Richard Cornelisse

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Conceptual thinking

In Indirect Tax Automation, Indirect Tax Strategic Plan, Processes and Controls, SAP add on, SAP add on for VAT, SAP for VAT, SAP implementation, SAP review, Technology, VAT automation, VAT for SAP, VAT planning on 15/11/2014 at 3:25 pm

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Every feature developed by Taxmarc™ improves indirect tax performance of SAP in a specific area. For example the time stamped tax code solution prevents that a company ever runs out of tax codes. During our design phase the performance should not only exceed everybody’s expectation but should meet a company’s strict IT policy and procedures around software development & implementation as well.

Our functionality increases workforce efficiency, avoids rework, decreases risk exposures but as well increases visibility and awareness by which the tax function is able to set the right priorities.

As our solutions are in production for many years at listed multinationals we have a proven track record. Those companies are our client references. We are not just telling you what we offer but encourage you to validate.

However, the real strength is that we think ahead of our clients’ objectives for managing indirect tax. During solution design we anticipate that even additional functionality will become available by which all these objectives will be met when all our features work together. An example is our integrated Tax Control Framework and Data Analytics Module.

Our features do not only improve an individual SAP performance issue but synergies are reached when these individual building blocks work together. This could not have been achieved without the individual strength of performance of all our features.

A chain is as strong as its weakest link. We have made certain that all our links are made of the strongest material currently known to man. Only that is what we consider best practice and revolutionary: ‘Nothing more and nothing less’.

All our features developed should meet the following test criteria: excellent performance in individual problem solving, contributing added value to overall functionality when all features operate together, satisfying client needs even beyond indirect tax and meeting the strict IT policies of a company.

Taxmarc™ Booklet

 

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Realizing it all

In Audit Defense, Business Strategy, Indirect Tax Automation, Indirect Tax Strategic Plan, Processes and Controls, SAP add on, SAP add on for VAT, SAP for VAT, SAP implementation, SAP SLO renaming tax codes, VAT automation, VAT for SAP on 15/11/2014 at 1:29 pm

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Our features realize automated VAT determination based on real time data for incoming and outgoing invoices even for the most complex transactions. Because the decision tree of Taxmarc™ is integrated in SAP as part of the Tax Control Framework, SAP is also enhanced with automated VAT controls.

The consistency of the combination of the VAT data is evaluated on actual transactional data. This enables Taxmarc™ to identify real-time when certain transactions are not possible, for instance because a local VAT registration is missing. The integrated SAP controls can either block transactions or store these in an emergency table when considered VAT non compliant. Blocked transactions can be released by the responsible tax person.

Each purchase and sale is checked by an integrated tax control framework that contains up to 75 messages. Each message provides information on why a transaction is accepted or not and is therefore of great management value for the tax function.

Taxmarc™ keeps a logbook – risk register – of all identified inconsistencies. The internal tax function has always insight into the areas for attention through this logbook. This allows tax managers to set the right priorities and take measures timely.

All features are easily managed via the Taxmarc™ cockpit. Through the enhanced condition technique for both sales and purchases – using a maximum of 250 condition records – and features such as time stamped tax codes, automated VIES validation and automated Intrastat reporting functionality, we realize optimum workforce efficiency, low maintenance costs and effective VAT risk management. It contributes to strengthening the relationship with the tax authorities.

Our integrated data analytics feature provides real time insight into the company’s operational business model without any need of manual transaction mapping. The impact of business changes can be determined via simulation with the use of real time data (e.g. cash flow planning).

We have developed a time stamped tax code feature by which a company never runs out of tax codes. The integrated VIES validation feature allows a company to validate VAT numbers in SAP via a batch with the VIES database at any time.

The best way to show where we really provide added value is to answer the next questions:

  • Who can automate the VAT determination in SAP for all incoming and outgoing invoices including most VAT complex transactions on real time data without hardcoding?
  • Who can deliver an integrated tax control framework that monitors all your transactional data in SAP?
  • Who can blueprint your organization immediately without run-time issues?
  • Who facilitates planning also beyond indirect tax without guessing the numbers?
  • Who can make your tax code design permanent and realize that you never run out of tax codes?
  • Who can restructure your tax codes without doing a System Landscape Optimization?
  • Who can run your sales transactions with a maximum of 250 condition records per tax reporting country?
  • Who can realize automated VAT and Intrastat reporting without any manual intervention?
  • Who has their features in production for many years at multinationals?
  • Who has been tested by the Big4?
  • Who has the solution presented to the tax authorities as part of OECD’s enhanced relationships?
  • Who has the solution operational in Europe (30+), Asia (7), African/Middle East (4), Latin America (5) and North America (1)?
  • Who can do this within SAP via a SAP add-on solution: no interface or external software?
  • Who can realize this all with a maximum of only 4 extra customized SAP tables to get our SAP add-on solution(s) up and running?

