[email protected] or [email protected]
Master of Economics (1995) Budapest University of Economics Studies at University of Cologne
Quality Auditor (ISO 19011)
2005- present SAP Globalizaztion Services SM Project Lead for Tax@Business ByDesign
1996-2005 Oracle Hungary Principal consultant of Oracle Financials. Participated and managed
numerous implementation projects and pre-sales activities. Consulting Quality Manager. Localization Manager of Hungary and the (then) new EU countries.
1992-1996 Scala ECE Responsible for business development in Croatia, Slovenia, Romania and
Bulgaria, Accountant of Scala ECE and Scala Hungary Senior consultant and trainer of Scala Financials modules
Agenda
1) What is localization?
- Coffee break
2) Special focus: EU regulations
What is localization?
Being compliant with…
…specific country requirements
and
…multiple country requirements in parallel
in the area of:
1) Internationalization
2) Language support
3) Functional localization
1) Internationalization
Multi language support Code pages Unicode Time zones Multiple currencies, country codes, etc Multiple and specific Calendars
2) Local Languages
Local language on the UI---) special case: Hebrew, Arabic, Chinese
Local language for documents printed from the system ---) especially legal documents like Invoices, Tax declarations, etc.
Local language for certain delivered/user entered content---) like Name prefixes (Mr, Mrs, etc) choosable from value lists
Local language for user documentation
3) Functional localization
Compliance with local legal and business requirements
Local ----) region/country/state/county/city/etc.
Legal requirements ----) defined and documented by country officials
Business requirements ----) common practice of businesses
Also for content pre-delivered with system ---) of increasing importance!
Global and Local elements
Global Calendar Language handling Time Zone support Global Master Data Chart of Accounts
design Global and integrated
processes
Local Tax handling Financial reporting Local processes Country specific
configuration options (eg.:Chart of Accounts)
Country specific installation program for preconfigured settings/content
Etc…
Why localize?
A) With certain requirements a software MUST comply
---) Gapless customer invoice numbering and copy tracking. In HU the software must be certified by officials and software vendor must issue a certificate of compliance when selling the product
B) You can not get a customer if you don’t
C) you have contractual obligations?!? ---) watch out for the wording of contracts
Maintenance of localizations
continuous activity of
Monitoring and following up changes Last minute changes of law --) short response time
needed Localization of any new functionality of the
software Supporting users of localizations
Legal requirements are usually high prio messages
What to localize?
What makes sense from a business perspective Justifyable business case of selling the product/
functionality The consequence of not localizing is great enough
(eg.: fines)
Be pragmatic, but keep in mind that localization becomes only visible when it is missing and that is potentially too late…
Organizational aspects
Localization is ALL over…
Usually defined as an independent function within the company
Regularly moved among the major divisions (development, sales, support, consulting)
And who pays for it?
It is primarily a cost ---) development, sales, support, consulting, etc…
Indirectly it generates license revenue ---) product can be sold
Indirectly it generates consulting revenue---) implementation of localizations, special knowledge
Increases customer satisfaction
Creates huge unsatisfaction if missing
Hard to quantify revenue saved or generated by localization
and now…
COFFEE TIME
Localization topics in EU
What is the product to be sold in a country of EU?
What are the requirements/legislations in general effecting the product?
What are the effeccting EU ones? What are the effecting local country ones?
---) EU gives directives to the countries and each country must harmonize it’s own legislation meet EU requirements.
Country versus EU
1st level: COUNTRY
entities must comply with local regulations
2nd level: EU
country must comply with EU requirements
Discrepancy: European Court of Justice rules (ECJ)
European Court of Justice (ECJ)
Article 220 of EC States:
The court of Justice shall ensure that in the interpratation and application of this Treaty the law is observed
(EC= European Community based on the Treaty of Rome)
Primary Community Laws
Refers to the provisions of the original three Treaties:
ECSC –European Coal and Steel Community(expired 23 July 2002)
Euratom – European Atomic Energy CommunityEEC (later EC) – European Economic Community
Later amended by: Single European Act (1 July 1987)Treaty on European Union (Treaty of Maastrich)Treaty of AmsterdamTreaty of Nice
Single European Act
Introduced a cooperation platform for the coordination of foreign policy under the name European Political Coopertion
Reformulated the objective of the common market as an internal market (an area without borders) and set the deadline 31 Dec 1992 to relaize this ---) the European Tax law underwent dramatic
changes at this time
Treaty on European Union
Treaty of Maastricht, Dec 1992
The original three tresties underwent substantial changes, including change from EEC to EC
Established the European Union:
The Union is not a searate legal personality, best seen as the organized totality of the relations between the Member States.
