A SAP review should assess potential improvements in VAT configuration and determine if additional control measures are necessary for the business’s Tax Control Framework. Such a review can also pinpoint areas where errors occur and where risks are elevated, enabling a more targeted data analysis. Following the quantification and evaluation of risks and errors, a risk profile should be established to guide further testing of risk tolerance.
During a SAP review for VAT and GST, it is crucial to verify the proper functioning of the implemented VAT configuration. This verification will help understand how changes in the business model, master data, or legislation may impact the existing VAT configuration. In practice, an effective way to test the control framework is to initially narrow the review's scope and focus on the top 3-5 indirect tax risks that exceed the company’s indirect tax appetite. These risks might include:
- Intercompany Transactions
- Cross-Border Transactions
- Accurate Deduction of Input VAT (VAT Paid)
By concentrating on these key areas, the review can deliver meaningful insights and enhancements to both compliance and risk management.
SAP errors
