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SAP, indirect tax functionality and client needs | Tax Management Con...

http://richardcornelisse.com/2013/02/06/sap-indirect-tax-functionality...

RICHARD CORNELISSE

Tax Management Consultancy
INDIRECT TAX, VAT, VALUE-ADDED TAX, TAX CONTROL FRAMEWORK, ERP SYSTEM, GST, RICHARD CORNELISSE, SAP, BUSINESS MODEL, CROSS-BORDER, CHINA, COMPLEX, PROFITS, SAP AG, SOLUTION, PARAMETERS, TAXMARC™, INDIA, MISMATCH, VAT OBLIGATIONS, INDIRECT TAX CONSULTANT, SAP FRAMEWORK, NATIVE SAP, INTERCOMPANY, DROP SHIPMENT, COMPONENTS, LOW-WAGE COUNTRIES, CALCULATION, PRE-DEFINED CONFIGURATION, HARD-CODING, VAT DETERMINATION, REAL TIME, FISCAL MONITORING, PREVENTIVE CONTROLS, BUSINESS PROCESS, PRODUCTIVITY, CLIENT NEEDS

SAP, indirect tax functionality and client needs
In Audit Defense, Benchmark, Business Strategy, EU development, Indirect Tax Strategic Plan, Processes and Controls, Technology, Training, VAT planning on 06/02/2013 at 6:39 pm

Richard Cornelisse (http://www.linkedin.com/profile /view?id=14470549&authType=name&authToken=Jm8Q& locale=en_US&pvs=pp&trk=ppro_viewmore), Director Strategy & Sales of Taxmarc™
The business models of many enterprises have radically changed over the last years and have become increasingly complex. SAP, however, has failed to keep up, which has resulted in the standard functionality of SAP being no longer sufficient for complying with VAT obligations. Practical solutions must be found within the flexibility and static structure of SAP regarding indirect tax. Because of this, SAP Indirect Tax Consultants in the market can only patch up the existing SAP framework. Regarding indirect tax, the structure of native SAP has hardly, if at all, changed over the last 20 years. As a result of globalization, the business models, on the other hand, have considerably changed. With the aim of creating new sales markets and achieving cost savings, business activities are spread

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. thereby risking incorrect calculation of VAT. This is due to the fact that essential tax parameters are missing and that it is not possible to link the different transactions in the entire chain (sale-purchase-sale)..com/2013/02/06/sap-indirect-tax-functionality.SAP. (hĴp://taxmarc. indirect tax functionality and client needs | Tax Management Con. Enterprises set up their business models and transactions in such a way that they can allocate the profits in the fiscally most beneficial way. the emergency patch is a pre-defined configuration (hard-coding) of assumptions about how transactions will take 2 of 3 04-03-2013 20:35 . The advantage of this is a low tax burden for the corporate tax. The indirect tax is typically late. cost considerations lead to a high degree of centralization of administrative functions.. failure to comply with local VAT obligations. Nontransparent mix This results in a highly diverse mix of transactions in which drop shipments – deliveries to the final customer of the purchasing party – are often the main point of focus. From emergency patches to eliminating risks Automatic determination of VAT obligations in chain transactions is not possible in the standard functionality or regular ERP systems.com/en/)These emergency patches usually focus solely on one specific problem instead of the entire flow of goods within the company or concern. such as SAP. In actual practice. whereby compliance and purchase more frequently take place via Shared Service Centers. (hĴp://taxmarc. if at all. incorporated in this fiscal strategy. Combined with the lack of harmonization of regulations in different countries. all over the world. Without the right VAT regulations. The consequence of worldwide business practices. maintaining the VAT position is extremely complicated. Cross-border chain transactions with third parties or within a company (intercompany transactions) have become the rule rather than the exception.. and transactions that cannot be commercially executed. the emerging complexity of business models and the centralization of financial functions is that companies get VAT obligations in multiple countries.com/en/)At the same time. regular ERP systems are not able to process data correctly.Transactions between different international stock locations of one and the same legal entity (plants abroad) take place more and more often. In that case. these flaws in SAP are often patched up in order to keep the system running. Many companies also deal with the outsourcing of the production of parts and components of the final products to mostly low-wage countries such as India and China. http://richardcornelisse.

place. http://richardcornelisse. companies can eliminate VAT risks.. 3 of 3 04-03-2013 20:35 .com.com/2013/02/06/sap-indirect-tax-functionality. Beside the highly improved preventive controls regarding risk management.. This entails definitively prescribed VAT determination and the risk that this might not match reality. These risks can be eliminated by adding missing tax parameters and linking master and transaction data of all relevant transactions to each other.. When this is combined with a Tax Control Framework for real time fiscal monitoring of transactions.. Theme: Customized DePo Masthead by AutomaĴic. And then we’re actually talking about Taxmarc™. This paves the way towards automatic determination of VAT obligations.SAP. indirect tax functionality and client needs | Tax Management Con. ▶ No Responses Blog at WordPress. they lay the foundation for more efficient business processes and increased productivity. A delivery from a different stock location in a different country or from a different supplier then results in an incorrect VAT determination.