When your organization expands its reach beyond borders, it becomes important to understand and adapt to the legal and statutory requirements of local government agencies. Withholding tax is a crucial topic for organizations doing business across multiple countries. SAP addresses these needs with a robust solution that includes process, data, and reporting capabilities to manage the diverse world of withholding tax requirements!
Challenges associated with Managing Withholding Taxes
One of the most complicated aspects of U.S. tax compliance is the withholding tax. The complexity of the tax system is not surprising. The tax laws have grown to cover just about every conceivable situation. And as the U.S. economy has become increasingly globalized, it has become necessary to apply those laws across borders and to the international business environment.
The complexity of the tax system and the difficulties in administering it have increased significantly in recent years as more and more U.S.-based multinational businesses have found themselves subject to withholding tax liabilities on their worldwide income.
Furthermore, the intricacy of the U.S. tax code only augments with the size of businesses and the number of overseas subsidiaries, and it becomes ever more difficult for companies to "manage" their taxes - to determine what they owe, when they owe it, and how much they owe. As a result, by the time a company is ready to pay its taxes, it often cannot determine whether it has incorrectly calculated its liability. The U.S. tax code almost feels like a blank page that must be filled in on an annual basis.
Compliance the BIG ‘C’:
As withholding regulations continue to multiply and change, companies are increasingly challenged with maintaining withholding tax compliance across their client and vendor base. The complexity of accurate payment classifications, the lack of centralized information, business operations that are often not integrated between finance and tax departments, as well as the proliferation of new global and domestic withholding regulations, all contribute to increased levels of risk for companies.
Overburdening Manual Processes:
The management of withholding tax is burdened by manual processes that are costly, labour-intensive, and error prone. The information management systems required to manage withholding tax are leave a huge paper trail and do not provide an automated audit trail for the relevant information.
It involves identifying and matching the appropriate documents to apply the necessary tax calculations. Another challenge arises from the lack of consistency in the form and content of these documents.
Managing Withholding Tax with SAP:
SAP solutions make managing withholding tax simple.
41% fortune 1000 companies say they benefitted from applying automation and transformative technologies in tax compliance, and 34% in tax provision processes according to The CPA Journal, one of US’s top tax and technology publications.
One consequence of not having robust processes for record keeping, and for recording accurate transactions (compliance with tax regulations) is that the required information is unavailable when it is needed by tax departments, law enforcement agencies (including customs), media representatives or regulators.
Organisations need to understand that there exists a range of tax-related risks they must manage. Tax departments are most often one organisation's administrative 'black hole'. Inevitably, this can lead to problems, as companies face challenges in complying with the requirements.
Organisations cannot afford to ignore these risks or the costs of managing them. They must understand the legal and administrative complexities involved in international transactions, or risk reputation and shareholder value being compromised. The rules governing transactions are globally consistent but still changing, and compliance with these rules requires sophisticated systems and processes – just like a business need to function successfully. It is imperative that organisations have an effective approach to managing their tax risk that is flexible enough to accommodate changing regulations, yet robust enough to withstand regulatory scrutiny.
SAP offers organisations a solution that can help them achieve effective compliance while reducing cost and IT complexity by providing a single integrated solution for all aspects of Withholding Tax Management.
“While tax compliance and auditing are not new, SAP's solutions are a game changer that have allowed businesses to manage withholding tax complexity. SAP's solutions enable organisations to bring their global operations into one integrated platform, reducing the time and cost of data transfer, while providing near real-time reporting. With SAP, organisations can now manage and control tax complexity effectively and efficiently” says Mallika Ramamurthy, Director- SAP Practice, Jade Global, whose upcoming webinar- Manage Withholding Tax with SAP, is an interactive discussion on how leveraging SAP can help you can gain real-time insight into withholding tax and localized reporting.
Jade Global, an SAP Partner will discuss:
- How SAP can streamline and automate your processes and implement systems to drive better outcomes for your organization.
- Easy ways to map Withholding Tax (WHT) leveraging standard SAP
- How your legal and statutory compliance around WHT can be simplified
- Transforming your Tax process to make it more efficient
If you are looking for a more careful, efficient way to manage compliance, watch Jade Global’s on demand SAP webinar on Withholding Taxes. You will learn how SAP can help you prepare and manage WHT by navigating the statutory and legal areas. You will learn how to make your WHT compliance simple, easy and efficient.
About the Author
Mallika Ramamurthy, Director – SAP Practice, Jade Global
As Director - SAP Practice at Jade Global, Mallika Ramamurthy works on diverse functional areas of SAP Finance. Ramamurthy has strong domain knowledge and project implementation experience. Ramamurthy is SAP Finance certified, MIT – Future Finance certified along with a certification in INSEAD -Blockchain for Business and possesses domain expertise in ERP (SAP) Consulting with a focus on Finance - Payments, Fixed assets, Receivables, Cash Management, Credit and Collections, Disputes management as well as integration with other modules of SAP. Her areas of specialization include Process and Business Transformation, Target Operating, Model Development for Processes.