Externalised tax director: role, missions and organisation within the company
Integrating a strategic tax function without creating an internal tax department
As a company grows, develops more than one company or expands its business internationally, taxation gradually changes in nature.
It is no longer limited to tax returns, the establishment of a bundle or the ad hoc treatment of a technical question.
Decisions on inter-company flows, financing, distributions, transfer prices, international locations, acquisitions, restructuring or ownership become interdependent.
The company can then find itself in an intermediate situation: its tax stakes have become large enough to require real pilotage, but the workload does not necessarily justify the recruitment of a full-time tax director.
The use of externalised tax director to respond to this situation.
This organisation consists of integrating senior fiscal competence into the company's decision-making process over time, while keeping this function outside its workforce.
The firm Edouard Pruvost works in this framework with entrepreneurial and international groups which usually have a structured financial management, but not an internal tax department.
What is an outsourced tax director?
An outsourced tax director is a professional who, with the company's management, performs a permanent function of management and coordination of tax issues without being an employee of the group.
Its role goes beyond that of ad hoc advice.
It is no longer just a question of answering a tax question when it arises, but of knowing enough of the organisation of the group to identify the upstream subjects, anticipate the tax consequences of the decisions envisaged and ensure their consistency over time.
The outsourced tax director thus becomes a regular contact of the Directorate-General, the Administrative and Financial Director and, depending on the subjects, the accountant, corporate lawyers, foreign counsel or other professionals working with the group.
It helps to make taxation a component of the company's decision-making process rather than a problem that is examined only after the operations have been carried out.
What is the role of a tax director?
In an enterprise with an internal tax department, the tax director occupies a particular position.
It does not just ensure compliance with tax rules.
It must also include group activity, economic flows, legal structure, investment projects, financing, international development and shareholder objectives.
Its role includes determining the tax consequences of the proposed decisions and alerting management when certain choices may create a risk or, on the contrary, require particular anticipation.
This function therefore has several dimensions.
A dimension of security, designed to identify and control the main tax risks.
A dimensionanticipation, to analyse the tax consequences before the transactions are carried out.
A dimension of Coordination, where a decision involves more than one company, court or professional.
A dimension of governance, enabling management to have a synthetic view of the group's tax issues.
Outsourcing aims to replicate this function when the creation of an internal tax team does not appear necessary or proportionate.
Externalized tax director and tax lawyer: what difference?
The main difference lies in the continuity of the relationship.
When a tax lawyer intervenes on an ad hoc basis, he or she is usually confronted with a specific problem: restructuring, tax control, acquisition, transfer pricing, assignment or international taxation.
It analyses the problem before it and makes a recommendation.
As part of an outsourced tax director function, the logic is different.
The firm is gradually experiencing:
- the legal structure of the group;
- the main companies;
- intra-group flows;
- the courts concerned;
- past operations;
- important tax positions;
- development projects;
- the stakes of shareholders and managers when they interfere with the group's strategy.
This accumulated knowledge enables new decisions to be addressed in their context.
The question is no longer just:
« What is the tax treatment of this transaction? »
It becomes:
« Is this operation consistent with the group's current organisation, its flows, future plans and tax decisions already taken? »
This continuity is one of the main values of an outsourced tax department.
The main missions of an outsourced tax director
The exact scope naturally depends on the organization and complexity of each group.
However, certain functions are particularly suitable for permanent support.
Define the group's annual tax strategy
The first task is to identify the main tax issues to be addressed during the fiscal year.
Not all subjects present the same urgency or level of challenge.
A tax roadmap identifies:
- recurring obligations;
- risks requiring monitoring;
- decisions to be taken during the year;
- projects which must be prepared several months or years in advance.
The aim is to prevent the tax function from being exclusively ordered by emergencies.
Identify and track key tax risks
Management must be able to know which tax subjects are likely to have a significant impact on the company.
These risks may include transfer prices, intra-group flows, stable establishments, withholding tax, international VAT, financing, deductibility of certain charges or the legal organisation of the group.
The outsourced tax director can help map these topics and track their treatment over time.
This mapping, or Tax Risk Registeris a governance tool to prioritize risks and decisions.
Overseeing international tax issues
International taxation is one of the areas where the continuity of advice is particularly important.
Where a group has several companies in different jurisdictions, each decision must be assessed at several levels.
The creation of a subsidiary, the conclusion of a contract, the financing of a foreign company, the remuneration of a function performed in another country or the raising of a dividend can have simultaneous consequences in several states.
The outsourced tax manager enables these different dimensions to be integrated into a global vision.
It can also coordinate with foreign tax boards when analysis requires local expertise.
Pilot transfer prices and intra-group flows
Transfer pricing is rarely an isolated subject.
They reflect economically the organization of the group and the distribution of functions, assets and risks among the different companies.
The role of the outsourced tax director includes verifying that the main flows are identified, that their economic logic is understood and that the remuneration methods used remain consistent with the group's evolution.
