SAP S/4HANA for Tax
challenges & opportunities.
The tax department often faces various challenges related to processes
and the quality and availability of tax-relevant data in the SAP ERP system:
Complex processes
Tax processes can be extremely challenging due to the complexity of tax laws and regulations in different countries and regions. The tax department must ensure that all tax-related processes are carried out correctly, which requires time and resources.
Manual data entry
Manual entry and processing of tax-related data can be error-prone and lead to inconsistencies in reports. This can lead to problems with tax returns and reporting.
Data silos
In some cases, tax-related data may be isolated in different departments and systems, making it difficult to consolidate and access the information you need.
Deferred access
If tax-relevant data is not available in real time, this can lead to delays in reporting and affect the tax department's ability to react quickly to changes.
Corrupt data
If tax-related data is not available in real time, it can cause reporting delays and affect the tax department's ability to respond quickly to changes.
Complex tax calculations
Tax calculations can be extremely complex due to various tax rules and regulations. It can be difficult to include all relevant factors in the calculations while ensuring compliance.
Integration of changes
When tax regulations change, it is important that these changes are implemented quickly and correctly in the SAP systems. Inadequate integration of changes can lead to errors and compliance risks.
Automation
Insufficient automation of tax processes can lead to time-consuming manual tasks and reduce the efficiency of the tax department.
To overcome these challenges, it is important that companies invest in modern technologies and tools that automate processes, improve integration and increase data quality. By using solutions like SAP S/4HANA, companies can improve the efficiency and accuracy of tax processes and promote informed decision-making in the tax department. A well-integrated and automated SAP landscape can help address tax department challenges and ensure compliance.
our advice.
DO WHAT YOU LOVE.
Our consulting services focus on identifying, defining and implementing the relevant tax requirements for your SAP systems.
We attach particular importance to the optimization of the process steps:
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data request
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Customization
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processes
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reporting
Whether you are implementing a SAP S/4HANA transformation or updating (refreshing) your existing SAP/ERP systems, our team is at your disposal.
Our comprehensive services include the conception of business blueprints, global and local templates as well as the evaluation of the technical implementation and services.
We support you during the implementation phase and accompany the test management including training.
Trust in our expertise to integrate tax processes into your SAP landscape and thus increase your business efficiency. Contact us and discover how we can support you in the successful implementation of your goals.
Article SAP S/4TAX
from Rethinking 1/2023.
Retroperspektive SAP S/4TAX
by Stephanie Henseler
Article Plastic Tax
from Rethinking 5/2023.
Challenge plastic tax
by Tim Nowroth
fields of play.
Value Added TaxSales tax must be considered as a transactional tax in all relevant business processes. In SAP S/4HANA, sales tax processes can be better anchored in the operational business, data quality can be improved, and data granularity can be increased. Thus, the entire sales tax end-to-end process can be supported. Sales tax determination is mapped on the basis of the relevant sales tax business transactions. The definition and mapping of the relevant sales tax-related facts in SAP (business transaction matrix) are therefore the basis of an implementation project and should be designed accordingly. A tax determination based on such a business transaction matrix makes it easier to adjust system settings in the future and to achieve a precisely fitting tax determination in the current SAP S/4HANA system. In this way, data quality and granularity are ensured so that the sales tax reporting and reporting processes can be implemented as automatically and standardized as possible. Relevant topics here include: Tax code concepts, decision regarding available functionalities in SAP S/4 HANA (tax reporting date, plants abroad), business partner concept, material master data, invoicing, reporting, etc.
Direct taxesSAP S/4HANA can also set the basis for highly automated income tax reporting and mapping of the reporting processes for direct taxes. Thus, the tax function can make a corresponding contribution to a data-based acting tax function via the integration of the requirements resulting from this. In the area of direct taxes, SAP can help support the following activities and tasks: - Supporting the preparation of annual financial statements as part of tax reporting - Fulfilling tax declaration obligations (submission of corporate and trade tax returns including tax balance sheets in electronic form) - Managing tax audits (BP) - Monitoring income tax risks as part of tax compliance management through process-integrated/ERP-based controls - Fulfilling tax withholding obligations in ongoing business operations Relevant topics here include: Chart of Account, account settings (A-segment, B-segment), ledger concept (parallel / extension ledger, tax balance sheet, tax tagging etc.).
