Many SAP clients have multiple VAT registrations. Due to principal structures, centralized functions, complex business models for sales of goods, cross-border and drop shipment transactions, these companies often use more than 900 SAP tax codes. These organizations will face difficulties regarding the standard SAP tax code design which will cause not only tax compliance, but commercial issues as well.
As a Standard SAP tax code consists of only 2 characters, the number of possible tax codes is limited. Numerous companies use a considerable amount of tax codes and risk facing a “shortage” of the necessary tax codes.
Multinationals have asked SAP for a solution over the last couple of years, but to date SAP has not provided a proper solution. In many countries around the world, the VAT revenues make up an important part of the total revenues of the governments. Combined with the financial crisis and the need to reduce the budget deficit, VAT rates are changed frequently.
The change of a VAT rate has a significant impact on a SAP system. Due to the standard set-up in SAP, for every new VAT rate multiple new tax codes must be created. As a consequence, a significant amount of additional changes are required to get the new tax code up and running for all SAP transactions.
Apart from the required changes in SAP, all VAT reporting templates (i.e. excel or OneSource) must be updated to incorporate the new VAT codes correctly. Due to design limitation in SAP, all above-listed actions are required.
Below you find a non-exhaustive list of required activities in case of VAT rate changes. It depends on the current configuration of VAT functionality whether all activities listed below are required. The opposite is also possible that more activities are necessary.