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International Accounting & Tax Compliance Localisation in NetSuite: Part I

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As much as a skilled team of experts with the right approach can take much of the pain out of an implementation project, multiple complexities arise when implementing NetSuite internationally.

It’s vital that businesses understand the statutory accounting and tax requirements present in the country or countries of the implementation as well as NetSuite’s offerings and limitations as related to the statutory requirements.

For this reason, I thought it would be a great idea to address some pretty key points when it comes to localising NetSuite for international accounting and tax compliance requirements (e.g. direct and indirect taxes, tax accounting, preparation of statutory financial statements and country by country reporting).

I’ll tackle the topic across two blog posts by addressing these four important topics:

  1. What do the terms “internationalisation” and “localisation” mean? And how are they different? How does NetSuite support “internationalisation” and “localisation”?
  2. What needs to be considered in relation to statutory accounting and tax compliance requirements when implementing NetSuite internationally?
  3. How does NetSuite support international statutory compliance requirements?
  4. Where can I get more information about localising NetSuite for international businesses?

WHAT DO THE TERMS “INTERNATIONALISATION” AND “LOCALISATION” MEAN? HOW ARE THEY DIFFERENT? HOW DOES NETSUITE SUPPORT “INTERNATIONALISATION” AND “LOCALISATION”?

Firstly, lets layout the definition of the terms as defined by the W3C. The World Wide Web Consortium (W3C) is the main international standards organization for the World Wide Web. The W3C also engages in education and outreach, develops software and serves as an open forum for discussion about the Web:

internationalisation (i18n)

− “the design and development of a product, application or document content that enables easy localisation for target audiences that vary in culture, region, or language” – W3C

localisation (L10n)

− “refers to the adaptation of a product, application or document content to meet the language, cultural and other requirements of a specific target market (a locale)” – W3C

Within NetSuite, “internationalisation” requirements to consider include language, layout, icons, workflows and country specific data whereas “localisation” requirements to consider include translation, legally required data, cultural workflows and reports.

Many countries have similar statutory accounting and tax requirements and thus localisation drivers are often common. These include:

  • Legal regulation
  • GAAP requirements (Generally Accepted Accounting Principles)
  • Tax calculation
  • Tax reporting
  • Document layout
  • Local best practice
  • Regional integration
  • Formatting
  • Translation

Within NetSuite, example localisation solutions could include:

  • Core capabilities & APIs
  • Business process SuiteApps
  • Configuration and reports tailored to localized requirements
  • NetSuite country SuiteApps
  • In country partner value-add (last mile type functionality) combined with local knowledge
  • SDN partner SuiteApps

NetSuite’s core capabilities that support and enable flexible “localisation” include:

  • NetSuite OneWorld
    • Enables the management of multiple subsidiaries, business units and
      legal entities.
  • NetSuite Multi-Book Accounting
    • Enables companies to report financial results within compliance based on multiple accounting standards concurrently.
  • SuiteCloud Platform with managed SuiteApps
  • BI/Analytics SuiteFlow for workflow
  • SuiteGL for general ledger transactions
  • Electronic Payments for international bank payment formats and processes
  • SuitePayments API for payment gateway integration
  • SuiteShipping API for shipper integration
  • SuiteTax API for localized tax calculations
  • Document and transaction numbering
  • Email capture
  • Custom address forms

NetSuite also relies on Partners to build and deliver “last mile” solutions in-line with specific country strategies including:

  • Country SuiteApps (Japan, Mexico, Germany and Portugal)
  • Partner’s country SuiteApps (increasingly BFN certified)

In summary, when undertaking an international NetSuite implementation, keep in mind the flexible options that NetSuite provides to support both “internationalisation” and “localisation” including:

  • Financials & Reporting
    • Multiple accounting books
    • Multiple Fiscal & Tax calendars
    • Localised tax calculations and reporting
  • Local format Income Statement and Balance Sheet
  • Audit and Compliance Reporting
  • Multi-Currency
    • 190+ Currencies with automated rate update
    • Multi-currencies customers and vendors
    • Real-time currency conversion and financial consolidation across global operations
  • Multi-Language
    • User interface in 20 languages
    • Print customer/vendor/partners documents in any Unicode language
  • International payment processing
  • International formatting
    • Dates
    • Currencies and numbers
    • Addresses

WHAT NEEDS TO BE CONSIDERED IN RELATION TO STATUTORY COMPLIANCE REQUIREMENTS WHEN IMPLEMENTING NETSUITE INTERNATIONALLY?

In simple words, “statutory” means the laws and regulations. Companies today need to comply with what can be a daunting multitude of national and international legislation and regulations. Many companies are rethinking their approach to managing global compliance and reporting by optimizing their technology, processes and resources to ensure compliance and prevention of regulatory issues.

Statutory laws and regulatory obligations may vary according to country and/or industry, but typically include:

  • Trade conventions
  • Fiscal and financial regulations
  • Intellectual property restraints
  • Environmental regulations

At times you may hear consultants utilise “statutory” and “regulatory” reporting and compliance synonymously, but there are differences:

Statutory requirements refer to those requirements that are mandatory by Law while Regulatory requirements are those which are imposed by independent agencies or bodies. Statutory reporting is the mandatory submission of financial and non-financial information to a government agency. Each country and often industry has its own set of laws and regulations (statutes) that mandate compliance requirements. As an example, in many countries, International Financial Reporting Standards (IFRS) have replaced country-specific Generally Accepted Accounting Principles for statutory reporting.

Within a NetSuite implementation, especially an international implementation, the following are the most common statutory compliance requirements that come into play:

  • Local and/or industry specific legal regulation process and/or reporting requirements
  • Financial systems and/or software certification
  • Accounting standards
  • Currency controls and standards
  • Tax calculations
    • Global VAT/GST/Sales tax landscape –  over 160+ countries have VAT, GST or Sales Tax requirements
    • Localized tax codes and tax rates
  • Withholding Tax
    • Withholding tax code records
    • Different tax points – accrual or payment
    • Different tax base – gross/net/tax amounts
    • Determination and calculation
    • Withholding tax reporting
      • Sales/Purchases by Withholding Tax Code
      • Tax Withheld by Vendor/Tax Withheld by Customer
  • Tax reporting & Returns filing
    • Localized Tax Reports
    • Indirect Tax Reports
  • Tax Audit Files
    • Standard Tax Audit Files (SAF-T)
  • Commercial document layout
  • Electronic payments
    • International bank file formats
    • Credit Transfer formats
    • Direct Debit and positive pay formats
  • Dunning processes / regulations

In conclusion, all of the above should be examined and discussed in detail during requirements gathering to ensure NetSuite can be correctly configured to meet the statutory compliance requirements for both your local and international implementation. To ensure compliance during an implementation, the best practice is to work in concert with a local/in country auditor to make certain all standards and conventions are met.

That’s it for part one of this post. We’ll tackle part two next week, but in the meantime, if you have any questions about NetSuite accounting and tax compliance, either internationally or locally, do not hesitate in reaching out to our team and we’ll be able to put you on the right path towards stress free accounting.

 

Noura Panaritis
As Director of Client Services at Big Bang ERP, Noura brings a wealth of expertise across a number of industries. She prides herself on her ability to build lasting relationships with individuals and organizations and join them in their goal of process optimization.