Multi billion Euro companies operate with Taxmarc™ Tax Code Solution already for many years
Many SAP clients have multiple VAT registrations (in 10+ countries), principal structures, complex business model for sales of goods, cross-border, drop shipment, shortage tax codes (use of 900 + SAP tax codes) and centralized functions.
These organizations will face difficulties to solve the shortages of tax codes issue causing not only tax compliance, but commercial issues as well.
SAP developed a CDP solution on a 4 digit tax code. We understand that this SAP 4 digit tax code solution will not be rolled out to other customers because of risks around the stability and robustness of the solution.
This means that multinational companies still have limited options when facing issues with the limited number of available tax codes.
Alternative market solutions
- 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 as external interface have to be used for certain clients it is in conflict with own IT policy as use of standard SAP is preferred
- Renaming of tax codes exercise (SLO projects) – downside is that in the future due to global VAT change increases a company will face shortages again
How can above downsides be avoided?
Taxmarc™ has developed – an integrated SAP solution that uses a time stamped rates for tax codes. As a result the tax code structure will always remain the same. The advantage is that SAP tax codes structure does no longer require changes and that maintenance costs and involvement of IT is reduced significantly.
A single VAT rate change could take (set up, transports across the SAP landscape and test cycles prior to production) about 200 – 300 hours. After implementation this is reduced to 2-3 hours and in order to calculate hard savings the surplus has to be multiplied by the amount of VAT rate changes expected.
How long does this process take within your organization and what will be the amount of annual saving (i.e. Return on Investment period)?
Proven solution: all our Taxmarc™ solutions are ‘implemented’, ‘tested’ and ‘in production’ for many years. This product have been implemented by several listed multinationals and are our client reference for Q&A. One customer has an annual revenue of approximately $36 billion and operations in more than 80 countries.
The solution also covers the important iDoc processes within this type of business with many intercompany transactions.
Renaming exercise of tax codes via System Landscape Optimization
One of SAP’s offerings are SLO (System Landscape Optimization) projects. For indirect tax that could mean a renaming exercise of tax codes – SLO renaming project – to set up a more logical tax code structure in which the different tax categories in each country will have the same meaning.
The result should be: a logical grouping of the various VAT tax codes in all countries. Such logical re-design of the tax code structure allows centralization of functions regarding indirect tax compliance in Shared Services Centers, as well as implementing control measures in an efficient and effective way.
This leads to substantial cost savings and improved indirect tax risk management.
The objectives of SLO projects are:
- Align organizational structures and processes at the system level to meet the needs of corporate restructuring
- Align with best practices and IT strategies to realize data harmonization and process optimization
- Reduce IT complexity and centralize disparate IT solutions
The SAP approach for SLO projects regarding the tax code structure is not the most effective and efficient way. In order to keep the historical audit trail, the old active tax codes are duplicated and renamed often with the use of special characters ($,/,\,& etc.).
That causes not only an increase in tax codes but as well a potential shortage of tax codes when in the future country specific tax procedures are used.
As the company’s objective is a logical tax code structure, the use of these special characters ($,/,\,& etc.) does not meet that objective when investigation of historical audit trail is needed (e.g during a tax audit).
Our Taxmarc ™ approach
Taxmarc™ uses a different approach to perform such SLO renaming exercise of tax codes.
In our method, for the old active tax codes no new tax codes have to be set up as this will also follow the new tax code logic.
That means the renaming is no longer causing an extra increase of tax codes and that both ‘old active tax codes’ as new ‘renamed tax codes’ will follow the same logic and use of special characters ($,/,\,& etc.) is avoided.
Taxmarc ™ Time Stamped designed Tax Codes
In addition to such SLO renaming project, Taxmarc™ has also developed as describes above a separate solution: Time Stamped designed Tax Codes. That is beneficial when a company would like to keep the current logic also in case of new VAT rate changes.
Downside of the SAP SLO renaming tax codes is that in the future due to global VAT rate changes the overall designed logic will no longer apply in all cases and could in certain cases cause a risk of tax code shortages.
The advantage of this ‘Time Stamped’ solution is also that such a VAT rate change can be implemented beforehand, takes no longer than 2 hours max to set up and has thus a quick Return on Investment.