Taxmarc™ has realized this all.

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Booklet: anticipate what SAP users would want

In Audit Defense, business intelligence, Business Strategy, cash management, financial audit, Indirect Tax Automation, Indirect Tax Strategic Plan, internal audit, liquidity management, Macroeconomic effects of VAT, Processes and Controls, SAP add on, SAP add on for VAT, SAP for VAT, SAP implementation, SAP review, SAP SLO renaming tax codes, System Landscape Optimization, Technology, VAT automation, VAT for SAP, VAT planning on 10/11/2014 at 10:07 am

If full ‘VAT automation of Accounts Receivable (AR) and Accounts Payable (AP)’ and ‘being in control’ are objectives of your organization, it is important to know what exactly makes Standard SAP not functioning optimal from an indirect tax perspective. Only then it is possible to validate whether a company’s objectives can be achieved via upgrading Standard SAP functionality and/or implementing an external tax engine.

Below Booklet “Solving the real problem not a symptom” explains when Standard SAP requires additional VAT functionality, the root cause, the impact of patch up solutions that remediate a symptom and how the real problem is resolved.

It is shown in an easy to read format for both desktop or mobile devices. After ‘Click to read’, the menu bar contains a button for downloading in PDF.

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Direct Download Booklet in PDF

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Standard SAP: VAT relevant transactions from simple to complex

In Indirect Tax Strategic Plan, Processes and Controls, SAP add on, SAP add on for VAT, SAP for VAT, SAP implementation, SAP review, VAT for SAP on 09/11/2014 at 9:37 am

Standard SAP VAT determination logic and functionality do not work for complex dynamic business models.

The root cause is that both Standard SAP and bold-on tax engines exclusively focus on transactions within a single company; it only assesses the underlying individual transactions and fails to link the current transactions to the VAT results of previous transactions.

When more than 2 parties are involved, the VAT treatment depends on the VAT treatment of the prior transactions.

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Automated VAT determination of Accounts Payable (AP)

In Indirect Tax Automation, Indirect Tax Strategic Plan, Processes and Controls, SAP add on, SAP add on for VAT, SAP for VAT, SAP implementation, SAP review, SAP SLO renaming tax codes, System Landscape Optimization, Technology, VAT automation, VAT for SAP on 08/11/2014 at 7:29 pm

Business challenge

The purchase order (PO) and the vendor invoice are the VAT relevant data sources used to determine the VAT treatment of incoming invoices. However, the vendor invoice data is in general not available in SAP. However, in order to automate the VAT determination, it is essential that external information is added in an easy and intelligent way.

In practice, many of the incoming invoices are still processed manually. AP clerks, who are not VAT experts, have to select the correct tax codes and thus determine the VAT treatment and reporting. In order to manage this process, detective controls should be executed to check whether this is done correctly.

This is labor-intensive and poses a major area for VAT errors, such as failing to deduct the correct input VAT in the VAT return. It will therefore be an area of investigation during a tax audit.

When an incorrect VAT result is caused by the incorrect data in the PO, the remediation takes place via updating the PO with correct data and re-processing the related transactions (goods receipt, etc). Such a process causes workforce inefficiencies due to the hidden factory.

Definition of ‘hidden factory’ or ‘hidden operation’ : the rework and cover-ups, the hours and days of wasted time in a company of people who constantly correct mistakes (unnecessary rework). The objective is to make the hidden factory visible (measure/calculate ROI) and as a result, return precious time and money to the business.

The AP clerk often fully relies on the purchase order and is unaware that this purchase order might no longer reflect the actual situation. For example, if the vendor decided to execute the transaction differently from what had been initially agreed upon – the vendor decides to deliver from another country as locally the goods were not in stock.

This causes a gap between data in SAP and the formal invoice (i.e. incorrect use of goods supplier partner function). That gap has to be closed.

Additional complexity arises when the purchase orders relate to services and not to materials or when the VAT is not fully deductible.

What do we offer

The purchase engine combines the information from SAP purchase orders with the VAT relevant information from the purchase invoices, automates the VAT determination and verifies this VAT treatment real-time against the applicable fiscal requirements.

This comes down to a tax control framework for purchases being included. The advantage is that the solution supports invoice processing without the necessity of changing purchase orders retrospectively for VAT reasons only.

