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www.rtpay.comSeptember 2014
Rules and Regulations governing treasury practices are changing fast, particularly for international business
FX trading can be complicated and expensive if you don’t have expert staffing
Changes in EU VAT regulations (from 1/1/2015) and other tax issues around the world require immediate and constant attention
But the international market is where there is greater growth and potential for bigger profits if managed properly
KPMG/ RTpay ConsultingSPECIALISTS IN INTERNATIONAL PAYMENTS
www.rtpay.comSeptember 2014
Buyers from “new wealth” world markets are increasingly important
Personalizing payments to local currencies is essential – but can carry risk
The optimal solution is knowing how to manage payments in local currency while settling
guaranteed amounts in the seller’s currency. The accounting can be complicated, including
the settlement of taxes, commissions and fees in either currency
Managing credit risk is critical in many LDCs to avoid chargebacks etc.
Handled well, the return on international business is far higher than domestic markets, with
FX income a key add-on
But constant attention to the risks is essential, so real-time expertise is needed
www.rtpay.comSeptember 2014
Experience • Our team has seasoned experts in FX and transaction processing
Software• We can provide a full software solution for real-time reports and
management controls
Hedging• We can manage the overall hedging strategy, including day-to-day
trading and market analysis
Tax and legal• We work with experts around the world to help clients keep ahead
of the fast-changing regulations
Longer term strategy• We work with management on selection of new markets, plus
analysis of country and sector risk
Investment• We can provide currency investment strategies for optimizing asset
values and reducing risk on committed capital in foreign operations
www.rtpay.comSeptember 2014
Requirement• Changes in EU VAT collection rules from 1/1/2015 for electronic
trades
Software• Integrating tax calculations with FX conversion enables merchants
to operate a single pricing product
Reports and collection • All merchants, in the EU and external sellers to EU, can have all
reports and funds managed with no FX risk
Choice of reports • One stop shop or country-specific reporting
World strategy• Managing settlement of VAT and Sales Tax for all countries by
ecommerce merchants, including USA and LDCs
All payment alternatives
• Any country, any tax, any payment type can be included in one reporting structure
www.rtpay.comSeptember 2014
RTpay FX and KPMG tax
Rates
1
2
0
Go to step 3 if trans authorized
Merchant updatesown rate tables at Regular intervals
Consumer makes onlinepurchase from client
Merchant / Processor
Payment Issuer
Merchant authorizes transaction based on VATand FX with card issuer
www.rtpay.comSeptember 2014
Merchant / Processor
KPMG/ RTpay GlobalTransaction Reports
Gross settlement in consumer’s
currency
Convert net of VAT
Pay VAT in local currency
Pay merchant in its currency
3
4
KPMG/ RTpay returns posting object with record ID
www.rtpay.comSeptember 2014
www.rtpay.comSeptember 2014
When you expand into the Global Market your consumers will expect
to transact in their own local currencies and with their own local payment methods.
This means that you will be managing bank accounts in more than one currency and that
you will need to understand the risk involved in holding balances in other currencies and in converting them.
Tools which monitor fluctuations in
currency exchange rates and differences in interest rates between countries can be used
to manage this risk.
Staffing requirements to provide intelligent
decision making can be costly; our consultancy can bring you a wealth
of experience at a fraction of the cost.
We offer a currency risk mitigation platform to you as a web service
and include friendly desktop tools which
bring sample reports to you in a familiar and
friendly interface.
You can integrate the web services directly into your back office applications, with a
seamless flow of data into your own
customer applications.
www.rtpay.comSeptember 2014
www.rtpay.comSeptember 2014
Multicurrency accounting needs to recognize fees, taxes, and commissions payable in the consumer currency which requires some foreign funds to be maintained - and not traded back into the merchant’s currency
The remainder of the receivable needs to be traded ahead of the funds being available, to limit foreign currency risk exposure
The hedging process requires detailed analysis of risk, as well as the anticipated net conversion calculation
A key function of accounting is in individual transaction identification to enable reversals to take place at the same rate
Managing the income analysis is important, particularly where the profits are shared between various partners, as is the preparation of all tax reports
www.rtpay.comSeptember 2014
www.rtpay.comSeptember 2014
Constant monitoring of hedge strategies is needed, particularly for volatile currencies
Management of tax settlement processes can be in real time or lodged into escrow accounts
Hedging will also reflect anticipated movement in the currency, in particular for recurring transactions and installment payments where forward coverage is required
The hedging policy also takes into account any likely refunds and chargebacks which might impact the receivable’s eventual deposit amount
Where a trade can be predicted, but has not yet taken place, it is necessary to instigate a hedge structure to offset the risk
www.rtpay.comSeptember 2014
www.rtpay.comSeptember 2014
o Global commerce requires partnerships with banks with experience in international markets,
regional funds transfers and multi-currency offerings
o For card acquiring, banks or payment processors need to authorize the consumer in the local
currency and receive funds in that same currency
o By receiving funds in the local currency, taxes can be deducted automatically before
conversion to the seller’s currency, thereby reducing costs and risks
o Sharing income is an option for partners, or choosing standard consulting arrangements
o Our tools and techniques enable you to do these trades efficiently,
maximizing your profit and eliminating your risk
www.rtpay.comSeptember 2014
o International commerce requires compliance with rules and regulations from multiple tax jurisdictions
o In some cases tax is due in the consumer’s country of origin and in other cases tax is due in the merchant’s country of record
o Tax reporting and data management risks are increasing dramatically in many countries
o The increased cost of compliance is causing many banks to increase their pricing to merchants
o Merchants need to show compliance with AML, KYC, PCI and other legislation, as well as managing local and international tax filings
www.rtpay.comSeptember 2014
Processor/ RTpay API
Merchant
Web
ProcessorGateway
ConsumerConsumer
ConsumerMerchant
Catalog
Merchant
Checkout
ProcessorReports
Visa/MC
MerchantBack office
ProcessorDDA
RTpayDDA
MerchantDDA
1
2
34
5
6 7
8
9 10
11
12
13
14
This flow diagram illustrates the basic way in which data flows between Merchant, RTpay and Processor in a typical sale transaction.
