If the aim of your organization is full VAT automation of AP and AR, it is important to have a clear understanding of your material risks at hand, and your lowest performing processes in order to define the functional specifications for a solution.
The first step is to understand what exactly makes standard SAP not functioning optimally from an Indirect Tax perspective. Only then it is possible to validate whether companies’ objectives can be achieved with upgrading standard SAP functionality and/or implementing a tax engine?
In our article “Case study: cross-border chain transactions and the weakness of Standard SAP” we made the core weaknesses of Standard SAP visible using a case study.
We explained amongst others that for a correct VAT determination of a cross border chain transaction the VAT relevant data of company code A and B has to be linked real time as Standard SAP itself is only processing a transaction within one specific company code. That means a helicopter view is needed to make that happen.
This is only possible if tax logic is based and generated on a higher SAP’s hierarchy: 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.
Questions to ask before you commit
If you know the underlying weaknesses of SAP, your own indirect tax risk areas that exceed your company’s risk appetite and your underperforming processes, it is important to get a clear understanding whether or not solutions that are available in the market are actually closing the spotted gaps.
The following is a non-exhaustive list of questions that could be raised during tax software vendor selection. For readability we use ‘Solution’ to refer to the product of the respective tax software vendors.
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Written by Richard Cornelisse
Richard advises multinational businesses in improving the efficiency and effectiveness of their Indirect Tax Function and Tax Control Framework.
He started his career as a manager at Arthur Andersen and then became an EY partner where he led the indirect tax performance team for Netherlands and Belgium. Currently, he is a managing director of SAP Tax Consultancy Firm.
Richard has over 20 years of experience advising clients on international VAT issues. He is specialized in the tax aspects of financial transformations, shared service center migration, and post-merger integration work.