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Business challenge: complying with the mandatory SAF-T filing requirements

In Audit Defense, Phenix Consulting, Processes and Controls, SAFT, SAP implementation, SAP review on 31/10/2014 at 9:43 pm

Across the globe many multinational companies are facing challenges in complying with the mandatory SAF-T filing requirements. SAF-T is the OECD’s Standard Audit File for Tax Purposes that is being adopted as common practice for tax administrations and will be the basis for IT-based audit tools to help to combat fraud and tax evasion.

We developed a lean and flexible solution which extracts relevant data directly from SAP® systems and transforms the data into the XML format in compliance with the legal requirements.

We are currently developing a SAF-T cockpit which will be fully integrated with SAP®. It includes individual templates that satisfy the data and format requirements of each country and provides an analytical reporting library to support monitoring controls for finance and tax.

Demo via PowerPoint

Who we are and what we offer

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Phenix Consulting is a joint venture company of LiNKiT Consulting and the KEY Group. This company is based in Amsterdam, Berlin and Cologne and provides tax, financial and control solutions for SAP. Phenix comprises 6 partners and a team of 30 consultants.

Phenix Booklet

Phenix Booklet

Study to quantify and analyse the VAT Gap in the EU-27 Member States 2012

In Audit Defense, EU development, Indirect Tax Strategic Plan on 25/10/2014 at 7:48 am

This report provides estimates of the VAT Gap for 26 EU Member States for 2012, as well as revised estimates for the period 2009-2011. It is a follow-up to the report “Study to quantify and analyse the VAT Gap in the EU-27 Member States”, published in September 2013. This update incorporates the NACE Rev. 2 classification of economic activities into the calculation of the theoretical liability.

The year 2012 saw overall unfavourable economic developments, as the GDP of the European Union shrank by 0.4 percent. These developments contributed to a slowdown of nominal final consumption and of other economic activities that form the basis of the Value Added Tax.

A few countries applied changes to standard or reduced rates, but on the whole the structure of VAT rates was relatively stable compared to the numerous changes in the wake of the onset of the Great Recession in 2008-2009.

For the EU-26 as a whole, VAT revenues grew by slightly over 2 percent, from Euro 904 billion in 2011 to Euro 922 billion in 2012; and the theoretical VAT liability (VTTL) also grew by a similar percentage. The overall VAT Gap, as estimated according to the refined methodology, for the EU-26 saw a slight increase in absolute numbers (of about Euro 6 billion) between 2011 and 2012, to reach Euro 177 billion, but remained essentially stable as a percentage of the overall VTTL, at 16 percent. The estimates for 2009-2011 have been revised because of the switch to NACE-2 classification and refinements in the methodology, and are slightly lower compared to those discussed in the 2013 VAT Gap report.

In 2012, Member States’ estimated VAT Gaps ranged from the low of 5 percent in the Netherlands and Finland, to the high of 44 percent in Romania. The median absolute change in the VAT Gap of the individual Member States from 2011 to 2012 was 1.1 percent, with a number of countries registering considerably higher changes. Overall, 11 Member States decreased their VAT Gap, with the largest improvements noted in Greece, despite the depth of its recession, and Bulgaria. However, 15 Member States saw an increase in the VAT Gap, ranging from virtually nil (e.g., Slovenia) to a substantial deterioration (e.g., Slovakia, Poland).

This report also provides estimates of the Policy Gap for the EU-26. This is an indicator of the additional VAT revenue that a Member State could theoretically collect if it applied uniform taxation to all consumption. Estimates of the Policy Gap confirm the finding that in most countries the loss of revenue compared to an “ideal” system with no reduced rates and no exemptions, is due to a greater extent to policy decisions than to non-compliance and weak enforcement.

2012 Update Report to the Study to quantify and analyse the VAT Gap in the EU-27 Member States

2012 Update Report to the Study to quantify and analyse the VAT Gap in the EU-27 Member States

Getting the most out of standard SAP

In Audit Defense, Business Strategy, Indirect Tax Automation, Indirect Tax Strategic Plan, Processes and Controls, SAP add on, SAP add on for VAT, SAP for VAT, SAP review, SAP SLO renaming tax codes, System Landscape Optimization, VAT automation, VAT for SAP, VAT planning on 25/10/2014 at 7:10 am

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Taxmarc™ provides a SAP VAT  add-on solution that ensures that for every transaction the correct VAT treatment can be determined, adds VAT logic to SAP when standard SAP is not sufficient and is fully integrated in SAP and focused to meet all needs of the (indirect) tax function.

VAT/GST Control framework: becoming a business control tool

In Business Strategy, Indirect Tax Automation, Indirect Tax Strategic Plan, Processes and Controls on 22/10/2014 at 4:01 pm

Written by Ferry Geertman and Sasha Savic

In the articles “VAT Control Framework“, “Auditing your VAT Control Framework” and “Function Effectiveness Toolkit“, an introduction and methods were provided how to set up a control framework and an indirect tax function with the right focus on managing those risks that exceed the company’s risk tolerance.

