KPMG/ RTpay Consultingrtpay.com/wp-content/uploads/2014/09/RTpay-Consultancy.pdfSoftware •Integrating tax calculations with FX conversion enables merchants to operate a single pricing

www.rtpay.comSeptember 2014

Rules and Regulations governing treasury practices are changing fast, particularly for international business

FX trading can be complicated and expensive if you don’t have expert staffing

Changes in EU VAT regulations (from 1/1/2015) and other tax issues around the world require immediate and constant attention

But the international market is where there is greater growth and potential for bigger profits if managed properly

KPMG/ RTpay ConsultingSPECIALISTS IN INTERNATIONAL PAYMENTS


Buyers from “new wealth” world markets are increasingly important

Personalizing payments to local currencies is essential – but can carry risk

The optimal solution is knowing how to manage payments in local currency while settling

guaranteed amounts in the seller’s currency. The accounting can be complicated, including

the settlement of taxes, commissions and fees in either currency

Managing credit risk is critical in many LDCs to avoid chargebacks etc.

Handled well, the return on international business is far higher than domestic markets, with

FX income a key add-on

But constant attention to the risks is essential, so real-time expertise is needed


Experience • Our team has seasoned experts in FX and transaction processing

Software• We can provide a full software solution for real-time reports and

management controls

Hedging• We can manage the overall hedging strategy, including day-to-day

trading and market analysis

Tax and legal• We work with experts around the world to help clients keep ahead

of the fast-changing regulations

Longer term strategy• We work with management on selection of new markets, plus

analysis of country and sector risk

Investment• We can provide currency investment strategies for optimizing asset

values and reducing risk on committed capital in foreign operations


Requirement• Changes in EU VAT collection rules from 1/1/2015 for electronic

trades

Software• Integrating tax calculations with FX conversion enables merchants

to operate a single pricing product

Reports and collection • All merchants, in the EU and external sellers to EU, can have all

reports and funds managed with no FX risk

Choice of reports • One stop shop or country-specific reporting

World strategy• Managing settlement of VAT and Sales Tax for all countries by

ecommerce merchants, including USA and LDCs

All payment alternatives

• Any country, any tax, any payment type can be included in one reporting structure


RTpay FX and KPMG tax

Rates

1

2

0

Go to step 3 if trans authorized

Merchant updatesown rate tables at Regular intervals

Consumer makes onlinepurchase from client

Merchant / Processor

Payment Issuer

Merchant authorizes transaction based on VATand FX with card issuer


Merchant / Processor

KPMG/ RTpay GlobalTransaction Reports

Gross settlement in consumer’s

currency

Convert net of VAT

Pay VAT in local currency

Pay merchant in its currency

3

4

KPMG/ RTpay returns posting object with record ID



When you expand into the Global Market your consumers will expect

to transact in their own local currencies and with their own local payment methods.

This means that you will be managing bank accounts in more than one currency and that

you will need to understand the risk involved in holding balances in other currencies and in converting them.

Tools which monitor fluctuations in

currency exchange rates and differences in interest rates between countries can be used

to manage this risk.

Staffing requirements to provide intelligent

decision making can be costly; our consultancy can bring you a wealth

of experience at a fraction of the cost.

We offer a currency risk mitigation platform to you as a web service

and include friendly desktop tools which

bring sample reports to you in a familiar and

friendly interface.

You can integrate the web services directly into your back office applications, with a

seamless flow of data into your own

customer applications.



Multicurrency accounting needs to recognize fees, taxes, and commissions payable in the consumer currency which requires some foreign funds to be maintained - and not traded back into the merchant’s currency

The remainder of the receivable needs to be traded ahead of the funds being available, to limit foreign currency risk exposure

The hedging process requires detailed analysis of risk, as well as the anticipated net conversion calculation

A key function of accounting is in individual transaction identification to enable reversals to take place at the same rate

Managing the income analysis is important, particularly where the profits are shared between various partners, as is the preparation of all tax reports



Constant monitoring of hedge strategies is needed, particularly for volatile currencies

Management of tax settlement processes can be in real time or lodged into escrow accounts

Hedging will also reflect anticipated movement in the currency, in particular for recurring transactions and installment payments where forward coverage is required

The hedging policy also takes into account any likely refunds and chargebacks which might impact the receivable’s eventual deposit amount

Where a trade can be predicted, but has not yet taken place, it is necessary to instigate a hedge structure to offset the risk



o Global commerce requires partnerships with banks with experience in international markets,

regional funds transfers and multi-currency offerings

o For card acquiring, banks or payment processors need to authorize the consumer in the local

currency and receive funds in that same currency

o By receiving funds in the local currency, taxes can be deducted automatically before

conversion to the seller’s currency, thereby reducing costs and risks

o Sharing income is an option for partners, or choosing standard consulting arrangements

o Our tools and techniques enable you to do these trades efficiently,

maximizing your profit and eliminating your risk


o International commerce requires compliance with rules and regulations from multiple tax jurisdictions

o In some cases tax is due in the consumer’s country of origin and in other cases tax is due in the merchant’s country of record

o Tax reporting and data management risks are increasing dramatically in many countries

o The increased cost of compliance is causing many banks to increase their pricing to merchants

o Merchants need to show compliance with AML, KYC, PCI and other legislation, as well as managing local and international tax filings


Processor/ RTpay API

Merchant

Web

ProcessorGateway

ConsumerConsumer

ConsumerMerchant

Catalog

Merchant

Checkout

ProcessorReports

Visa/MC

MerchantBack office

ProcessorDDA

RTpayDDA

MerchantDDA

1

2

34

5

6 7

8

9 10

11

12

13

14

This flow diagram illustrates the basic way in which data flows between Merchant, RTpay and Processor in a typical sale transaction.

