Joint Business Relation with PwC

Current developments in tax audits and your opportunity for automation

The current PwC study "Study on the practice of tax audits in Germany" shows that 54% of the companies surveyed experience additional tax burdens as a result of tax audits and every second company wants to invest more in digitalization. In the case of transfer prices, these are often considerable, especially for service allocations/group allocations.

Challenges in tax audits for service billing

A frequent stumbling block in tax audits is the documentation of service billing. Companies are often faced with the challenge of presenting the cost items for internal services and their allocation in a complete and comprehensible manner. Auditors require complete documentation that begins with the audited annual financial statements and also includes the relevant cost centers, their allocated shares and the subsequent direct and/or indirect allocation, including invoices issued. However, the necessary (Excel) calculations are often missing - at least in their final form - or they contain formula errors that can lead to significant adjustments.

Medium-sized companies are particularly at risk in this context. Often the responsibility for calculating the costing lies with individual employees who may leave the company or be absent due to illness. This not only leads to internal inefficiencies, but also increases the risk of tax irregularities and time inconsistencies, which can be costly in the event of a tax audit.

Increased requirements due to § 90 para. 4 AO

The new version of § 90 para. 4 AO also significantly tightens the documentation requirements. Companies must now submit the complete documentation within 30 days of the request or notification of the audit order. This requires proactive preparation and regular updating of the relevant data in order to be prepared for a possible tax audit. This increased requirement is forcing companies to review and adapt their internal processes. Even today, compiling the necessary data is a time-consuming challenge, especially for the small-scale billing of services with a 60-day submission deadline in the manual setup.

Opportunities through the automation of service billing

In view of these challenges, the automation of service billing/group allocations is recommended, as this offers the opportunity to make documentation and billing more efficient and error-free. The spectrum of automation solutions ranges from low-code automation to specialized technologies for service billing and ERP-integrated solutions. PwC also offers the billing of services as a managed service. However, companies should ensure that their transfer pricing policy is also reviewed in advance if they implement a technical solution.

Expansion of our portfolio: Joint business relationship with nicetec GmbH

To complete our range of solutions for our customers, we have entered into a joint business relationship with nicetec GmbH. This partnership enables us to jointly realize innovative and transformative projects in the field of automated service billing . We look forward to further cooperation and to being able to offer our customers the tried-and-tested, modern and flexibly integrable standard solution insightpro together with nicetec.

A contribution by Dr. Alexander Totzek and ppa. Dr. Fredrik Utesch-Xiong