This function may include the supervision of transfer pricing policy, the analysis of intra-group agreements and the identification of documentary or economic work to be undertaken.
Anticipating acquisitions, divestitures and restructuring
Some tax consequences can no longer be corrected when the transaction is too advanced.
An acquisition, assignment, merger, reorganization or transmission must therefore be considered sufficiently early.
The outsourced tax director plays a warning role here.
His knowledge of the group's projects allows him to identify operations requiring in-depth analysis before decisions become irreversible.
Major due diligence related to the execution of the operation may then be the subject of a specific task.
Analyze financing and distribution
Entrepreneurial groups must regularly arbitrate between different uses of their resources:
- investment;
- dividend returns;
- intra-group loans ;
- bank financing;
- capital injections;
- distribution to shareholders;
- reinvestments.
These choices may have different tax consequences depending on the companies and jurisdictions concerned.
The outsourced tax director allows these consequences to be integrated into financial and strategic reasoning.
Group taxation and shareholder taxation
In an entrepreneurial or family group, the boundary between group taxation and shareholder taxation may become particularly important in certain decisions.
Transfer, holding, distribution, transmission, international mobility, reinvestment or changes in ownership may require a coordinated analysis.
The tax function must then identify situations in which a decision taken at company level is likely to have significant consequences at the level of its partners or managers.
Externalized Tax Director and DAF: a central relationship
The financial management is usually the main contact of the outsourced tax director.
The FAD has the financial, operational and organizational knowledge of the group.
He knows about budgets, financing, investments, development projects and company constraints.
The tax director provides a further reading: the tax consequences attached to the proposed decisions.
An effective organization thus allows the FAD not to have to identify complex tax risks alone and the tax officer to understand projects that may require its intervention early enough.
The outsourced tax director does not replace the DAF.
It becomes the Financial Directorate's Tax Reference.
This distinction is fundamental.
External tax director and accountant: two complementary functions
The use of an outsourced tax department does not undermine the role of the accountant.
In particular, the accounting expert retains his or her duties related to accounting, annual accounts, declarations and, more broadly, compliance under his or her mandate.
The externalised tax director intervenes on another level:
- anticipation;
- structuring;
- international taxation;
- transfer pricing;
- organization of flows;
- strategic decisions;
- coordination of exceptional operations.
A good organization is precisely to allow the accountant, the DAF and the tax lawyer to work together with a clear division of responsibilities.
The outsourced tax department therefore does not seek to replace the accountant.
It complements the existing organisation when strategic and international tax expertise becomes necessary.
Why outsource the function of tax director?
The recruitment of an internal tax director naturally has advantages for groups whose volume of tax subjects requires a permanent full-time presence.
But this organization is not necessarily suitable for all companies.
A group may need very high tax expertise without having a weekly workload corresponding to a full-time internal position.
Outsourcing then allows for a long-term senior competence while adapting the model to real needs.
In particular, it allows:
- avoid premature recruitment;
- immediate access to specialized expertise;
- maintain a flexible organization;
- benefit from experience with several groups and situations;
- direct access to a tax lawyer where decisions have an important legal dimension;
- focus intervention on decisions that really create value for the group.
However, the choice between recruitment and outsourcing depends on the situation of each company.
When does an outsourced tax director become relevant?
There is no universal threshold for turnover from which an enterprise should have a tax director.
Tax complexity often depends more on the organization of the group than on its size.
A group can become tax complex when it combines several elements:
- several companies;
- several courts;
- regular intra-group flows;
- international growth;
- financing between related companies;
- transfer pricing issues;
- regular acquisitions;
- an entrepreneurial or family shareholding;
- a proposed transfer or transmission;
- frequent reorganizations.
Conversely, a large company with a relatively simple business in a single jurisdiction may have much more limited tax needs.
The externalized tax director becomes particularly relevant when management finds that tax decisions become too frequent, too interdependent or too international to continue to be dealt with exclusively on a case-by-case basis.
What type of business can benefit from this organization?
The firm Edouard Pruvost is mainly responsible for the SMEs and international entrepreneurial groups already having a structured financial function but without an internal tax director.
These groups generally have:
- a still heavily involved leader or shareholder;
- a DAF or a financial officer;
- an accountant;
- several companies or subsidiaries;
- an activity, participation or flow abroad;
- development decisions requiring regular tax analysis.
The model is particularly suitable for companies accustomed to remote work and coordination of councils located in several jurisdictions.
How can intervention be organised in practice?
The intervention begins with an understanding of the organisation.
The firm analyses in particular:
- the group structure;
- the main companies;
- the courts concerned;
- significant flows;
- financial organisation;
- tax matters already identified;
- the main projects.
This first phase allows to build a mapping of the stakes and a roadmap.
Regular exchanges are then organised with the management.
The aim is for the firm to be informed early enough of projects that could produce significant tax consequences.
The relationship is therefore based less on a predetermined number of consultations than on a integration of the tax officer into the decision-making process.
Organisation compatible with remote work
The function of externalized tax director is particularly suitable for a dematerialised organization.