There are variations on this theme but this shows the basic structure and other scenarios still follow the same general guidelines.
1 Consumer passes IP address to Merchant2 Merchant Passes IP plus price to
Processor/RTpay3 Processor/RTpay returns converted price4 Consumer sees price already converted5 Consumer checks out6 Merchant passes transaction to Processor
gateway
8 Processor authorizes transaction with Visa/MC9 Processor copies transaction to RTpay API10 Multi-Currency Reports shared7 Processor reports in merchant currency8 Like for like currencies settled to Processor
direct deposit account as always
12 Consumer currency trans settled to Processor/RTpay account
13 Like for like currencies settled to Merchant direct deposit account as always
14 Merchant currency from converted FX trans settled to Merchant
www.rtpay.comSeptember 2014
If the merchant would like to also receive optional services related to covering the FX risk associated with VAT on digital goods, the same general flow applies.
Processor/RTpay API
Merchant
Web
ProcessorGateway
ConsumerConsumer
ConsumerMerchant
Catalog
Merchant
Checkout
Processor Reports
Visa/MC
MerchantBack office
ProcessorDDA
Processor/RTpayDDA
MerchantDDA
1
2
34
5
6 7
8
9 10
11
12
13
14VAT
Authority
1. Consumer passes IP address to Merchant2. Merchant Passes IP, plus price, plus consumer’s
country to Processor/RTpay3. Processor/ RTpay returns converted price and VAT
rate(s)4. Consumer sees price already converted with VAT
included5. Consumer checks out6. Merchant passes transaction to Processor gateway
7. Processor authorizes transaction with Visa/MC8. Processor copies transaction to RTpay API9. Multi-Currency Reports shared10. Processor reports in merchant currency for total of
goods sold, while retaining VAT in consumer’s currency
11. Like for like currencies settled to Processor direct deposit account as always
12. FX trans settled to Processor/RTpay account, in merchant’s currency for goods and consumer’s currency for VAT
13. Like for like currencies settled to Merchant direct deposit account as always
14. Converted FX trans of goods sold settled to Merchant - and VAT in consumer’s currency settled (atmerchant’s choice) to either the merchant, the relevant tax authorities (or one stop shop) or into an escrow account
www.rtpay.comSeptember 2014
If the merchant would like to manage its own VAT reporting – and have all funds settled to it in its own currency, the same general flow applies.
Processer/ RTpay API
Merchant
Web
ProcessorGateway
ConsumerConsumer
ConsumerMerchant
Catalog
Merchant
Checkout
Processor Reports
Visa/MC
MerchantBack office
ProcessorDDA
Processor/RTpayDDA
MerchantDDA
1
2
34
5
6 7
8
9 10
11
12
13
14VAT
Authority
1 Consumer passes IP address to Merchant2 Merchant Passes IP, plus price, plus consumer’s
country to Processor/RTpay3 Processor/RTpay returns converted price and VAT
rate(s)4 Consumer sees price already converted with VAT
included5 Consumer checks out6 Merchant passes transaction to Processor gateway
7. Processor authorizes transaction with Visa/MC8. Processor copies transaction to RTpay API9. Multi-Currency Reports shared10. Processor reports in merchant currency the full
conversion of sale value, including VAT, into merchant’s currency
11. Like for like currencies settled to Processor direct deposit account as always
12 FX trans of full amount settled to Processor/RTpay account
13 Like for like currencies settled to Merchant direct deposit account as always
14 Converted FX trans settled to Merchant with VAT included - Merchant is responsible for calculation and settlement of VAT to consumer’s VAT authority
www.rtpay.comSeptember 2014
RTpay Global Consulting has the expertise and software solutions to assist processors and
merchants to optimize their FX income and lower their risks
The partnership with KPMG creates a consultancy service which can operate on a real-time
advisory basis for all international transactions for FX and tax settlement
Use of RTpay software is included as part of the service
RTpay Global Consulting can manage the hedging function and the calculation for the net FX
conversion, after deduction of local costs in buyer’s currency
Ecommerce merchants need to have all tax matters constantly updated; in particular for
international business – with the EU VAT change due on 1/1/2015 an urgent matter
Contact RTpay Global Consulting through [email protected] or by phone on 561.278.7668 to have an
assessment of your international transaction opportunities