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Elevate Your VAT Control Framework to the Next Level

A solid tax control framework offers benefits such as:

  • Insights into VAT risk vulnerabilities
  • Clear definition of acceptable risk levels
  • Implementation of controls for significant risks.

A VAT Control Framework is an internal control tool for a company's tax function, integral to its overall business control framework. It identifies, mitigates, manages, and reports on VAT risks to ensure compliance with tax laws and accurate reporting while managing risks within the company's appetite. A robust framework prevents VAT errors and identifies opportunities.

A company's VAT control framework is adequate if it highlights potential VAT risks and fosters awareness. Organizations should define risk tolerance, implement control measures, and regularly review VAT risks, likelihood, impacts, and mitigation strategies. Assessing risk appetite and measurement is also essential.

The following gaps raise significant benchmarking concerns:

  • Inability to Comply with Local VAT Rules: Non-compliance arises from insufficient resources, local expertise, clear policies, and effective monitoring.
  • System Incompatibility: Issues with master data can disrupt tax determination logic, leading to non-compliance and manual fixes.
  • Undefined Processes: Lack of clear internal guidelines and communication with tax offices increases error risks.
  • Inadequate Documentation: Training often neglects indirect tax guidance, leaving staff unprepared.
  • Insufficient Communication: Poor coordination between the indirect tax function and other business units complicates the resolution of VAT issues.
  • Lack of Compliance Controls: A solid VAT control framework with performance metrics is crucial for compliance; a well-structured indirect tax function can provide significant benefits.

Automating VAT processes reduces manual effort and errors, allowing tax staff to focus on strategy and problem resolution. A strong tax function balances consistent operations with flexibility for growth and compliance. By evaluating risks and rewards, companies can streamline VAT functions and create effective migration structures.

A robust VAT Control Framework is vital for navigating today’s regulatory complexities. By fostering accountability, optimizing resources, and ensuring coherent governance, organizations can better manage VAT compliance, mitigate risks, and enhance operational success.

How KGT Can Support You

1 - Improve your VAT Control Framework using KGT's normative benchmarking framework.

KGT assists clients in establishing effective VAT control frameworks to enhance compliance and efficiency. Our framework provides a comprehensive assessment of your current situation, identifying gaps and recommending targeted controls.

Our experienced team, including former EY Indirect Tax partners, draws on industry best practices to address your unique challenges. We offer tax consultancy, advisory services, and internal audit support tailored for multinational corporations.

Trust KGT to optimize your tax strategy and enhance your financial integrity while navigating the complexities of VAT.

2- Check the performance of your VAT risk management with KGT's data analysis

KGT has developed an advanced data analysis solution for SAP users. Their SAP add-on automates tax controls and improves the efficiency of control checks, allowing for client-specific adaptations. It extracts tax information from billing documents by considering factors like departure and destination countries, customer classifications, and tax codes, ensuring alignment with best practices and identifying discrepancies with SAP's determinations.

A notable feature is the "full flow" check in SD billing, which provides an overview of VAT codes throughout the invoice chain linked to a sales order, helping maintain compliance with local VAT regulations for goods supplied from European warehouses.

Intercompany partners, Party A and Party B, can track tax determination results throughout the entire process. The dashboard includes traffic light indicators for adequate health checks.

KGT will analyze the data and create a report outlining the tax determination logic, associated risks, and necessary steps to address any gaps. If our data analysis proves valuable for regular assessments, consider securing an annual subscription for our solution.

3 - Check the performance of your VAT risk management with KGT's SAP review

Our evaluation focuses on your organization’s VAT processes within SAP, ensuring efficiency and compliance with local tax laws.

KGT reviews your SAP system’s VAT settings, including codes, rates, and account assignments, to ensure they meet current regulations. Our experts assess tax determination configurations, considering place-of-supply rules, customer/vendor types, and product/service classifications.

By collaborating with KGT’s VAT specialists, you will receive valuable insights and recommendations, empowering you to implement best practices and improve your VAT management.

Download KGT's brochure

The link provided allows you to download KGT's brochure, which offers a detailed explanation of how KGT can assist you. If you have any questions, please don't hesitate to contact us. 

KGT is an SAP partner for PE services and an SAP Build partner, and to become an SAP partner, strict due diligence requirements must be met, including having certified SAP consultants. You can find us at: https://partnerfinder.sap.com/profile/0001925409