Local compliance challenges of centralised accounting and tax functions
By Laurent Capbern, HLB Global Accounting & Compliance Services Leader
What is a Shared Service Centre (SSC) and why would you need one?
A shared service centre (SSC) is any centralised base of operations that takes over a role that was previously done by multiple localised departments. Many large organisations have SSCs for functions such as IT or HR, and it's becoming increasingly popular to simplify tax and financial reporting.
For companies with a global reach, the centralisation of all finance and tax functions under one roof can help reduce costs, improve consistency, and standardise processing across the board. It differs from a standard department in that is it has distinct measurable outcomes that are both qualitatively and quantitatively assessed.
How to deal with local compliance issues at the SSC level
While an SSC offers significant benefits in efficiency and cost reduction, they are not without challenges. Despite progress in the sector, there are several local compliance issues that some SSCs still struggle with, so it's important to take these into account.
Variations in requirements and practices
The SSC will need to work with local business units (LBUs) and it's important that they maintain a good relationship. As statutory requirements and business practices differ from country to country, the SSC will need to keep this in mind when working with local LBUs. Furthermore, SSCs that use standardised and automated processing must be prepared to tailor certain functions to suit the varied requirements. This often means creating protocols that clearly define what is done at the local level and the SSC level.
Cultural and language barriers
Naturally, working across multiple jurisdictions means an SSC will probably need to accommodate a wide variety of languages and cultures. In most cases, this requires the onboarding of local experts that not only speak the language but understand important cultural nuances and customs. This is particularly important when you need to file financial documents in the local language.
Keeping abreast of changes in legislation and taxation
Without a locally based tax team, it's easy to miss out on important updates regarding legislation and taxation. The SSC needs to consistently monitor any changes to regulatory frameworks or arrange for frequent updates from professional advisors in the countries they operate.
Reporting requirements regarding local currencies and formats
In many countries, the law may require that taxes are filed in the local currency and formatted to a specific set of rules. An SSC will need to have systems in place to support reporting in multiple currencies and enlist the help of a local advisor for correct formatting procedures.
Additional concerns: GAAPs, tax exemption, depreciation
Beyond compliance and legislation concerns, there remains a wealth of other minor issues that must be addressed for each different jurisdiction. Many countries use generally accepted accounting principles (GAAPs) that differ from the IFRS (International Financial Reporting Standards), these cases require a deeper conversation. You will also need to research whether any specific rules apply for depreciation and fixed asset capitalisation, and whether specific regions are tax exempt.
How much can you do in the SSC and how much do you need to do locally?
Countries that facilitate a lot of international business will have well-developed processes in place to simplify foreign financial reporting. If you do a lot of business in a certain region, it makes financial sense to employ an in-house local expert to deal with this. However, it's impossible for an SSC to maintain comprehensive, up to date information on all financial regulations across the globe. When dealing with smaller nations, you may need the assistance of local advisors to fill in the gaps.
Whether or not you have a locally based advisor, some form of connection between the SSC and the local authorities and auditors is always necessary. Some countries have local businesses that outsource these services, but otherwise, you’ll need to work directly with authorities.
How can HLB help?
HLB is a global advisory and accounting network that provides financial services to global businesses. Our team of local experts helps SSCs around the world remain compliant with tax and statutory reporting obligations, no matter the reporting location.
We have developed a business model that uses a single point of contact to ensure you remain up-to-date with changes in local legislation and never miss critical regulatory information. That gives you the same multi-language, multi-national advisors with less cost, less confusion, and all in one convenient place.
For simple, hassle-free tax reporting, HLB provides a reconciliation between local and Group GAAPs for each country in a standard format, all of which can be easily monitored by your SSC.
Our powerful suite of tracking tools provides a central hub to monitor compliance status in multiple regions, ensuring you stick to deadlines and never miss a filing.