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Interim tax management

Interim tax management Interim tax management (Lat. ad interim "Meanwhile, in the meantime") is a temporary type of business management in the tax field area. Interim executives take responsibility for their work resulting in a line position. They leave the company once the problem is resolved and a stable new business or management area is established or after the relaunch of the respective strategic business unit. The first interim management orders were made in the Netherlands around 1970. Management on-time (abbreviated MAZ) is a German translation is occasionally used for interim management.

Activity content

Interim tax managers are often acting as a crisis manager to bridge human failures, and they are temporarily used as a field line in order to rehabilitate a business unit. Therefore, the managers would be liked to see as a "fire brigade" of management, who often undertake an unpleasant restructuring or even the closure of tax audits or other audits. Sometimes liquidation of a company (so-called Dirty Jobs) are on their to-do-list. More recently, interim tax managers are increasingly used as part of project work. The same applies to special topics, for which an entity must not hold on a permanent capacity. These include, for example, either outbound branches and subsidiaries or the implementation of SAP R / 3, where tax knowledge is fundamental, or tax audits and special projects like transfer-pricing-studies, or setting up a new structure. The Interim tax manager is used in different stages of company development, with problems and tasks, in which specialists need more than just a couple of consulting days, or if the existing management is not able to solve the tasks alone; the interim tax manager is then the best supplement for the management of the company. The Interim tax managers offer a wide variety of special knowledge, especially in mergers and acquisitions, business transition and succession, when buying or selling a business or part of the whole company. Interim tax management support is then necessary for the management directors to avoid high tax payments due to tax knowledge deficiencies. Due to the increasing frequency of shortage of skilled labour, which even the top management is concerned, managers are increasingly used as a temporary buffer until a suitable staff has been found for the job or the problem is solved.

Personnel

Often senior managers act as interim tax managers, who were already in various companies on high-level or leading positions. But also young professionals from mid-thirties are represented in the market. The bandwidth in the interim tax management goes much further, to experienced specialists or generalists with many years of practical industry experience and qualification in difficult situations, which are a godsend for the company. In addition, it must be said that the managers are starting younger nowadays. The fees of the managers usually depend on the scope and responsibility of work and are sometimes less than 500, - € daily rate plus expenses and possible bonuses. Internationally experienced top renovators can easily cost several times more. Highly qualified interim professionals are not getting under 1250 €, to managing director level rarely less than 1,500 € (each plus expenses and VAT).

Tasks

Doing a monthly, quarterly or yearly tax reporting

For a better understanding of the tax issues and tax impacts of the subsidiaries in each country it is necessary to have a efficient tax reporting. It is useful for the parent company on a subsidiary level for all included subsidiaries (around the world). Afterwards they will be consolidated at the parent company level. It is also necessary for calculating the ETR.

Create corporate Income tax returns for the company

For companies, it is required to have tax returns for several kinds of taxes like Corporation Income Tax (CIT), Trade Income Tax (TIT), calculated on a fiscal year basis. The underlying payment has to be on behalf of the communities tax authority after receiving the notice from them.

Create the valued added tax (VAT) declaration

Companies, which are selling and buying products and stuff, have to have a monthly-calculated VAT declaration. This declaration has to be at the tax authority on the tenth day of the next month. The VAT declaration shows the values of the sold and bought products and stuff. The underlying payment has to be paid on the same day on behalf of the tax authority of the community.

Calculation of the effective tax rate (ETR)

In multinational companies with a parent company in the U.S. and subsidiaries in other countries it is common to calculate the effective tax rate at the end of every month.

Calculation and analysis of Mergers & Acquisitions (M&A)

Mergers and acquisitions (M&A) are now emerging as a major influence on contemporary business expansion. They provide a popular means of achieving rapid growth and market entry. A corporation can grow internally by expanding its operations both globally and domestically, or it can grow externally through mergers, acquisitions and strategic alliances. A merger is a transaction involving two or more corporations in which stock is exchanged, but from which only one corporation survives. Mergers are so-called „friendly“ takeovers. At M&A the staff has to look into the details of the M&A‘s to calculate the impact on taxes and all other issues.

Doing a transfer pricing study

“goods or services are exchanged between organisational units of the same company … a transfer price is a substitute for a market price.” Transfer pricing is a tool that can be used to move money around the world in order to maximise profits and minimise tax. Since 2004 it is recommended in germany (and many other countries around the world) to provide the tax authorities in a tax audit with a transfer pricing study. If a company is not in such a position or has not created a transfer pricing study, this will lead to a penalty (up to 1.000.000 Euro) as long as this study isn‘t presented in a correct form with all needed information in it to the tax auditors.

Market situation

Interim tax management in germany is still primarily in the areas of large and medium industrial enterprises. Most interim assignments are mediated through the personal network, and only 20% by so-called interim management provider. Some of the Interim tax managers work for smaller companies, so-called single-member companies, which are not aware of finance or tax skill sets. The use of interim tax management is increasing by the number of companies using interim managers repeatedly. Furthermore, those are companies, which have already gained experience abroad with interim managers more willing to choose this form of cooperation. The best advertisement for interim tax manager at the customer‘s project is a successful work with very good results for the person and the work done (it should be more than that!). Because the words get around quickly. The opposite case is much more faster!

Length of contracts

The length of a contract as interim tax manager depends on the issues and their inherent problems. The lengths can vary from three months up to 1,5 years. At the end of the period the contract will be terminated without termination costs.

Critics

Problems for interim tax management can be:

- The Interim tax manager takes too long to get acquainted.
- The existing management team does not accept the interim tax manager.
- The company's management doesn’t support the decisions of interim tax manager.
- The interim tax manager gets no link to the staff of the company. This is necessary for providing the interim tax manager with required information and for doing the job properly.
- After finalisation of the contract, revised structures are still vulnerable and not upon the goal of the newly installed control-oriented organization to a reasonable extent.

Advantages of Interim tax management

- The company can respond quickly, flexibly and the way as required to internal and/or externally induced shortfall situations.

- Depending on the experience of the interim tax manager, adjustments to market changes and aiming for new market positions or simply overcoming acute shortages of high probability targets.

- Easy availability of short-term contractual relationships and contract completion dates.

- No competition for internal tax management; this due to the fact that there is no such skill set internally.

- Personal development effects.

Considerations about the use of Interim tax manager

The results of the interim tax management are largely dependent on individuals, so that a highly structured selection process is necessary. Integrating interim tax managers into the company can result a better knowledge of the confidential internals. In relation to the competitive situation of the industry, this requires indefinitely sustainable arrangements after leaving the job as interim tax manager To avoid discontinuities at the end of the first activity, respected and responsible managers should be informed about strategic business objectives on the bases of documentation in several meetings.