On April 17, 2024, the "Challenges and Responses Seminar for Chinese Enterprises Going Global in the European Union," jointly hosted by Zhong Lun Law Firm and Wolters Kluwer, was held at the Zhong Lun Beijing office. This seminar provided in-depth interpretations of important legislation and law enforcement issues concerning Chinese enterprises going global into the European Union. It also discussed crucial issues that would impact future business operations. Several representatives from well-known companies, including Fortune 500 companies, attended the event and engaged in discussions. Ms. Grace Shi, founding partner of ARTxDIGI (Beijing) Consulting Co., Ltd., was specially invited as an industry expert to deliver a keynote speech.

During the seminar, Grace delivered a speech titled "Digitization: A Must for Multinational Corporations' Compliance in Europe," providing detailed explanations and analysis on the compliance risks of multinational corporations operating in Europe, the inevitable trend of ESG sustainable development, and the promotion of digitalization by enterprises.

Key Points of Discussion:

1. Risks of multinational corporation management and considerations for digital compliance.
2. Compliance risks of multinational corporations in Europe regarding finance and taxation.
3. Looking towards the future: The impact of ESG and carbon tariffs on multinational corporations' operations in Europe and ways to respond.

In the context of globalization and the rapid rise of the global platform economy, cross-border e-commerce and digital taxation are among the important trends in global tax compliance. To address the tax challenges of the platform economy, the European Union has proposed two key reforms: the "Digital VAT" (ViDA) and customs union reform. These proposals aim to expand the scope of tax collection obligations, including platforms operating in short-term accommodation rentals and passenger transport. Additionally, e-commerce platforms will be responsible for collecting value-added tax on all goods sold within the EU, regardless of the buyer's identity or the supplier's location.

Furthermore, the application of real-time compliance presents a series of new challenges for enterprise tax systems. One common form is the implementation of mandatory electronic invoicing, which requires businesses to issue invoices in a structured machine-readable format and report invoice data to the government. Real-time compliance requires businesses to be able to capture and transmit transaction data promptly, placing higher demands on their financial and tax management systems. Businesses need to invest in advanced technological solutions to ensure compliance with different countries' electronic invoicing and real-time compliance requirements. Additionally, as electronic invoicing regulations may vary from country to country, businesses need to stay updated on these regulations' latest changes and ensure that their invoicing and reporting processes align with each country's requirements.

With the increasing types of sales taxes, businesses face more challenges in tax compliance. In addition to managing traditional sales taxes, businesses also need to deal with various newly introduced tax types and incentive policies. Cross-border transactions often involve tax treaties, domestic tax regulations, and tax regulations of the investment country (region), while involving multiple entities domestically and abroad. In specific tax treatments, it involves a series of matters such as revenue recognition, expense deduction, enjoying benefits, and transfer pricing. For major project investments, the tax treatment is generally more complicated due to the longer cycle. For businesses with cross-border transactions, they need to "peel the cocoon" according to tax treaties and tax regulations to find compliance paths in complex transactions.

Based on the above global finance and tax trends, a comprehensive and secure digital tax system is crucial for multinational corporations. Digital systems can efficiently collect, organize, and analyze large amounts of data, helping multinational companies better understand and comply with European compliance requirements. Through real-time data monitoring, businesses can quickly identify potential compliance risks and take preventive measures. By automating many tedious compliance processes such as data reporting generation, document archiving, and updates, not only can human errors be reduced and work efficiency improved, but the risk of fines or legal disputes that businesses face due to compliance issues can also be reduced. Digital systems help businesses establish more complete risk management and internal control mechanisms. Through preset rules and algorithms, the system can detect and report abnormal behaviors or potential risks in real-time, ensuring the compliance of business operations.

With the increasing emphasis on environmental protection by the European Union and other countries, ESG as an investment philosophy and corporate evaluation standard emphasizes that while pursuing economic benefits, companies should also pay attention to environmental protection, social responsibility, and corporate governance. For multinational corporations, this means that they need to pay more attention to sustainable development and incorporate ESG factors into strategic planning and daily operations. ESG compliance requires companies to comply with relevant regulations and standards, improve environmental governance, protect employee rights, and strengthen corporate governance structures. This helps enhance the company's social reputation and brand image, and increase the trust of consumers and investors.

ESG and carbon tariffs also have an impact on the market strategy of multinational corporations. Companies need to pay more attention to the ESG and carbon tariff policies of target markets and formulate corresponding market entry and exit strategies. At the same time, companies also need to strengthen communication and cooperation with international partners to jointly address the challenges and opportunities brought by ESG and carbon tariffs. A well-established digital system will help companies comprehensively monitor and control supervision from internal processes to external compliance, thereby helping companies enhance their competitiveness and gradually succeed in the market.