Intercompany Tax
Many companies are required to extend beyond their systems standard functionality to take advantage of advanced business models. Often this can lead to difficulties in calculating the intercompany tax requirements, particularly when handling withholding tax and amounts withheld from settlements.

While not designed to be a commercial tax engine, Virtual Trader provides the core functionality to address the common intercompany issues arising from withholding tax, tax accruals and settlement processing.

Intercompany Tax Evaluation

ERP tax engines are primarily focused on trade invoicing where most of the tax complexity exists. However for organizations that trade inter-nationally, intercompany activity arises in many places, and tax needs to be considered and evaluated in each case.

Virtual Trader has native functionality to evaluate intercompany tax directly against any transaction. It can support multiple tax jurisdictions, and can handle tax regimes that produce multiple tax elements.

The tax details evaluated are available on intercompany invoices and reports, can be used to create tax entries directly to the General Ledger if desired, and can produce tax extracts to support tax returns or interfacing into other tax reporting systems.

Virtual Trader has the capability to call 3rd party tax engines if required.

Withholding Tax

Automated handling of withholding tax often falls outside the remit of ERP systems, and particularly when it relates to intercompany activity. However this can represent a significant problem for organizations trading in many countries.

Withholding tax impacts not just the settlement of the payable but also the receivable invoice process. The withholding tax needs to be deducted from the settlement amount to the supplier and posted to a tax liability account. However at the time the intercompany receivable is raised, there is a need to record an accrual for the withholding tax as an offset to revenue that will not be realized.

Virtual Trader can automate both the creation of the accrual on the receivable side, and the accounting required during the settlement of the payable.

Transfer Pricing

Multi-national organizations are under increasing pressure to have greater control of Transfer Pricing.

This is often achieved through a monthly process, most commonly a reimbursement of operating cost plus markup, often referred to as Cost Plus, and is described in the ‘Cost Plus Monthly Fee & Tax Agreement’ section.

Where transfer pricing is too complex, or a monthly fee is not permitted, then transfer pricing must be evaluated on a transaction basis.

Virtual Trader can provide automated solutions for both monthly fee and by transaction methods.

When operating on a transaction basis, Virtual Trader has the flexibility to select common or client specific Pricing Methods, based on business scenario. It can then automatically select price, discount, cost and markup based on the parameters relating to your business. More complex pricing can also be achieved using spreadsheet style Formula Sets.

Transfer pricing can be controlled independently where multiple tiers of intercompany arise, as with trade through scenarios.

Cost Plus Monthly Fee & Tax Agreements

Multi-national organizations are under increasing pressure to have greater control of Transfer Pricing.

A common approach is a monthly reimbursement of operating cost plus markup, as this is typically a more simple process to administer and audit.

Virtual Trader has functionality designed specifically to automate such schemes. Usually driven by cost and revenue from the General Ledger, additional or alternative sources of accounting can be accommodated.

Standard cost plus functionality is seeded, but can be extended to provide alternative approaches or include more complex algorithms if required.

The process can work on actuals, but also provides forecast and true-up options, operated on a Year-To-Date basis. ‘Trial’ processing allows operation in a report only mode, allowing review, re-run and commit functionality.

Transfer pricing on a transaction basis is discussed in the ‘Transfer Pricing’ section.

Deferred Intercompany Revenue Recognition

As legislation on deferred recognition of trade revenue for service related activities has tightened, this has highlighted the need for improved functionality around related intercompany activity.

Organizations are more often considering synchronizing intercompany activity with the recognition of deferred revenue. This provides a more realistic view of intercompany revenue, profit and tax planning.

Virtual Trader can automate such processes, and is usually driven off the revenue recognition system within Oracle, but can also be driven from other systems such as RevPro.

Cost Plus Support Agreements

An automated system within the Virtual Trader solution that uses nominated cost and revenue values from General Ledger, and applies calculations or uplifts to create intercompany payments for subsidiary entities.

Supports forecast and ‘true-up’ in arrears. Operates on year-to-date figures.

Intercompany Invoice Print

Where a receivables application is used to produce intercompany transactions, this will usually provide an invoice print capability.

However intercompany can arise in many places and using receivables to get an invoice print is not always a viable or desirable option.

Virtual Trader can produce intercompany invoice documents as an alternative to a receivable sub-ledger. Documents can be produced against any transaction processed through the product, regardless of its origin.

Documents can be produced as discrete invoices, but as these are generally for audit and compliance purposes, more commonly these documents are produced in a consolidated listing style.

As these documents are produced through the standard Oracle BI Publisher functionality, the client can customize the layout of their invoicing through the templates provided by Virtual Trader.

Virtual Trader has functionality to provide invoice numbering, which is usually sequenced by company or by Tax Registration.