The ever changing landscape for large corporate taxpayers has pushed the expectations for managing indirect tax obligations to a new level. The research indicates that tax authorities around the globe are becoming ever more vigilant and are looking to reign-in more tax remittances on behalf of often highly indebted governments.

The days of just submitting the VAT or excise return and shelving your files till the next month are well and truly over. The tax authorities have become more aggressive and inquisitive frequently demanding more from taxpayers – examples include scrutinizing the tax numbers, conducting ratio analysis, and performing contemporaneous risk reviews, prior or following the submission of the tax return.

For the Head of Tax and CFO it is about facing new challenges – the increased activity across indirect taxes generally means more time spent on audit issues, away from strategy and tax planning, ultimately can demand more resources and increase of external advisory costs.

The solution is the ‘VAT Control Framework‘ which is increasingly becoming a key defense tool for large corporates enabling them to engage with the tax authorities on the front foot. Coming on the back of the SOX requirements, today’s VAT/GST Control Framework has evolved significantly providing numerous benefits to Tax and Finance functions with very moderate upkeep.

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This might be music-to-the-ears for the cost conscious multinational corporate functions looking for real value-add. We examine in more detail the key success factors for getting the VAT/GST Control Framework right.

  • Demonstrating increased control of tax risks to the audit committee is a key challenge which can be addressed with careful planning and tailoring response to individual circumstances. In practice it is mitigated by targeting control gaps with both detective and preventive controls formalized in monthly/quarterly sign-off document. From a CFO or Head of Control stand point it provides high-degree of assurance around tax and more broadly GL numbers, and facilitates knowledge transfer to the internal audit team.
  • Accuracy of tax data is critical to reduce the likelihood of tax errors and misstatement. Effective Indirect Tax Control Framework will ensure Head of Tax and CFO sign-off of the tax remittances with an added level of certainty having had the assurance that key checks have been performed prior to submission of the tax return. The Framework also ensures there are clearly defined responsibilities between Tax and Finance functions thus avoiding interpretation issues.
  • The key benefits arising for the Tax and Finance functions include reduction in tax authority risk ratings and consistent assessment of tax risk across multiple jurisdictions where the corporate operates. Ultimately it significantly raises the profile and the efficiency of the Tax (and Finance) functions with internal and external stakeholders alike.

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As written above in the article VAT Control Framework we provided narrative examples that relate to management of indirect tax risk areas that matter. Below a further explanation is provided with some flow charts that include roles and responsibilities between the various departments involved.

Cautionary Note: these flow charts are an example only and need to be tailored to a company’s specific circumstances.

The segregation of duties (SOD) can often occur between the core Tax function who approves any tax impacting coding changes and the team performing the compliance activity.

1 Phenix Consulting - Blog Vat control

Master Data controls are key and fully warrant SOX controls as they impact the tax decision tree. The solution here is to ensure formal SOX control is in place for the Indirect Tax Manager to have input in designing & periodically reviewing the appropriate flow charts used of MDM.

2 Phenix Consulting - Blog Vat control

Review by exception of invoices AP is also common and generally materiality is used to filter out the volume

3 Phenix Consulting - Blog Vat control

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SAP add-on: never run out of tax codes

In Indirect Tax Automation, Indirect Tax Strategic Plan, Processes and Controls, SAP add on, SAP add on for VAT, SAP for VAT, SAP SLO renaming tax codes, System Landscape Optimization, Tax News, Technology, VAT automation on 15/09/2014 at 4:02 am

Business Challenge

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.

To our knowledge, SAP has developed a solution with a 4-digit tax code for one company. However, we understand that this SAP 4-digit tax code solution will not be expanded to other customers because of risks concerning the stability and robustness of the solution. This means that multinational companies still have insufficient options when facing issues with the limited number of available tax codes.

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.

Alternative market solutions

The following alternative solutions are available in the market. However, all have considerable drawbacks.

  • Use the special characters ($,/,\,& etc.) for the tax code – even with the extended number of tax codes some companies will be running out of available tax codes and tax codes with these special characters are not user friendly to work with
  • Purchase external tax engine – besides high purchase and maintenance costs external interfaces have to be used, which for certain clients is in conflict with their own IT policy, as the use of standard SAP is preferred
  • Renaming of tax codes (SAP’s System Landscape Optimization projects: SLO) where the existing tax codes are archived and a new tax code design could be created. Such restructuring will however not avoid creating multiple new tax codes in the future when the VAT rate is changed. Companies will face shortages again in the future.

What do we offer?

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