Automated VAT Controls in SAP
- Topic Author
For standard SAP VAT determination logic and functionality for VAT determination does not work for complex dynamic business models (e.g. Principal-Toller-Agent model) with for example multiple VAT registrations, pick up and drop shipments, chain transactions between legal entities (ABC / ABCD scenarios). Tax logic should in those circumstance be based and generated on a higher SAP’s hierarchy: at client level combined with implementing the basic tax rules into the logic. Client level includes all the company codes working on the same SAP platform.
Taxmarc™ draws upon 30 parameters at this level to be able to fully automate the VAT determination of all (chain) transactions in SAP on real time data. Via enhancement implementation extra Taxmarc™ functionality is added to standard SAP (no interface needed).
In analogy with a car, we have tuned up standard SAP (i.e. given it extra brain power) to realize that extra indirect tax performance. The result is that the VAT treatment of all incoming and outgoing invoices is automatically determined for also the most complex transactions. In fact you have a SAP built in designated driver that makes that happen.
Even important is that you keep on driving safely. It therefore includes all the necessary safety features such as an integrated Tax Control Framework that stops the car or shows a RED light in an emergency table when danger is ahead.
Because the decision tree in the Taxmarc™ is integrated in SAP as part of the Tax Control Framework, SAP is equipped with automated controls
- Real time evaluation of the consistency of the combination of the VAT data Taxmarc™ identifies real-time when certain transactions are not possible, for instance because a local VAT registration is missing
- In the event of inconsistencies transactions are automatically blocked. The correct combination – incoterms, tax compliancy, customer/company VAT registration, export control – has to be entered via the Edit function in order for the transaction to proceed. If a transaction is classified as fiscally impossible, the internal tax function must take action, whereupon configuration occurs, such as the entry of a new VAT number.
- It is possible to allow transactions to proceed during these actions, if that is necessary from the company’s perspective.
- Taxmarc™ keeps a logbook – Risk Register – of all identified inconsistencies. The internal tax function always has insight into the areas for attention through this logbook. This also allows companies to set the right priorities when measures are taken.
- The results are processes in VAT reports without manual interventions and by pressing one button, it is possible to compose, submit and check central VAT reports.
- The use of Excel sheets to submit tax return is in the past, as are the risks caused by manual interventions and VAT processes.
Where We Differentiate
The standard VAT functionality of SAP is far from optimal. SAP exclusively focuses on transactions within a single company; it only assesses the underlying individual transactions and fails to link the current transactions to the VAT results of previous transactions. As a consequence, companies with VAT registrations in different countries cannot automatically comply with all VAT obligations.
Partly due to this reason SAP offers a certain degree of flexibility within the system, which enables users to apply adjustments in order to customize SAP for their organization. Previously this was known as ‘user exit’ and nowadays as enhancement implementation.
It offers users the possibility to add functionality and that is exactly what is accomplished with the implementation of Taxmarc™.