Complying With an EU Directive on Taxation

Syntel helped a leading global financial services firm, with $9.8 trillion in assets and $1.4 trillion under management, bring three of its European offices into compliance with a European Union (EU) Financial Services Action Plan directive. The directive requires that interest payments to individuals who have accounts in one EU member state but are residents (for tax purposes) of another state be subject to the tax laws of the latter state. Banks can either exchange information with the taxing authority of the individual's state or withhold taxes at the time of payment.

The Luxembourg, Ireland and United Kingdom offices of Syntel's client chose to withhold the taxes and tasked Syntel with developing a mainframe-based flexible and scalable application tailored to the local requirements of the three offices. Luxembourg was chosen as the base location to coordinate requirements and develop the application for all three offices.

Challenges

Syntel was charged with developing an application that would:

• Identify funds within the scope of the directive-based static setup and funds holdings at regular intervals;
• Extract data from fund accounting and other systems;
• Calculate the Taxable Income per Share (TIS) daily for all funds within the scope of the directive; and
• Generate reports and disseminate TIS data to paying agents so they could calculate withholding amounts.

In doing so, Syntel faced a host of disparate challenges. The funds encompassed by the system originated from different time zones and on different holiday schedules, complicating their processing. Further, a single application was to be rolled out simultaneously in the three European locations with minimal changes between locations. However, system requirements were expected to change as the taxation directive did not have the permanency of a law.

Finally, the client's Luxembourg office was new to outsourcing. As such, they had no history of monitoring outsourcing requirements. Success would require Syntel's guiding the client in developing effective monitoring processes while working on the project.

Syntel Solution

Syntel identified six components that would accomplish the objectives: data extraction, business rules and other static data setup, identification of the scope of funds related to the directive, daily calculation of TIS for all such funds, generation of reports and transmission of the reports to their respective destinations.

Syntel built a flexible system to ensure near-simultaneous deployment at all three client locations. The system's business rule engine enables users to define, update or disable business rules from time to time. The user interface is intuitive and user friendly, allowing auto fill of business rules and static data setups. A built-in calendar ensures auto extraction of data and processing of TIS based on the calendar setup. Users can manually override auto processing.

Syntel developed a J2EE compliant application based on a Syntel-proprietary framework, with a rules-based engine to ensure a lower defect rate and better performance. This approach helped absorb some of the changes to the EU directive without drastically affecting the code or the implementation. A staggered, iterative approach to code delivery enabled the early rollout of critical components, maximizing testing opportunities and minimizing risks.

As the tax directive was expected to go through multiple revisions during the initial phases of the installation, Syntel added a domain expert to its team to translate and incorporate fluid requirements.

Client Benefits

Syntel's application provides the client with several advantages. Its adaptable design enables the client to roll it out with minimal changes to other countries at a fraction of the cost of the original application. The intuitive user interface helps lower users' learning curves. Through the interface, users can respond quickly to changes in the directive and easily make adjustments to business rules themselves, instead of waiting for technical resources to make the adjustments.

The calculation and dissemination of tax information is now automated. As a result, the client requires a smaller operations team that works fewer hours per week.

The application self-initiates many tasks. This leads to better management of events such as the calculation of TIS on holidays that occur only in parts of Europe. Consequently, there are fewer mistakes and less need for reprocessing.

Syntel delivered the project on time and budget, with zero production defects. The client was able to comply with the EU directive well within the deadline, thus avoiding penalties.

Syntel continues to provide the client with post-production support, maintaining a high level of customer service through ongoing knowledge transfers between onsite and offshore teams.

Technologies

Sun J2EE, Websphere, Oracle 9i, IN SYNC, Unix, Windows 2000, Crystal Reports 9.0.