Richard Cornelisse

Unchanged tax code structure made possible

In Audit Defense, Benchmark, Business Strategy, EU development, Indirect Tax Strategic Plan, Processes and Controls, Technology on 09/02/2013 at 4:29 pm

Taxmarc™ SAP solution2

In SAP is it necessary to create new tax codes in the event of VAT rate changes. Due to the many VAT rate changes in different European countries, many new tax codes had to be created.

This usually concerns extensive projects that include the adjustment of many tables in SAP. As a tax code in SAP consists of 2 characters, the number of possible tax codes is limited.

Numerous multinational companies use very many different tax codes and risk facing a “shortage” of necessary tax codes. They have asked SAP for a solution over the last couple of years, but to date, SAP hasn’t complied with the request, which leaves companies with the 2 character tax codes and the many necessary modifications in SAP in the event of VAT rate changes.

Beside the new tax codes, all VAT condition tables must also be evaluated and updated in standard SAP. In addition, interfaces, VAT returns, templates of reports and work instructions for AP must, inter alia, be adjusted. Taxmarc™ offers the solution for this problem without changing the standard functionality of SAP. In the event of VAT rate changes, the actual VAT percentage only needs to be added and new tax codes are no longer necessary.

The name and description of the tax code in de SAP pricing procedure remain the same; only the VAT rate changes in time. With this, the solution enables a substantial reduction of the working hours that are spent on maintenance. Moreover, the centralization of local compliance functions is possible in an efficient and effective way (Shared Services Centers).

Case study – logic of tax code structure

De description of tax codes does not change in the event of rate changes.

Example of a rate change of the standard VAT rate:

Country I increase (1x) Netherlands
Country II increase (2x) Spain
Country III no increase Belgium 

Overview of tax codes in the event of rate changes: real changes

All started with A1 for standard rate

 B1  BE STANDARD RATE 0.21 1/01/96 
 EN  BE STANDARD RATE 0.21 1/09/12
 NG  NL STANDARD RATE 0.21 1/10/12
 EF  ES STANDARD RATE 0.18 1/07/10
 E1  ES STANDARD RATE 0.16 1/01/95
 N1  NL STANDARD RATE 0.19 1/01/01

If BE company is also registered in The Netherlands (and has a fixed establishment), then company BE01 has besides B1 BE standard 21 percent also for instance a code N1 for The Netherlands standard 19 percent, which has been changed to NE NL standard 21 percent in October 2012.

As a consequence, countries will have different SAP names for standard VAT rates.

This is to the detriment of the transparency and logic, which makes that more control is required to monitor risks and changes. Since October 2012 the following tax codes are applicable for the standard VAT rate:

 Belgium   B1  (original) 
 Netherlands   NG  
 Spain   EN

With Taxmarc™ the original name of the VAT rate (tax code) is maintained after rate changes.

Moreover, a tax code is unique within the client:

Belgium     B1 
Netherlands    N1 
Spain    E1 

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