PRESENTATION ABSTRACTS

WARSAW, 2013

1 INTRODUCTION ................................................................................................................................... 3

2 TWO DIMENSIONS .............................................................................................................................. 4

3 RUSSIAN FRAMEWORK ...................................................................................................................... 5

3.1 E-FILING ......................................................................................................................................... 6

3.2 E-DOCUMENTS ............................................................................................................................. 7

3.3 NETWORK ARCHITECTURE .......................................................................................................... 8

3.4 LANDSCAPE ................................................................................................................................... 9

3.5 PAPERLESS PRACTICE................................................................................................................. 10

4 GLOBAL CHALLENGES....................................................................................................................... 11

4.1 PROBLEM OVERVIEW ................................................................................................................. 12

4.2 SOLUTION .................................................................................................................................... 13

4.3 COLLABORATION ....................................................................................................................... 15

1 INTRODUCTION

While the Russian VAT e-invoicing laws present an opportunity for local businesses to

communicate invoices and accounting documents in electronic format with a high

degree of legal certainty and convenience, some obstacles remain for subsidiaries of

international businesses that seek to consolidate their global data flows through hubs.

TrustWeaver and Taxcom remove these obstacles and facilitate a global, trade-

compatible, yet 100% tax compliant solution for invoices under Russian law.

ABOUT TRUSTWEAVER

TrustWeaver provides business transaction compliance as a service. By adding legal

certainty, we allow hundreds of the world’s largest enterprises to automate and

consolidate business processes globally.

Unlike alternative solutions, TrustWeaver’s cloud solution decouples legal compliance

from the process, for scalable, guaranteed results spanning 44 countries. Applications

supported include VAT compliant e-invoicing, e-contracting, e-insurance policies, both

stand-alone and in partnership with many of the world's leading organizations. In

business since 2001, TrustWeaver is headquartered in Stockholm, Sweden. For further

information please visit www.trustweaver.com.

ABOUT TAXCOM

Together with Russian Federal Tax Service Taxcom is the founder of E-Filing

infrastructure in Russia. It is the first authorized operator and architect of network to

exchange e-documents with tax administration over Internet.

Today, Taxcom operates the flows of tax related e-documents to the government and

business with

12 years of unblemished reputation,

250 sales offices across the country,

A large share of Russia's 4 million taxpayers subscribing to our services.

2 TWO DIMENSIONS

DIFFERENCE AND INTERRELATION

It is important to outline the difference and interrelations of these two dimensions:

On the one side we have Global trading, finance processes (billing, accounts

payable) and e-invoicing (presented as vertical and colored);

On the other side (horizontal and tricolor) - Russian legislation, tax function (tax

management and accounting) and e-filing.

Unified global e-invoicing procedures need to be transparent in legal operations in

Russian tax administrative environment in order to facilitate seamless tax-compliant B2B

communication.

3 RUSSIAN FRAMEWORK

TAX LAW, ADMINISTRATIVE ENVIRONMENT AND STATUS OF E-DOCUMENTS

So, on one side, we have e-Invoicing of global supply chains with Unified business

processing in global ERP and business networks. We try to intersect this dimension with

fundamentally different one - Russian state regulations.

The most of Russian legislation framework for e-invoicing is Russian tax law - Tax Code

and Government directives. This establish the exchange of e-documents with business

and government for tax administration purposes.

In addition to tax law, we have a number of security, telecom, customs, social and other

laws that regulate e-invoicing. All of them important but not as dramatically important

as tax legislation.

This is in large part due to the tax administrative environment - electronic network

driven by the Federal Tax Service to control taxation procedures. Using this network

taxpayers can exchange tax related e-documents with the government as well as with

trading partners.

3.1 E-FILING

CORE NETWORK FOR TAX ADMINISTRATION

More than 12 years ago the Russian Federal Tax Service established the e-Filing network

of authorized Operators to exchange e-documents with taxpayers. Today, most of these

documents are tax reports.

The main procedure is as follows: Russian legal entities (red B-circles) submit e-

documents with e-signatures to Tax administration via the Operator, receiving

confirmations in return - signed timestamps.

Legal entities have to submit e-documents on request, periodically or during onsite

inspection.

The choreography and formats of communication are mandatory and regulated by

FTS – Federal Tax Services.

Taxcom was the architect of this network and the first e-Filing Operator authorized in

FTS.

3.2 E-DOCUMENTS

INNOVATIVE B2B NETWORK FOR VAT ADMINISTRATION

In 2012 the FTS established a new innovative B2B network for VAT administration. This

network is similar to the e-Filing one - e-documents with e-signature are channeled via

the Operator with time stamps. However, the main procedure is to exchange e-

documents between legal entities in order to collect confirmations of VAT deductions

and zero-rates. This collection is subsequently to be submitted to the tax administration

using an e-Filing sub network (on request, periodically or during onsite inspections).

The main VAT document in Russia – the mandatory VAT-invoice that declares the VAT

calculations for a business transaction as confirmed by primary accounting documents

(notes for goods and services). FTS (Federal Tax Service) has a design of joint and unified

invoices (similar to the invoice in global trading) for accounting as well as for tax

administration.

As for e-Filing, Taxcom took an active role in the prototyping and designing of this B2B

network, and has the authorization passport number #1.

This VAT administrative environment is an integral part in the maintenance of paperless

supply chains in Russia.