Exchanges with the executive, the DAF, the accountant or foreign councils can be arranged via videoconference.
The necessary documents and information can be shared securely.
This organization is particularly suitable for international groups whose leaders, companies and councils are already divided among several cities or countries.
The firm therefore favours a proactive relationship, mainly at a distance, allowing for a great flexibility in the organisation of exchanges.
What is the cost of an outsourced tax director?
The cost of an outsourced tax department depends on the real complexity of the group.
The number of companies, the number of jurisdictions, the nature of international flows, the frequency of strategic decisions and the level of coordination expected are taken into account.
The firm Edouard Pruvost offers its accompaniment to strategic tax management outsourced from 5 000 € HT per month, as part of an annual commitment.
The amount shall be determined after analysis of the organisation and scope of the intervention.
The package covers the permanent tax control defined with the customer.
Operations requiring significant due diligence — e.g. certain restructurings, acquisitions, disposals, tax controls, litigation, audits or complex documentation — may be the subject of a supplementary mission.
What remains outside the scope of the outsourced tax director?
Outsourcing a tax department does not mean transferring all of the company's tax work to the firm.
On the contrary, the model is based on an efficient division of functions.
Accounting and reporting obligations are generally borne by financial teams and the accountant.
Operational work requiring significant production may be entrusted to the most suitable professional or to a separate task.
The externalized tax director maintains the overall vision and helps to coordinate the most important issues.
This distinction allows the firm to focus its time on decisions for which senior tax expertise creates the most value.
A relationship built over time
The value of an outsourced tax department gradually increases with the group's knowledge.
Throughout the relationship, the firm is more familiar with:
- operations history;
- the positions chosen;
- the main interlocutors;
- constraints specific to each jurisdiction;
- the plans of the leaders;
- development objectives;
- topics already identified as sensitive.
This tax memory reduces the time needed to understand each new situation and increases the quality of anticipation.
The outsourced tax director gradually becomes a component of corporate strategic tax governance.
Edouard Pruvost's intervention
Edouard Pruvost is a lawyer specializing in tax law and has over ten years of experience in corporate taxation and international taxation.
A PhD in tax law, he devoted his thesis to corporate taxation, which enabled him to develop a particularly technical and in-depth expertise in the tax issues related to the organisation, development and operations of companies.
He teaches business tax law at the University as well as at the Law School as part of the training of law professionals.
A holder of the Certificate of Specialization in Tax Law issued by the Conseil national des barreaus, he was also appointed Chairman of the Jury of the Certificate of Specialization in Tax Law of the École de Formation du Barreau de Paris.
Its activity is dedicated to the support of companies, groups and leaders facing issues of corporate taxation, international taxation, structuring, transfer pricing and high stake transactions.
Its approach is to integrate taxation into the decision-making process of the company in order to anticipate the consequences of the choices envisaged, to ensure their consistency over time and to secure operations before they are implemented.
Establish an outsourced tax director
The relationship begins with a confidential exchange to assess the organisation of the group, its main tax issues and the current functioning of its financial management.
In particular, this exchange helps to determine whether the outsourced tax department is an appropriate organisation or whether the group's needs are more a matter of one-off tasks or an internal tax function.
Where this organisation is relevant, the firm shall define with the management the accompanying perimeter and the operating procedures.
Frequently asked questions about the outsourced tax director
What is the role of an outsourced tax director?
It ensures the strategic management of the main tax issues of the group without being employed by the company. It accompanies management in anticipation of decisions, risk monitoring, international taxation, intra-group flows and coordination of important tax operations.
Does the outsourced tax director replace the DAF?
No. The DAF retains the financial control of the company. The outsourced tax director acts as a specialist reference on the tax consequences of group decisions.
Does he replace the accountant?
No. The accountant and the externalized tax director perform complementary functions. In particular, the accountant performs the accounting and reporting tasks entrusted to him, while the tax director intervenes mainly on the strategy, structuring and complex tax issues.
Can an outsourced tax director intervene on international taxation?
Yes. This is even one of the areas in which this organisation is most relevant, particularly when a group has several subsidiaries, makes cross-border flows or encounters transfer pricing issues.
How much does an outsourced tax director cost?
The cost depends on the complexity of the group and the scope of the intervention. The firm Edouard Pruvost offers its support of strategic tax management externalised from 5,000 € HT per month, as part of an annual commitment.
Internal or outsourced tax director: how to choose?
Outsourcing is particularly appropriate when the issues warrant permanent senior tax competence but the workload does not yet require a full-time internal tax function. When needs become daily and highly operational, the recruitment of an internal tax director may become more appropriate.
Can outsourced tax management be done entirely remotely?
Yes. The model is particularly suitable for groups accustomed to video conferencing and coordinating teams and councils across jurisdictions.
To receive annual support from your tax strategy and to set up an outsourced strategic tax department tailored to your group's needs, contact Edouard Pruvost to organise a first confidential exchange.
