How Three Multinationals Navigate Tax Compliance Complexities

This blog was last updated on March 11, 2019

Companies looking to expand internationally or ones already doing business in multiple locations face a complex web of tax regulations and reforms, varying dramatically from country to country. Existing tax compliance systems and processes typically aren’t sufficient to manage these growing challenges, requiring multinationals to adopt a new, proactive approach to compliance to reduce risk and save time and money.

Here’s a look at how three leading global companies approached these challenges head-on.

Brown-Forman Faces Growth Burdens

Brown-Forman is one of the 10 largest spirits companies in the world, manufacturing Jack Daniels, Southern Comfort and other iconic beverage alcohol brands. The company counts on international expansion to fuel its growth, but tax compliance demands began to put significant pressure on Brown-Forman’s IT team. Keeping up with frequent changes to tax regulations in Brazil and Mexico, where the company has nine facilities, was becoming increasingly resource intensive.

With limited in-house IT staff to monitor and implement each country’s fiscal requirements, Brown-Forman needed a solution that would help it adapt to the ever-changing Latin American landscape and also integrate into its single global instance of SAP ERP. It turned to Sovos to cut down on its human resource capital and technology investments.

Common eInvoicing Challenges Abound in Latin America

Brown-Forman’s problems are not unique. Any company with operations in Latin America and now Europe, must address how to handle regulations that leverage technology to enforce electronic tax filings, accounting, ledgers and invoicing. These mandates present significant challenges:

• Stretched IT resources – Changes and upgrades must be done in each country to SAP and other systems to comply with financial regulations.
• Business disruption – A patchwork approach to upgrading necessary systems – or even worse, complete software overhauls – can bring operations to a halt.
• Lack of country-specific tax expertise – Without internal resources native to each country, it’s tough to monitor and implement constantly changing requirements.
• Language barriers – Since requirements are communicated in local languages, there is often lag time and confusion if key IT and finance personnel are not fluent.
• Cost – Continual updates to SAP and other internal systems introduce unexpected expenses not related to the core business.

Sun Chemical Opts for Holistic Approach

Companies can take a number of approaches to compliance – from building their own internal solution to working with local providers to taking a global approach. Sun Chemical tried all of these methods, electing to use an internal solution in Mexico, contract with a local provider in Chile, and work with the Sovos Intelligent Compliance solution in Argentina. After analyzing results from the various options, Sun Chemical realized Sovos’ holistic approach was delivering the necessary benefits, and expanded the solution to cover operations in Chile, Mexico and Brazil.

Why did such a proactive, global solution work best to address both Brown-Forman and Sun Chemical’s challenges? They each needed a platform that provided:

• A global solution – one that constantly monitors and supports tax law changes in multiple countries, and automatically updates the platform to ensure companies remain compliant, regardless of where they operate.
• Local language support – Offering support in English, Portuguese, Spanish and more ensures companies don’t experience confusion and delays related to translating complex regulations.
• A single source of truth – Integration enables companies to leverage their existing ERP as the system of record for reporting back to the government, dramatically reducing the risks and costs of compliance.
• Lower costs – Another Sovos customer, Royal Philips, achieved an 80 percent reduction in maintenance costs after eliminating its responsibilities for infrastructure management.
• Greater productivity – Automation frees up internal resources from tedious reporting. Royal Philips achieved a 25 percent increase in productivity among employees across all business units in Brazil with proactive compliance.