If full ‘VAT automation of AP and AR and being in control’ is the aim of your organization, it is important to understand what exactly makes standard SAP not function optimal from an Indirect Tax perspective. Only then it is possible to validate whether company’s objectives can be achieved with upgrading standard SAP functionality and/or implementing a tax engine.
In so many instances the current problem turns out to be nothing more than a symptom of something far bigger. With an easy fix we will probably not solve the real problem at all.
In order to fix a problem, we have to first understand the root cause thoroughly. We have to accept the possibility that the problem involves far more than what is immediately apparent and will require more work than is estimated at the beginning.
The standard SAP logic and functionality for VAT determination does not work for complex dynamic business models (e.g. Principal-Toller-Agent model) with for example multiple VAT registrations, pick up transactions, drop shipments and chain transactions between legal entities (ABC / ABCD scenarios).
- The reason is that both standard SAP as bold-on tax engines focus exclusively on transactions within a single company; it only evaluates the underlying individual transactions and fails to link the current transactions to the VAT results of previous transactions.
- As a consequence, companies with VAT registrations in different countries cannot automatically comply with all VAT obligations.
- Tax logic should in those circumstance be based on the complete end-2-end scenario and the country specific legal requirements.
- In case the transaction involves multiple companies on the same SAP platform the VAT Determination must be done across the different SAP company codes, at SAP client level.
- Additional functionality need to be added to standard SAP to give it its Birds Eye overview.
- That is the real problem that Taxmarc™ is solving in order to remediate all the symptoms in a structured way.
Because all VAT relevant data of all legal entities are gathered and used in the decision tree of Taxmarc™, SAP can now be equipped with automated VAT controls via evaluation of the consistency of the combination of VAT data and identifying real-time when certain transactions are not possible, for instance because a local VAT registration is missing.
Taxmarc™ does not patch up a symptom but solves the real problem. We should not limit our options to what we believe today’s solutions could provide more quickly or more cheaply.
Turn-key solutions fix only a symptom
There are in the market other SAP add-on solutions offered as a turn-key solution to overcome the pitfalls and shortcomings within SAP’s VAT determination and reporting logic. After signing a SOW such turn-key solutions are implemented via simply handing over an USB stick to the company’s IT department with the request to load the software into SAP.
That would mean that the product is designed as a Plug And Play solution and has been developed as an One Size Fits All which probably qualifies more as a patch up solution as it is focused only on remediating some symptoms but does not meet the ‘being in control’ aim set. That is not the Taxmarc™ approach.
Such way of operating would be in conflict with reality, not in line with our philosophy and never be qualifying as best practice. Every multinational company has not only their own deviations from a supply chain perspective (e.g. 4 parties in the chain) but would have a different SAP set up with various ‘homegrown’ practical work-around’s as well. There are not only generic VAT rules and risks but also specific (industry) VAT rules and risks.
We have tuned up standard SAP (i.e. given it extra brain power) to realize extra indirect tax performance.
The result is that the VAT treatment of all incoming and outgoing invoices is automatically determined on real time data for also the most complex transactions and it includes features to optimize workforce efficiency (i.e. Taxmarc™ time stamped tax codes).
Continuous Controls Monitoring and Planning
With Taxmarc™ Data Analytics all relevant VAT data are immediately available without any run-time issues as the VAT data are separately stored in the SAP database. It provides a Continuous Controls Monitoring tool for all stakeholders, also beyond indirect tax (e.g. export control, transfer pricing), and realizes real time access to the company’s blue print without any need of manual transaction mapping.
This contributes added value to company’s business objectives. The impact of business changes can be determined via simulation with the use of real time data (e.g. cash flow planning) and facilitates in better management of the executives own KPIs.
Apple and orange comparison
Taxmarc™ Tax Engine is our premium package. In order to facilitate the client needs or simply to avoid apple and orange comparison with our competitors of turn-key solutions, we have launched Taxmarc™ Basic (standard package) and Taxmarc™ Add-on (start up package).
The difference is that the features of these packages are built on the ‘proven Taxmarc™ platform and adding additional features or even upgrade to the full Taxmarc™ Tax Engine is possible at a later stage.
Last but not least
A company’s indirect tax objectives go beyond Europe and standardized global processes and controls are important from an indirect tax management perspective.
Although the VAT rules are most complicated in the EU the SAP VAT solution should not be limited to only EU countries. Taxmarc™ is already running outside the EU in the following countries: China, Chile, Israel, Japan, Malaysia, Mexico, Norway, Russia, Singapore, South Korea, Switzerland, Taiwan and the US. All new VAT or GST countries can easily be added.
The US is an example that Taxmarc™ can handle other than VAT or GST countries.
Our company statement is ‘promise only what you can deliver and deliver everything you promise’. All our solutions are ‘implemented’, ‘tested’ and ‘in production’ at various listed multinationals.
The maximum VAT performance of SAP
Where Taxmarc™ differentiates
Taxmarc™ Tax Control Framework
Real time access to your company’s blue print
VIES ID check integrated in SAP
The best SAP Add-on solution for VAT
Tax Codes with validity dates
SLO renaming tax code exercise
Taxmarc™: Intrastat Module in SAP