Transfer PricingThe Universal Journal in SAP S/4HANA combines all relevant transactional data from Finance and Controlling in a common transaction data table as a central data pool. The tight integration of FI and CO can help operationalize transfer pricing. Data analysis and data visualization support reporting obligations such as country-by-country reporting and transfer pricing documentation (e.g., to create transaction matrices). The integration of transfer pricing requirements with SAP S/4HANA can thus support the transfer pricing lifecycle. In addition to transactional accounting data, company master data is also relevant for this purpose. Relevant topics here include: Business partner concept, maintenance of trading partner as a central parameter of the master data (VBUND), chart of accounts, tax tagging, identification of additional data fields for clustering the transactional data, etc.
Withholding TaxThe extended withholding tax functionality in SAP supports the process-related requirements of withholding tax in the company. With Extended Withholding Tax, both credit-side and debit-side withholding tax can be mapped. The main tasks that are processed in the area of withholding tax, e.g. on the inbound side, in the business processes (essentially within the procure-to-pay processes) initially include the assessment of facts for any withholding tax deduction obligations, in order to be able to derive the correct tax determination in SAP S/4HANA from this with the selection of the correct withholding tax types or withholding tax codes (tax determination). Based on this, the data available in SAP S/4HANA can be queried for the tax reporting process and the notifications for withholding tax can be created, checked and finalized for transmission to the tax authorities and at the same time the tax certificates for the creditors can be issued. In addition, the functionality is also used for the procedural mapping of construction withholding tax and tax havens (tax withholding for black list countries). Relevant topics here include: Activation of the extended withholding tax functionality, business partner concept, process-related requirements for the P2P process, maintenance of materials and exemption certificates (validities), etc.
Pillar 2The requirements of Pillar 2 are intended to ensure a global minimum taxation of all corporate groups with annual sales of at least EUR 750 million. The aim of the implementation is thus to limit international tax competition and consequently to create extended tax justice. The Global Anti-Base Erosion (GloBE) Rules play an important role in this. The GloBE Rules ensure that large multinational companies pay a minimum level of tax on the income they generate. Within SAP S/4HANA, it must therefore also be ensured that the requirements resulting from Pillar 2 are taken into account and implemented. Here, basic settings / requirements within SAP Core must be taken into account (data quality and granularity), and in addition, solutions such as SAP Analytics Cloud (SAC) and/or SAP Profitability and Performance Management (PaPM) must be validated.
Plastic TaxA new levy has come to the attention of tax departments in the form of the plastic tax. A plastic tax is a tax or levy imposed on the manufacture, sale or use of plastic products. The main goal of such a tax is to reduce the consumption of plastic products and provide incentives for greener alternatives. Plastic taxes are often used as tools to address environmental issues related to plastic waste and pollution of oceans and other ecosystems. The exact design of a plastic tax can vary from country to country. In some cases, taxes are levied on specific plastic products such as single-use plastic bags, plastic bottles or packaging. The amount of the tax can also vary and can be based on either the weight, volume or retail price of the plastic products. However, with regard to the plastic tax, the challenge for the tax department is somewhat more complex. The information from the accounting department is only of partial help here. In addition, there is a lack of cross-border harmonization of the plastic tax. The following information is needed for standardization: - Identification of the relevant plastic components in the master data and bills of materials - Weight of the relevant plastic components - Quantity of plastic components placed on the market in the respective country There are different ways to implement the requirements within SAP. In addition to SAP Core, there are already special SAP solutions for mapping the requirements - SAP Recycling Administration (SAP REA) and SAP Responsible Design and Production (SAP RDP). The solutions provide support in particular for: - Mapping of relevant master data - articles, packaging, fractions, single use plastic, recycled plastic, exceptions, etc. - Possibility of data integration non-SAP systems - consideration of relevant business transactions, i.e. production and import, exclusion export with integration to SAP Sales, Purchasing, Materials Management. - Support of legal reporting obligations - integration with SAP modules: SD Pricing, SAP CO Controlling and FI Finance.
