: more and more country-specific tax report based on same interface (fast implementation) and more external data, simulations and tax reclaim



− Tax reclaim− Tax simulation and− Electronic reporting

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Do outsourcing or inhouse in full or partially?▪ Consequences on other demands

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3

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BR: the official online service e-CAC for e-filing.

CH: Regional solutions eSteuerauszug enable e-filings.

FN: online tax service portal OmaVero enabling taxpayers to file their statement online.

SE: Skatteverket e-filing creates a prefilled tax statement for the taxpayer to review

DE: ELSTER* enables e-filing for tax payers.

SG: myTax Portal for e-filing

AU: public and a private online tax tool MyTax / Etax making e-filing possible.

Online Tax Tools Worldwide – overview of a selection of solutions

Online systems are

increasingly implemented.

• Enable easy and

• Errorless filing

• Competitive advantage

Trend: Electronic reporting formats and options are more and more introducedaround the world.




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2





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ES: RENTA WEB

FR: impots.gouv.fr

Source: own research

US: IRS Free File / Commercial solutions

UK: HMRC online services

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Inhouse versus Outsourcing reporting


+

+

-- Importance of market

InhouseOutsourcing




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2





3

Sourcing strategies are frequently validated at many banks. Often partial outsourcingis an option for non-core markets.

Importance of client

Full outsourcing

+ Transparent costs

+ Low operational risk

+ Scalablity

− No internal tax knowhow

− If tax reporting is outsourced → CRS outsourced as well

Full inhouse

+ Data is held within bank

+ Tax knowhow in bank → to decide on make or buy

▪ Standard strategy: currently buy (“make” solutions are more and more replaced)

− High efforts if many markets to be covered

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Hub SatelliteFI




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2





3

Tax Team Organisation


1 Hub (max. one per region) with

• 1 Operations/ Tax Team

• 1 tax reporting system

• 1 Data Center (if possible)

Satellite:

• Only in countries with legal

restrictions for export of

reporting data

• separate software installation

versus delivery from Hub

Trend is going in the direction of centralisation

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Centralised approach with advantages and limits

Advantages markets Disadvantages

Scalability Data obligation of secrecy (working with anonymised data)

Concentration of tax expertise Acceptance of central approach depending of local sites

Standardised reporting quality for the group High workload during the reporting season

Fast implementations

Extension of services to third banks possible


Client management

Securities processing

Account handling

Cash payments

Loans management

Bank systems (functional architecture)

Tax Data HubTax Reporting

for all countries in one system (on/off-shore)

CRS / Fatca for all ▪ One source for all reports

▪ One interface and easy integration of

additional tax jurisdictions

▪

Entity 2 Tax results, bookings




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Comparability

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Banks core banking

systems

Cloud provider

Tax authorities

Tax reportingTax calculation& booking

Applicationsupport &

management

Strategies of Financial Institutions - Digitalisation

Cost reductions by using Cloud and SaaS

Classical installations locally in the bank versus using cloud

installations and Software as a Service offerings

+ Reduces costs and infrastructure

+ Improves scalability

+ Scope definable varying (from maintenance, incident

management up to full application support and operations)

+ Allow different access options,

▪ Not only by the tax operation team, but

▪ also by relationship managers and in

future maybe clients

→ high quality and clear rules required

− Data may leave bank environment (if not internal)

Tax solutions

Clients

Trend in regards of tax solutions cloud approaches are being evaluated




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2





3

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Offshore versus onshore Banking


▪ Challenge to compete with onshore services

and to offer onshore-capable products

▪ Offshore clients are, depending on importance,

moved onshore.

▪ Core banking systems are tax wise competing

with vendors of specialised tax solutions.

▪ Real-time solutions are also requested for

simulation topics.

Decentralisation Strategy for clients. Consolidation of offshore- and onshore tax reporting, calculation and -booking on

one tax platform.

Core Banking System

+ Deeply implemented in banks systems

+ Performance

− Mainly onshore jurisdictions covered

− Even for one jurisdiction maintaining tax rules is

cost demanding

Specialised Tax Reporting system

+ Covers many different countries on one interface

+ Advantage in coverage of tax rules and accuracy

− Tight integration required

− Performance to be validated (real-time)




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Content





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Present status as of today and a lot more challenges to come in the future

Off-shore location of the

bank inCore markets

Non-coremarkets

Operating Model and IT Model

Trends

CH, UK and Europe

▪ Country specificreports

▪ Tax reclaim▪ Partially simulations▪ Inital electronic

reports

▪ Generic reports▪ Rare usage of

country-specificreports

▪ In-house (mainlycentralised) and Outsourcing models

▪ Both mainly with externalvendor solutions

▪ More accurate, timely▪ Digitalisation ▪ Embed Tax reclaim

solutions▪ Simulations▪ Electronic formats

Other Offshore markets

(SG, HK, Bahamas, etc.)

▪ Generic partlycountry specificreports

▪ Tax Reclaim?

▪ Rarelyperformed

▪ Inhouse models and solution

▪ Assumption: development like for CH, UK, Europe banks

▪ 97% * expectingincreased requests of tax reports in Singapore in the next 2 years

Standards for banks located in offshore markets * Asian Private Banking study in 2019 Client Tax Reporting 2019

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Tax Solution Providers react to these challenges – example solution BearingPoint’s EasyTax

Existing Markets off-shore Existing Markets on-shore

Tax rules applied are the same as for offshore, but perhaps with additional rules related to onshore products, the authority reports and bookings.

Monthly reports ** In addition, EasyTax supports specific functionalities like internal transfer, reconciliation etc.

* In developmentSimulation functionalities

Tax Reclaim (partly)

SpainUK USA*

Italy Luxemburg Russia*

Denmark Sweden Mexico

AustriaBelgium China*

Finland USA 871m*France

Australia Indonesia Greece

Argentina Turkey Generic

Germany Norway India*

Portugal Netherlands South Africa

France

Netherlands (client reporting only)

Luxemburg (client reporting only)

Switzerland (client reporting only)

Swiss final withholding tax agreement with Austria

Swiss final withholding tax agreement with UK

Spain

UK (reporting only)

Australia (reporting only)

Chile

Brazil

Israel

Switzerland plus e-Tax*

Corporates

Add. plannedjurisdictions mainly linked to APAC and LatAm:

• Japan• Taiwan• Peru• …

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Ronald G. FreyPartner

BearingPointPfingstweidstrasse 608005 ZurichSwitzerland

[email protected]

T +41 43 299 65 98F +41 43 299 64 65M+41 79 620 52 18

www.bearingpoint.com

Mathias Wegner Director

BearingPointPfingstweidstrasse 608005 ZurichSwitzerland

[email protected]

T +41 43 299 64 14F +41 43 299 64 65M+41 79 744 96 61


Your contacts

Barry Smith Senior Manager

BearingPoint100 Lower Thames StreetCentennium HouseGB-EC3R 6DL LondonUnited Kingdom

[email protected]

T +44 20 7337 3085M +44 757 2116425

www.reg.tech

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Thank you.From BearingPoint Switzerland

International client tax calculation & reporting: How …...2019/09/03 · 1 International client...

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