After the scoping, the company’s (in-house, outsourced, co-sourced) tax function should define the tax rules and the logic informing the VAT determination for all identified business cases and contracts - alone or with the help of an external provider. The VAT (tax) function should collaborate with all business unit leaders, team members of order management, indirect tax technology colleagues and, ideally, pull it together with the help of a project manager officer (PMO). The bigger an organization is the higher the need to have a PMO to support the tax function’s coordination, as this is a vast task in larger corporations.
One of the challenges during a system adjustment is to find a stable and sustainable systematic solution instead of dealing with manual workarounds where the potential for human error is great. This challenge is much more difficult if a tax regime change is temporary because building a sustainable environment may take longer than the timeframe of the regime itself (for example, 6 months). Companies could naturally use a manual workaround, but what is key is to still have the entire process under control. Why a business unit selected an exceptional workaround, the factors considered for decision making and who are the parties responsible for the steps needed to be documented internally (we recommend preparing a KPI, RACI, or at least a simple responsibility matrix).
Once the project team is ready with the scoping, deadlines are clear, the project team has agreed on the meeting schedules, the VAT (tax) function of the organization should closely track all discussions and stand by for consultation. It is advisable to prepare a comprehensive document describing the logic of the timing of the VAT rate change in detail with examples. The wording of such document has to be straightforward because the reader of such a document may not be a tax professional but
- a colleague who has to deliver an IT logic and design an invoice layout;
- an order management colleague who has to deal with customer queries;
- a procurement and/or AP team-member who validates vendor invoices or
- an account manager who negotiates pricing.
The latter is a sensitive topic as contracts have to properly define whether the price includes VAT or not. In such cases the legal department may also suddenly become a part of the VAT rate change project because contracts need to be analyzed from a civil law perspective