Implementation of a standard audit file is a considerable challenge not only in regard to tax but also it purposes. Andrzej Tajchert – a partner at kpmg in poland, answers the questions of The “turning point” magazine.
PUNKT ZWROTNY (PZ): Standard Audit File (SAF) is a topic that many of our Clients have recently been interested in. This was evident at the latest KPMG Tax and Accounting Congress, as well as in the latest webinar, which encompassed over 700 registrations … why is that so?
ANDRZEJ TAJCHERT (AT): Indeed, this topic arouses not only interest, but also emotions. This is due to the fact that tax payers – big companies from 01.07.2016, and medium and small ones from 01.01.2017 – will have to, at the request of a tax audit authority, present most of the data from their financial and accounting systems, and mandatorily send in VAT registers. These will require considerable detail – including precise lines of invoices or inventory movements. It is an enormous amount of information, essentially a disclosure of the company’s finances “from the inside” – what, from whom and for how much we buy and sell, and how accounting of these activities is kept.
PZ: Why are companies afraid of disclosing such data to tax audit authority?
AT: They are primarily afraid of data leakage. The Ministry has just started to develop new regulations concerning e.g. the encryption of SAF data transmission to the MF website. There are also no regulations and clear procedures explaining to whom and how this data can be disclosed. The current regulations were adapted to paper documents, not to mass electronic data. One has to realize that these files will also include personal data, e.g. in SAF from our electricity supplier.
PZ: Why then does the Ministry of Finance implement such a risky instrument?
AT: It is inevitable. In order to efficiently control the operations of modern companies, there is no other way than to collect the entirety of their data and control it with specialized software that will search for irregularities or deliberate actions which result in lowered taxes. Indeed, this is a global trend. SAF is an initiative launched by OECD. There are countries, such as Portugal or Brazil, where electronic systems of economic transaction control have been in use for some time.
PZ: And Poland has been building on their experience?
AT: Yes, although the format of the Polish SAF files is, unfortunately, different from the standard proposed by OECD.
AT: Yes, in my opinion the Polish SAF will not allow for effective analyses of the links between particular pieces of data, e.g. between invoices and payments, or deliveries and invoices, especially in such complicated cases as one payment made for many invoices and deliveries. Assuredly, taxpayers will have to change the file content after the implementation of SAF.
PZ: This is, as far as I understand, a task for the Ministry of Finance. What is KPMG working on in the context of SAF?
AT: The implementation of SAF by the taxpayer is a joint IT-tax undertaking. IT, because there needs to be created a SAF-generating instrument. Tax, because simply downloading the data from the system or systems will produce an unacceptable effect as far as presenting such data to tax audit authorities is concerned. Data, types of transactions and accounting methods have to be analysed in terms of tax, so that the result is as close to what the Ministry expects in terms of compatibility, e.g. with VAT returns. I focus on the SAF topic from the perspective of IT advisory, at the same time cooperating closely with the Tax Department.
PZ: What factors may cause difficulties for companies when preparing SAF?
AT: There are many such factors: data stored in many systems, usage of older versions of software that are not supported by the producers, complicated business processes, especially regarding logistics and accounting, but also inflexible corporate financial systems operated globally.
PZ: Could you elaborate a bit more on the last example?
AT: Global concerns centralize their IT systems, a trend which has been very visible recently. The result is, however, a decrease in the flexibility of changes for particular countries, since they have to be coordinated globally. Often their service is outsourced to low-cost locations such as India. Agreeing on and implementing changes in such a situation is complicated and time consuming, especially if the team in Poland no longer has people with expertise in computer science.
PZ: Should a company that has all the data in one integrated system with the support of the producer be concerned then?
AT: Unfortunately, yes. Many producers have stated that it is impossible to provide a turnkey solution early enough for all clients. It is mainly due to short time and various solutions applied in companies regarding account planning, transaction codification and preparation of VAT returns. A universal tool would have to be very widely configurable. In addition, many customers have modified standard systems, and these modifications may cause the manufacturer’s tool not to work properly. Of course, there will be companies where applying the producer’s standard tool will have a sufficient effect. Nevertheless, due to potential problems regarding the data content, for example, as a result of human error or historical conditions, tests will be necessary. In our nomenclature, we call this validation.
PZ: I understand that validation should be performed in every case?
AT: Absolutely. Regardless of where we will be generating SAF, it is always worth making sure it is correct.
PZ: Thank you for your time!
© 2017 KPMG Sp. z o.o. jest polską spółką z ograniczoną odpowiedzialnością i członkiem sieci KPMG składającej się z niezależnych spółek członkowskich stowarzyszonych z KPMG International Cooperative (“KPMG International”), podmiotem prawa szwajcarskiego. Wszelkie prawa zastrzeżone.