Tax authorities, due to technological innovations, have increasingly improved their tax auditing. They collect tax data directly from the taxpayer's ERP systems periodically (SAF-T VAT), on-request (SAF-T VAT and CIT), and more real-time (e-invoicing VAT and TP).
The objective is to audit tax reporting for both VAT as Corporate Income Tax automatically via data analysis. The tax authorities will use the tax data received to check tax positions taken in the tax reporting and rulings closed (corporate income tax and VAT) that reflect the data in the SAF-T or e-invoicing files.
The tax function must gain access to that tax data as well. The data is essential for tax returns and analyses, pre-audits, and tax planning. A material tax risk occurs when its own financial and source data contradict the tax terms under which a business model is supposed to operate. For instance, the financial data might suddenly reveal new services, new goods transactions, other sales support, specific staff with a particular role and specialization. Consider the situation in which what is taken for a fact in a closed tax ruling might then subsequently not correspond with the data that is (electronically) periodically provided to the tax authorities.
Preaudit before submission to tax authorities
The tax function must a risk analysis before the data is provided to the tax authorities. However, that does often not happen in practice. Consider, for instance, compliance with SAF-T obligations. The focus of Finance and IT is on meeting the deadline of submitting the tax authorities' data set. Often, the application of the 'audit defense protocol' is lacking, which would have been done in the case of a traditional audit. In this protocol, unanticipated risks are first internally assessed and evaluated before submitting the requested documentation to the tax authorities.
Nowadays, all the tax data is already submitted and available at the local tax authorities.
The tax function and tax digitalization: 'what to do'
SAP add-ons for tax reporting and tax audit defense
KGT SAP add-ons for SAF-T, e-invoicing and MTD UK for VAT work as a standalone application within the SAP system and does not change existing customer SAP functionality or processes. It is fully configurable with custom namespace /KGT.
KGT partnered up with SAP regarding 'SAP Advanced Compliance Reporting for SAP HANA'. The 'Advanced Compliance Reporting' (ACR) service enables you to configure, generate, analyze, and electronically submit statutory reports that contain indirect taxes, such as value-added tax.
KGT provides also S/4 HANA transformation support.