Initial situation
After the cooperation with the Chief Accountant ended, a large transport company operating internationally lost control over the corporate income tax (CIT) settlement area, significantly increasing its tax risk.
The identified issues included:
- lack of up-to-date and reliable CIT calculations,
- unreconciled accounts affecting the tax base,
- risk of errors in advance corporate income tax payments,
- uncertainty regarding compliance of CIT settlements with regulations,
- management pressure and the risk of a tax audit.
The company required support in a CIT Compliance model to ensure compliance and security of its tax settlements.
Challenge
The objective was to quickly assume responsibility for CIT settlements and ensure full tax compliance while simultaneously organizing the accounting books without disrupting ongoing reporting.
Key challenges:
- taking over the CIT process without operational interruption,
- reconstructing correct settlements without support from the previous accountant,
- verification of data used for CIT calculations,
- restoring timeliness and repeatability of settlements,
- reducing the risk of tax errors.
Scope of work – Outsourcing CIT Compliance
The project was carried out as a comprehensive outsourcing of CIT settlements, with full responsibility for the accuracy and timeliness of reporting.
1. Taking over the CIT Compliance process
- assuming responsibility for ongoing CIT settlements,
- analysis of prior advance income tax payments,
- review of tax policy and documentation,
- identification of tax risks.
2. Verification of accounting books
- analysis of tax revenues and costs,
- identification of non-deductible expenses (non-tax-deductible costs),
- verification of completeness of recorded tax events,
- review of compliance of accounting entries with CIT regulations.
3. Reconciliation of tax accounts
- reconciliation of accounts affecting the tax base,
- analysis of accruals and deferrals,
- verification of tax depreciation,
- correction of historical errors.
4. CIT calculation and control
- preparation of correct current income tax calculations,
- identification of permanent and temporary differences,
- calculation of deferred tax,
- determination of the correct effective tax rate and its variances, key from the perspective of management reporting, financial reporting, and audit requirements,
- control of compliance of calculations with tax regulations,
- review of prior CIT settlements for potential adjustments.
5. Reporting and timeliness
- preparation of the tax result,
- closing of outstanding periods,
- implementation of cyclical CIT calculations,
- reporting to management.
6. Process standardization
- documentation of the CIT process,
- standardization of tax calculation principles,
- elimination of dependency on a single individual (the Chief Accountant),
- preparation of the company for audit or tax inspection.
Effects
Within 2 months:
- continuity of CIT settlements was restored,
- correct calculations of current and deferred tax were prepared,
- key tax risks were eliminated,
- timeliness of CIT advance payments was ensured,
- the company was prepared for a potential tax audit,
- management regained full control over the tax area.
Conculusions
CIT settlements should not depend on a single individual.
CIT Compliance outsourcing allows for:
- ensuring compliance with tax regulations,
- reducing the risk of errors in CIT calculations,
- maintaining continuity of tax processes,
- securing the organization in situations of personnel changes.
Summary: taking over CIT settlements after the departure of the Chief Accountant
Problem: lack of control over CIT settlements and risk of tax errors
Solution: full takeover of the CIT Compliance process and verification of settlements
Result: restoration of CIT compliance within 2 months and elimination of tax risks