There are variations on this theme but this shows the basic structure and other scenarios still follow the same general guidelines.

1 Consumer passes IP address to Merchant2 Merchant Passes IP plus price to

Processor/RTpay3 Processor/RTpay returns converted price4 Consumer sees price already converted5 Consumer checks out6 Merchant passes transaction to Processor

gateway

8 Processor authorizes transaction with Visa/MC9 Processor copies transaction to RTpay API10 Multi-Currency Reports shared7 Processor reports in merchant currency8 Like for like currencies settled to Processor

direct deposit account as always

12 Consumer currency trans settled to Processor/RTpay account

13 Like for like currencies settled to Merchant direct deposit account as always

14 Merchant currency from converted FX trans settled to Merchant


If the merchant would like to also receive optional services related to covering the FX risk associated with VAT on digital goods, the same general flow applies.

Processor/RTpay API

Merchant

Web

ProcessorGateway

ConsumerConsumer

ConsumerMerchant

Catalog

Merchant

Checkout

Processor Reports

Visa/MC

MerchantBack office

ProcessorDDA

Processor/RTpayDDA

MerchantDDA

1

2

34

5

6 7

8

9 10

11

12

13

14VAT

Authority

1. Consumer passes IP address to Merchant2. Merchant Passes IP, plus price, plus consumer’s

country to Processor/RTpay3. Processor/ RTpay returns converted price and VAT

rate(s)4. Consumer sees price already converted with VAT

included5. Consumer checks out6. Merchant passes transaction to Processor gateway

7. Processor authorizes transaction with Visa/MC8. Processor copies transaction to RTpay API9. Multi-Currency Reports shared10. Processor reports in merchant currency for total of

goods sold, while retaining VAT in consumer’s currency

11. Like for like currencies settled to Processor direct deposit account as always

12. FX trans settled to Processor/RTpay account, in merchant’s currency for goods and consumer’s currency for VAT

13. Like for like currencies settled to Merchant direct deposit account as always

14. Converted FX trans of goods sold settled to Merchant - and VAT in consumer’s currency settled (atmerchant’s choice) to either the merchant, the relevant tax authorities (or one stop shop) or into an escrow account


If the merchant would like to manage its own VAT reporting – and have all funds settled to it in its own currency, the same general flow applies.

Processer/ RTpay API

Merchant

Web

ProcessorGateway

ConsumerConsumer

ConsumerMerchant

Catalog

Merchant

Checkout

Processor Reports

Visa/MC

MerchantBack office

ProcessorDDA

Processor/RTpayDDA

MerchantDDA

1

2

34

5

6 7

8

9 10

11

12

13

14VAT

Authority

1 Consumer passes IP address to Merchant2 Merchant Passes IP, plus price, plus consumer’s

country to Processor/RTpay3 Processor/RTpay returns converted price and VAT

rate(s)4 Consumer sees price already converted with VAT

included5 Consumer checks out6 Merchant passes transaction to Processor gateway

7. Processor authorizes transaction with Visa/MC8. Processor copies transaction to RTpay API9. Multi-Currency Reports shared10. Processor reports in merchant currency the full

conversion of sale value, including VAT, into merchant’s currency

11. Like for like currencies settled to Processor direct deposit account as always

12 FX trans of full amount settled to Processor/RTpay account

13 Like for like currencies settled to Merchant direct deposit account as always

14 Converted FX trans settled to Merchant with VAT included - Merchant is responsible for calculation and settlement of VAT to consumer’s VAT authority


RTpay Global Consulting has the expertise and software solutions to assist processors and

merchants to optimize their FX income and lower their risks

The partnership with KPMG creates a consultancy service which can operate on a real-time

advisory basis for all international transactions for FX and tax settlement

Use of RTpay software is included as part of the service

RTpay Global Consulting can manage the hedging function and the calculation for the net FX

conversion, after deduction of local costs in buyer’s currency

Ecommerce merchants need to have all tax matters constantly updated; in particular for

international business – with the EU VAT change due on 1/1/2015 an urgent matter

Contact RTpay Global Consulting through [email protected] or by phone on 561.278.7668 to have an

assessment of your international transaction opportunities

Documents

KPMG/ RTpay Consultingrtpay.com/wp-content/uploads/2014/09/RTpay-Consultancy.pdfSoftware •Integrating tax calculations with FX conversion enables merchants to operate a single pricing