Roadmap to tax function effectiveness

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Standard Audit File for Tax solution

Standard Audit File for Tax solution

9 April 2014

The SAF-T standard, originally created by the OECD, is intended to give tax authorities easy access to the relevant data in an easily readable format. This leads to much more efficient and effective tax inspections.

The SAF-T standard, originally created by the OECD, is intended to give tax authorities easy access to the relevant data in an easily readable format. This leads to much more efficient and effective tax inspections.The OECD’s Committee on Fiscal Affairs (CFA) developed a set of guidance on business accounting system data requirements for tax audit purposes, and associated practical implementation issues for software developers.

The set of guidance was prepared by a task group consisting of representatives of national revenue authorities, the Business Applications Software Developers Association (BASDA), accounting bodies, and other interested parties.

The standard, originally created by the OECD, is intended to give tax auditors easy access to the relevant data in an easily readable format. This leads to much more efficient and effective tax inspections.

The aims of the guidance are to simplify tax compliance and tax audit requirements as they relate to information required for tax purposes from business and accounting systems.

This guidance should encourage voluntary compliance by businesses that will also add to profitability by encouraging better internal control procedures. The guidance should also help promote compliance with new legislation on accounting standards such as Sarbanes Oxley and IFRS (International Financial Reporting Standards).

The application of standards through software development also provides both public and private auditors with a reference point. The legal requirements of the file are in line with the obligation of using certified billing and logistic software that prevent changes on documents already issued.

Submit on mandatory basis billing data and logistic information on a monthly basis

The Standard Audit File for Tax Purposes (SAF-T) became obligatory for entities with head office or a permanent establishment liable to Corporate Income Tax in Portugal in 2008, with the objective of making tax inspection more efficient and reducing the effort. The latest development is the introduction of a new obligation in 2013: Taxpayers now have to submit billing data and logistic information on a monthly basis.

This is what causes problems for many companies: The amount of data is large, and the extraction too complicated for a monthly submission of SAF-T files.

"SAF-T: a global trend

Besides Portugal similar obligations exist already in Austria, Canada France, (voluntary basis), Luxembourg and Singapore. In Belgium, Croatia, Finland, Germany, Lithuania, Malta, Spain, Slovak Republic, Slovenia, and UK discussions on SAF-T are already taking place. Countries like Sweden and Netherlands have their own e-audit file standard.

Somehow related to SAF-T is the new mandatory electronic Tax Balance sheet requirement in Germany. From January 1, 2014 it is mandatory to send Tax Balances electronically. See also our eBilanz-Cockpit for Germany: our integrated SAP solution.

SAP's own solution

"Not flexible, response time to change low and impact on IT resources to implement

It is possible to use standard SAP for creating the required report but as you might know it is a very complicated change in SAP (more than 100 OSS notes) that will require a lot of IT resources.

SAP own solution is in practice often not considered flexible enough when it relates to response time on new law changes when new or additional requirements are issued.

That means that any solution should have the followings benefits to contribute value:

  • Cycle time re changes in short periode of time (e.g. one week including testing)
  • Reduction in needed IT resources
  • Reduced impact on ERP system and test cyclesEstablish effective workforce

 

KEY Group's ERP independent SAF-T solution

"ERP system independent solution when multiple legacy systems are used

Based on OECD requirement we developed a solution that can combine data from different sources (i.e. SAP, Oracle and Sabrix).

This solution is beneficial in case multiple legacy systems and can be easy tailored to country specific requirements.

It runs automatically within either ACL or Access and manual intervention is no longer needed as it is a fully automated process without data manipulation. The output will be a correct SAFT-XML.

Integrated SAP solution: for SAP users only

"In development Standard Audit File Cockpit for SAP

ERP independent SAF-T solution is used as prototype to develop an easy-to-use and lean SAF-T cockpit solution for SAP with country specific flexibility. This solution is currently built in SAP and will be able to generate automatically based on the specific country's legal requirements (e.g. every month and output) the mandatory SAF T files that need to be reported to the tax authorities. Besides that - as legal requirements might differentiate - our solution will have the necessary flexibilities.

The solution focuses on master data and transaction data in SAP, extracts the required data from several tables and is flexible enough to allow country- or company-specific adaptations (customizing).

The output is an XML-file with all relevant data as required by the SAF-T standard or an MS Excel / Access file that can easily be converted into XML. That makes roll out to other countries an efficient and effective process.

Therefore, a user-friendly solution for creating the monthly SAF-T files would be of great added value if the objective of the organization is an effective workforce and prefer in SAP automated processes with no manual intervention.

Full ERP Integration

  • The SAF-Cockpit is fully integrated into SAP®, all SAF-relevant data is directly extracted out of SAP-tables and is brought into the required SAF reports
  • Only one single transaction easily guides users to the creation of the reports
  • No interfaces or external data ‚Ä®manipulations required
  • Full integration of SAP security ‚Ä®features (e.g. roles, change logs)

 

 

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Take aways 

We combine technical knowledge with industry understanding and knowhow of technologically advanced tools and methodologies available in the market or developed by ourselves.

  • Focus on tax processes that could be improved
    • Manual process: same data requests are made by different stakeholders
  • As Is assessment
  • Anticipate future changes and the data needed
    • What are tax trends?
    • What is happening locally and what should be considered across jurisdictions where you operate?
    • Anticipate new stakeholders and their data needs or requests (internal and external)
  • Define scope and actions for short, mid and long term
  • Write business case for change
  • Realize sponsorship for implementation
  • What tax data is requested and by whom?
  • What tax process can be improved and what can be automated?
    • CIT, VAT, tax data warehouse
  • What is the Return on Investment?
    • Hard saving: process improvement
    • Meeting (new) tax requirement
  • What systems are in use: SAP, Oracle, etc
    • By which entities?
  • How many end-use computing tools (e.g. excel spreadsheet) do we have?
  • How do we avoid an ad-hoc solution?
    • Understand the bigger picture
    • Real problem and not the symptom

Technology-related tax risk: understand and address the potential harms and benefits of (new) technology.

Ascertaining proper IT support for ensuring efficient, timely and reliable reporting.

VAT should be considered in every aspect of the process, from concept through completion and beyond. Managing by design — looking at any process or transaction from end to end and factoring in all the requirements and controls essential to designing and optimizing a compliant VAT process.

We speak the language of the business and IT and no translation is needed.