The maximum VAT performance of Standard SAP

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™.

When is Standard SAP sufficient?

Standard SAP itself is only processing a transaction within one specific company code and the consequence is that standard SAP VAT determination logic and functionality for VAT determination should therefore only work for:

1. AB scenarios
2. Cross border inter-company
3. AB scenarios: electronic invoices via EDI/iDoc
4. Local ABC scenarios (e.g all legs in France)
5. ABC scenario with a static business model (for instance leg B-C triggers always the same VAT treatment)

Any standard SAP gaps could be resolved with limited adjustments the overall VAT determination improved via standard design of VAT condition tables, access sequences, tax codes, tax sensitive master data, configuration of customer VAT registration number.

When is Standard SAP insufficient?

However, 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.

Do you prefer a SUV instead of a supercar? That is possible as our features can be deselected and still added at a later stage. We are aware that not everybody needs a supercar immediately.

The following diagrams consist of some core Taxmarc™ features.The percentages shown describe the performance of standard SAP only, Taxmarc™ Add-on and Taxmarc™ full features per category item. The maximum performance is set at 99.5% due to for example cost benefit considerations (e.g volume rebates).