WHITEPAPER TAXATION IN INSPIRE HRM. A Global Experience

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1 WHITEPAPER TAXATION IN INSPIRE HRM A Global Experience

2 TAXATION IN INSPIRE HRM A Global Experience ABOUT TECHNO BRAIN Techno Brain is the leading IT Solutions, IT Training and BPO / ITES Services Company headquartered in Nairobi, Kenya with operations in Africa, USA, India, UK and UAE. Techno Brain is committed to deliver high quality, cost effective and off-the-shelf solutions to Governments, NGOs and Private organizations across the globe. Our competencies and experience span the entire spectrum of ICT Solutions, IT Training and BPO / ITES services Business & Technology Consulting Implementation Services System Integration Custom Software Development Product Development IT Infrastructure Services and Managed IT Services Business Process Outsourcing and IT Enabled Services IT Training, Education and Capacity Building

3 OVERVIEW The role of any organization s corporate governance with respect to Tax compliance in any country cannot be ignored. Compliance applies across the board for both private and public organizations. Regardless of the industry sector, organizations have to comply with Revenue Authorities, Welfare Bodies, Local Authorities and other Tax influences. Any organization cannot be deemed to be fully compliant without the Employee benefits taxation element, derived from Payroll Management. Human Resource Department shares the global compliance mandate with the Finance department since an Employee Life Cycle incorporates monetary compensation liable to taxation in the country of payment. HR AND TAXATION Typically, most organizations no longer run paper based payroll process, as no organization wants to bear the brunt of inaccurate and inefficient payrolls that may lead to noncompliance penalties, staff strikes and over/ under payments. Payroll fetches information, which is stored in HR Systems. The information maintained is not static and is bound to change during the course of business. These changes are triggered by HR inputs such as Salary increases through Appraisal, Leave Payments, New Hires and Terminations, Medical Benefits, and other HR related events. A Payroll manager needs to have consistency and accuracy in all the taxation activities at any given period, irrelevant of the above dynamics.

4 TAXATION IN INSPIRE HRM A Global Experience InspireHRM and its role in Employee Benefits Taxation Human Resource Management systems have evolved from being mere data entry and output environments to being startegic tools used to enforce compliance. Organizations including government,not-for-profit bodies and other external agencies have embraced HRM systems for this purpose InspireHRM presents itself as a very useful tool which can be used across boundaries, as its architecture ensures the dynamism of Payroll and HR Functions Practice globally. InspireHRM Payroll Supporting Structures Organization Network Structure: InspireHRM appreciates the fact that the network coverage and business units may differ from one organization to another. With this in mind, InspireHRM architecture supports the following environment in a centralized infrastructure: Multi-Country Multi-Company Multi-Currency This enables organizations with foreign subsidiaries experience and have Global picture of their organization. This is fully supported by having all the data stored in a central silo, and thus providing a complete multi-unit financial insight. Examples of Organization Models: Model 1 Global Organisation HQ Country Country 3 (Currency X) Country 2 (Currency Y) Country 2 Country 3

5 Model 2 Global Organisation HQ Country (Currency X) Country 2 (Currency Y) Country 3 (Currency Z) Country 4 (Currency W) Organization Network and Taxation With a centralized architecture, running multiple units in a single instance, compliance to multiple tax requirements is essential. Different regulations will apply for different business units/ countries. To achieve this, each business unit/country will have a supporting representation of its unique set of rules and regulations. Country Currency Company Tax Rates/ Bands Tax Rules Multi-user operability enables each unit to define specific Tax rules and regulations applicable in their particular jurisdiction/region/ country in dynamic setups (Localization). This ensures compliance and unique configuration per unit. Users design appropriate Tax reports and forms applicable in their business units. Online Filing (e-filing) capability is supported where tech savvy authorities have supporting infrastructure. The process is done electronically thereby saving time and stationary. Key determinants of Tax calculation can be defined per jurisdiction/ country/region such as: Tax Exempts e.g Social Welfare Tax Rates/Bands Taxable Elements Tax Exempts e.g. Retirement Benefits, Welfare Contributions, etc.

6 TAXATION IN INSPIRE HRM A Global Experience Employees and Taxation Employee Country Company Tax Rates/ Bands Tax Rules Tax Exempts e.g Social Welfare Employees emoluments are subject to Taxation in accordance with global practice. However, each employee may be accorded specific Tax treatment in compliance with the rules and regulation of the country of payment. Taking this into consideration, it is paramount to give each employee a Tax set that befits them. Irrelevance of Domicile jurisdiction/region, an employee can be assigned Tax elements that are applicable to the country of payment. Employee Tax calculation may vary periodically in harmony with non-static HR elements entitled to the staff e.g. Overtime Work, Leave Allowances, Salary Appraisals etc. Conclusion Multiple Tax Authorities rules and regulations are defined in a central repository Tax calculations on benefits are accurate and consistent Taxable Benefits are commensurate to benefit elements in HR InspireHRM ensures that Tax is remitted on time, with accuracy and in a compliant format

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