Automating complex tax scenarios with enhanced Tax Calculation capabilities

Financial management is in the midst of a transformative moment. The global operating environment of business today is increasingly complex and prone to turbulence from numerous sources. New business models are disrupting the status quo and challenging the idea of how products and services are delivered and experienced. Finance leaders are assuming greater responsibilities in their organizations and often doing so with smaller team footprints than would have been imaginable a decade ago.

Staying on top of local laws and regulations in several countries is resource-intensive and challenging. Not only do individual countries and regions have their own regulations, but these rules are continuously changing, making compliance a perpetual task that requires close attention. Technology-enabled digital transformation is at the forefront of the tools available to finance leaders who must do more with less. This blog focuses on how Microsoft’s enhanced Tax Calculation capabilities help automate complex tax scenarios and deliver more scalable and easy-to-adopt tax solutions to our customers.

For a general refresher of the Tax Calculation enhancements available in Microsoft Dynamics 365, be sure to visit our previous blog post.

Empowering global financial excellence

Ernst & Young Global Limited (EY) is one of the largest professional services firms in the world. One of the ways that EY engages with clients is as advisors and system implementers of tax technology. To better understand how Tax Calculation helps organizations scale financial excellence, let’s look at how EY helps its clients quickly deploy highly adaptable tax solutions for their businesses.

“Tax requirements are only getting more complex. Adding flexible and scalable no-code/low-code Tax Calculation capabilities to an already powerful ERP solution, such as Microsoft Dynamics 365, is definitely compelling functionality.”

Greg Hari, Director, Indirect Tax Transformation at EY

Client challenges

In part, one of EY’s clients faced challenges related to significant technical tax complexity across an extensive global footprint. The client’s small finance team was responsible for operating many business scenarios and handling a vast range of transactions.

To effectively manage complex global operations like these from a tax perspective, the business required a solution with the flexibility to scale to support its worldwide footprint and mirror its distinctive corporate structure. At the same time, the solution had to handle today’s unique tax complexities so that the in-house finance team could easily maintain business expertise to operate in all the territories they’re currently in today and allow for future expansion and ever-changing tax regulations.

Traditionally, clients selecting or implementing an enterprise resource planning (ERP) solution in these situations often require an external tax engine to perform tax determination and calculation or frequently end up with a sub-optimal determination solution. And indeed, this was the assumption and potential concern of EY’s client in this circumstance. However, as EY worked with the client during discovery, it explained the features and benefits of the native out-of-the-box Tax Calculation functionality included in Dynamics 365 Finance, which ultimately gave the client assurance over the tax determination that could be delivered.

“A new tax calculation service as a native component of Dynamics 365 was one of the key factors that helped Microsoft cater for the client’s complex requirements. It also gives us a high degree of confidence in recommending the solution because we understand it can be configured to meet bespoke requirements without significant coding or expensive customizations.”

Greg Hari, Director, Indirect Tax Transformation at EY

EY successfully supported the client through the implementation and go-live process earlier this year.

Automating complex tax scenarios

The Tax Calculation enhancements to Dynamics 365 released last year have been helping our customers to automate complex tax scenarios that required costly customizations before. Some of the complex scenarios that our customers have successfully enabled while deploying the new Tax Calculation capabilities include:

  • Transfer price model and limited risk distributor
  • Consignment warehouses with multiple VAT registrations
  • EU triangulation transactions
  • EU VAT on margin
  • EU distance selling
  • US origin-based and destination-based sales tax
  • Tax deductibility by the usage of the goods and services

Organizations can more effectively streamline and automate tax determination and calculation by leveraging our enhanced no-code/low-code tax calculation functionality, which is part of Globalization Studio within Dynamics 365. This can create significant advantages as it allows companies greater functionality to handle more complex enterprise-level scenarios while also reducing some of the maintenance burden and associated risk, even with a relatively small team. It also allows users to easily customize the solution to suit future needs as tax regulations evolve and businesses scale.

A scalable and robust tax calculation service allows both enterprise and small organizations to support and maintain a very effective tax calculation solution in-house.

Greg Hari, Director, Indirect Tax Transformation at EY

The Globalization Studio capabilities offer more than effective tax determination and calculation. Also included are no-code/low-code globalization tools and services and out-of-the-box content for electronic invoicing, tax audit and regulatory reporting, country-specific payment formats, business documents, and more. The combination of these easy-to-use and flexible services and the out-of-the-box content, extended by partners, allows users to operate our solution in more than 200 countries/regions and meet multiple tax compliance requirements and local business practice requirements.

What’s next?

Are you an existing Dynamics 365 user who would like to use the Tax Calculation capabilities in your organization? If so, you can get started today by visiting the Tax Calculation overview documentation.

Or, if you are looking for a solution to optimize across subsidiaries, acquire new companies, or expand internationally and are interested in learning more about the tools to streamline processes, increase compliance, and strategically grow your business globally, we invite you to take a guided tour of Microsoft Dynamics 365 Finance.