3.3 NETWORK ARCHITECTURE

WOVEN BASKET

The tax administrative environment in Russia is a unified, mandatory, centralized

network on a federal level.

It is possible to imagine the architecture of this environment being a "Woven Basket"

where the e-filing ‘spokes’ are linking the business to the Tax administration and where

the e-document B2B exchange weaves around it. This organization rules produce the

strictly formed document flows.

So, global supply chains should be tightly woven into this Tax administrative

environment to be seamless, tax-compliant and tax-efficient in Russia.

3.4 LANDSCAPE

RUSSIAN E-INVOICING COMMON PRACTICE

Looking at the current Russian e-invoicing landscape, e-Filing via the Internet is a

common practice in Russia:

It is mandatory - only very small business can submit paper documents;

Sturdy for quarterly peak traffics when all entites have a deadline for tax reports;

And works all over Russia;

This tax administrative network is closely connected with accounting systems. For

example, Taxcom is exclusivly native to 1C - very popular Russian accounting system.

We provide on demand web access and integration Web API for others.

To date most of the mandatory tax related B2B communications are in paper form,

thereby separating trading, accounting and tax administration.

However, today the current legal status of e-documents and the abilities of Operators

allows to keep paperless accounting, trading and tax administration together. This

represents great new opportunities for both enterprises and value added networks. We

see high local adoption rates in Russia.

3.5 PAPERLESS PRACTICE

FOR SUBSIDIARIES

What about international businesses?

Russian subsidiaries are trying to use local options to:

Outsource Russian accounting to BPO providers (note that paper as well as

double accounting and local BPM remains);

Integrate subsidiary’s local accounting systems to Operator services (no paper -

directly reduce costs; still double accounting and local BPM);

Integrate with local business networks using EDI to legal e-documents

conversions. Ideally only the issue to keep local specification of e-invoicing

process would remain.

Very often the benefits of paperless activity cover the additional expenses, yet the

problem of decentralization in BPM can be a regression factor by itself.

4 GLOBAL CHALLENGES

FOR RUSSIAN SUBSIDIARIES OF GLOBAL ENTERPRISE

Let’s look from another point of view to get the global perspective.

Russian subsidiaries of international businesses have:

A Centralized global ERP;

Are already integrated into Business networks;

Provided unified e-invoicing process to outsource with 100% tax-compliance;

Transparency to each country, including Russia.

Second part of the presentation is about

Obstacles we have to overcome if global enterprise and subsidiary undertake

these challenges;

Options we designed for this case.

4.1 PROBLEM OVERVIEW

BUSINESS NETWORK IS TO OPERATE ON BEHALF OF GLOBAL ERP ON RUSSIAN SOIL

To simplify and to describe the architecture of the appropriate common solution:

All tax administrative environments, including business and operator parts, are to be on

Russian soil. The frame of tax administration, the "basket" is to be located locally.

So, we need something to facilitate operation outside Russia – this would be the

“handle” of such a basket.

This “handle” (the Taxcom solution) is to be used by networks on behalf of global ERP

and must be suitable for both. The ideal situation is an on demand solution that extends

the current functionality of business network transparent to its business processes and

ERP integration.

4.2 SOLUTION

INTERACTION, OBSTACLES AND OPTIONS

MODEL

Let’s look a bit closer and consider a typical situation when a Global Supplier is trading

with a Global buyer. They outsource e-invoicing to global business networks or insource

it in shared service center (presented as hubs).

Each trading Partner has a number of subsidiaries in different countries including Russia

and one Global ERP. The business transaction on a global level is to be transparent for

each country.

We offer the Russian subsidiary to operate with documents on Russian soil in the

Taxcom cloud. By using remote access via ERP and Hub they can sign, issue, receive,

accept, revise and or simply submit documents to the Russian Federal Tax

Administration. There are no requirements for direct integration with local operator

services.

OBSTACLES AND OPTIONS

We can observe some gaps in Russian legislation when it comes to simply outsource e-

invoicing process to the Operator.

These constitute challenges with in responsibility partitioning. Taxcom remedies this via

customized legal and contractual designs based on the nature of the telecom Operator.

Other challenges are the certificate and signing in the cloud. Special solutions are

required to sign e-documents via business network on Russian soil.

Archiving options should allow to

subsidiary to get legal local copy at any time (on request or at onsite inspection)

enterprise to store main instance in Business Network, Global or Local ERDMS.

HOLISTIC TAX-COMPLIANCE

This solution is based on two layers of tax-compliance service composition. A local one

with process particular operation in Russian tax administrative environment and a

global one connected to hubs to provide a single API that is transparent for different

countries.

4.3 COLLABORATION

CORE ACTIVITY, PARTNERS, TRUSTWEAVER AND BUSINESS NETWORKS

Taxcom’s core activity is tax-compliance and the tax administrative environment in

Russia. Taxcom provides a neutral service for any accounting and trading systems and

cloud services. Integration, accounting as well as trading solutions are areas of

responsibility of our application partners.

The key challenge was to find a Weaver for our basket - trusted and advanced enough

to weave the tax-compliance of global business network processes into our tax

administrative network.

So, it was very natural for Taxcom to collaborate with TrustWeaver and supports its

global tax-compliance on demand service. We are now in the position to onboard

Russian subsidiaries in pilot mode.

No frills in our solution - business networks can operate directly and transparently and

get new own customers in Russia!