SAP Document and Reporting ComplianceSAP Document and Reporting Compliance (SAP DRC for short) replaced Advanced Compliance Reporting (ACR) as part of DRC. SAP DRC ensures tax reporting requirements and external reporting obligations. SAP provides support in the form of customized, legally compliant reports - with a view to the applicable legal situation in each case (taking into account a development roadmap from SAP). SAP DRC provides companies with a comprehensive solution for compliance reporting. It provides a centralized solution for meeting all types of legal requirements, from real-time electronic business documents to legally required reports. Thus, SAP DRC can be used as a single point of truth for global reporting obligations. Especially against the background of standardized and automated reporting requirements and the upcoming changes and new obligations from the new ViDA efforts (VAT in the digital age), centralized reporting platforms become more and more important. We support the validation of SAP DRC (technical, functional, country coverage) and the implementation including testing. For the successful use of SAP DRC it is essential to think about the tax requirements within the SAP S/4HANA project in the core and to ensure the implementation (e.g. correct VAT determination in SAP S/4HANA, withholding tax function etc.).
Business Process Management (Tax CMS)As a basis for the SAP S/4HANA transformations, all relevant operational processes are recorded (target definition) and mapped using standardized documentation methods. The Business Process Model and Notation (BPMN) notation language is mostly used here. The processes are structured within a process house. The basis of this process house is the so-called Business Process List, which specifies the structure and hierarchy of the processes. Within the scope of SAP S/4HANA projects, processes are mostly included in the level of detail Level 1 to Level 3 (in some cases also up to Level 5). The tax aspects are found in two different "categories" in this context. On the one hand, the tax reporting processes (e.g. e-balance sheet, advance VAT return, recapitulative statement, transfer pricing documentation, etc.) are anchored within Record-2-Report. On the other hand, operational business processes also have tax implications (e.g. tax determination within Purchase-2-Pay or Order-2-Cash). Consequently, it must be ensured from a tax perspective that the operational processes are also screened and checked for tax relevance (tax tagging of processes). These processes should also be validated in terms of content in order to store the tax input within the BPMN processes. This is the only way to ensure that the overall project is informed about the relevant tax parameters and requirements and that the tax department is also taken into account in the workshop planning for these processes. In the end, the process documentation provides a perfect foundation for a procedural Tax Compliance Management System (Tax CMS). Since the SAP project documents all relevant business processes, these processes can thus also be used for the Tax CMS. Of course, care must be taken here to determine the extent to which the level of process documentation (i.e., the defined level of detail) is sufficient for Tax CMS purposes. If necessary, further information or deeper process levels are relevant here, which would have to be created separately for these purposes.
ReportingSAP offers users new reporting options. SAP S/4HANA invites departments to map their reporting requirements in SAP standard functionalities. SAP Analytics Cloud or SAP Profitability and Performance Management can be mentioned here as examples. It therefore makes sense to ask at the beginning of the SAP S/4HANA transformation in the overall project what the reporting strategy of the entire company will look like in the future. Taking these framework parameters into account, tax requirements can then also be thought through and designed as well as implemented with regard to possible use cases for these reporting solutions. We are happy to support you in the definition and validation of use cases as well as in the presentation of individual solutions in the tax area.
Processes and DocumentationSAP S/4HANA transformation follows agile project methodologies (agile project management). In this process, functional requirements are usually addressed to the overall project via individual tickets / user stories and implemented and tested accordingly. To a certain extent, there are also functional requirement documents and the definition of mandatory basics - so-called Key Design Documents (KDD). In most SAP S/4HANA projects, however, there is a lack of sufficiently in-depth documentation of tax processes and system settings from a tax perspective. This is particularly relevant because these tax system settings must be documented accordingly as part of a process documentation in accordance with GoBD (principles for the proper keeping and storage of books, records and documents in electronic form). For this reason, it is important to create and maintain a central tax document (Business Blueprint Tax) by combining all documentation components already completed from the SAP S/4HANA transformation and the implementation project and supplementing them as necessary (fit gap). The relevant tax processes should also be part of the documentation (not only the Record 2 Report processes but also the operational processes with tax relevance). This so-called Business Blueprint must then be continuously maintained and kept up to date. It is therefore an integral part of the maintenance/update and requirements processes, even after the initial transformation project.