EU= The roof of a building
Best described as a roof where the building has 3 pillars:
I. A Community pillar, comprising the two treaties
II. Common foreign and security policy (CFSP)
III. Provisions on coopertion between the Member States in the field of justice and home affairs
Nice Declaration – the Treaty for Constitution of Europe
Nice European Council, Dec 2000
Declaration on the future of the Union was adopted
Institutional reforms
launch a debate on the future of the EU
Laeken European Council
Convening of an IGC in 2004
European Constitution
Key Elements: There will be only one European Union, replacing
„European Communities”, and the „European Union”,
the three pillars will be merged (special procedures will be replaced by „Treaty establishing a Constitution of Europe”)
The Charter for Fundamental Rights will be integrated into the text --) simplification
Entering force only when all MS ratified
Secondary Community Law
Decisions taken by the institutions entitled to take them under the three (now two) primary treaties via: Regulations Directives (EU 6th Directive on VAT) Decisions Recommendations Opinions
The Community Institutions
The European Parliament The Council (NOT the European Council)
The Commission The Court of Justice (ECJ) The Court of Auditors
Ancillary bodies
Supporting the 5 Institutions
The European Economic and Social Committee The Committee of the Regions The European Central Bank The European Investment Bank The European ombudsman
ECJ
Located in Luxembourg Ensures that in the interpretation and application of
the Treaty the law is observed Direct appeals by individuals and companies Disputes between Member States Member States and Institutions Between Institutions
One judge per Member State 8 Advocates General
The Council
Lay down and implement legislation Representatives of the governments of the
Member States Ensures the coordination of the general
economicc policies of the MSs Legislative authority Responsible for concluding agreement between
Community and non-member countries or international organizations
Responsible for common foreign and security policy
The Commission
Executive Committee of the EC Exclusive right of initiative --) no proposal, no act
by the Council Supervisor: ensures the obervance by the
Member States of their obligations under the Treaty
May institute proceedings against a MS that may lead to judgment by ECJ
Executes the tasks of the Commission
Important legal requirements
IFRS 6th directive on VAT Direct taxation (profit tax, etc) Statistical declarations: eg:Intrastat Industry Specific regulations (eg: ECB for
National Central Banks and commercial banks)
IFRS
International Financial Reporting Standards Post Enron world World-wide Applied also by EU In addition to local GAAP
Must be supported by softwares Need to support multiple country specific GAAPs
parallel Localized Financial Statements
Direct Taxation
Double taxation treaties Usually not supported directly by generic
softwares, only special nieche ones
VAT
Very important for any software in the ERP world
Also for nieche software from which purchasing, sales or inventory management is performed
Complex and troublesome to implement: Massive transactional data to be calculated and
stored in proper detail Legal reporting of VAT is high prio Auditability of data and processes
VAT
EC Articels 23-31: free movement of goods, customs union and prohibition of quantitative restrictions
EC Articles 90-93: prohibit fiscal discrimination, fiscal dumping with indirect taxes, instructs the Council to adopt provisions for further
harmonisation of indirect taxes
VAT
VAT Directive 2006/112 National VAT Acts ECJ Rulings
Characteristics of VAT
A general turnover tax: VAT covers all goods, services and imports, unless the law explicitly provides otherwise
An „all-stage” tax: VAT covers all persons engaged in economic activities in the chain of production and distribution of goods and services
A „non-cumulative” tax: taxable persons are entitled to deduct VAT on inputs
An”indirect tax”: VAT is not born by the taxable person who remits it to the government, but the final consumer
VAT - Neutrality principles
Legal neutrality: Tax burden is proportionate to final consumers expenditures
Economic neutrality: No incentive to vertical aggregation of business activities Neutral with respect to outsourcing activities Neutral with respect to allocation of means of production
Internal neutrality: also own consumption is subject to tax External neutrality:
exports are relieved from VAT in country of origin Imports are taxed in country of destination
Subject to VAT
The supply of goods and services
Effected for consideration
Within the territory of the country
By a taxable person acting as such
Taxable Person - VAT
Any Person
Who independently carries out
in any place
Any economic activity
Whatever the purpose or results
Taxable transaction types - VAT
Domestic
Intra-Community Trade
Third Country
Intra-Community– Supply of goods
Only if a supply involves movement of goods can it be exempted
Dispatched or transported goods PoS is where dispatch or transport of goods begins PoS in MS (Member State) of import Goods installed or assembled: PoS= where installation Chain transaction:
On who’s behalf are the goods transported Where am I in the chain ---) am I before or after the transport
responsible...?
Goods NOT dispatched or transported Place where supply takes place
Supplies in EU on ships/trains/aircrafts Point of departure (or first embarkation in EU)
Gas/Power via grid and pipeline PoS depends on the nature of buyer (where customer resides)
Intra-Community– Supply of services
General Rule: PoS where supplier has established his business or has a fixed establishment from which service is supplied or has his permanent address or where he usually resides
Exceptions from general rule: Intermediary Services – PoS where underlying supply takes place Services related to immovable property – PoS where immovable property is
located Passenger Transport Services – where transport takes place, having regard to
distances covered Services related to certain activities – PoS where services are carried out Intangible/professional services – PoS where customer is established if the
customer is a taxable person established in an other MS or is not a taxable person resident outside EU
Special rules for simplification and tax avoidance prevention: Margin Scheme: tour operators/travel agents, second hand goods, works of art,
antiques Special Scheme for investment gold
Intrastat
Intrastat is the name given to the system for collecting statistics on the trade in goods between the countries of the European Union (EU).
It has been operating since 1 January 1993, and replaced customs declarations as the source of trade statistics within the EU.
The requirements of Intrastat are similar in all Member States of the EU.
Intrastat
Similar to VAT: transactional data to be identified, stored and
declared Data of Intrastat is closely related to primary VAT
data in the systems, often based on VAT data Differences to VAT:
Intrastat is based on the movement of goods (Ship from and Ship to)
Not all VAT transactions are relevant for Intrastat
Thank You!