Below is a SAP example, but we are also experienced in other ERP systems (SAP, Oracle, PeopleSoft, JD Edwards, Microsoft Dynamics AX) and tax engines (add-on or bolt-on).


SAP Review - introduction

During a SAP review we verify the proper working of the implemented VAT configuration. Changes in the business model, master data or legislation will have an impact on the implemented VAT configuration.

The SAP review can demonstrate that the VAT configuration must be improved or that additional control measures should be added to the Tax Control Framework. 

The review can also bring errors and risks to light, allowing a more focused data analysis to take place. After the quantification and evaluation of the risks and errors, these are assigned a risk profile in order to be able to test against risk tolerance.



Examples of possible errors in SAP

  • Not making use of the proper partner functions in SAP for a supplier who provides services in multiple countries and invoices VAT locally. Result: the standard VAT calculation generates incorrect results. 
  • Missing/improper VAT registration numbers in customer master data, such that invoicing requirements are not satisfied for cross-border transactions.
  • Master data is adjusted and tested in the test environment, but the changes are not included in the final upload to the production system. 
  • The logic of the tax code structure is disrupted by VAT rate changes, something that could have been prevented using the SAP configuration. 
  • When performing reverse charge bookings, VAT rate changes do not get changed. 
  • For cross-border A-B-C transactions, a VAT mismatch between the VAT on procurement and the VAT on sales arises for party B. 
  • Blocked so-called iDoc (electronic interface documents) because of errors in the OBCD design. Suppliers with invoices in other currencies and the VAT amount in Euro, so that the booked VAT amount is incorrect due to an incorrect exchange rate.
  • Incorrect derivation of VAT registration numbers for cross- border transactions caused by incorrect SAP configuration.

 


What we offer

Depending on the client's requirements, the following VAT- relevant subjects can be analyzed during a ERP review from for example a risk perspective:

  • VAT treatment, correctness and the logic of the tax code structure and attributes such as VAT rate, the defined tolerance percentage when calculating VAT paid, the setting for EU-relevant VAT reporting
  • Incorrect VAT rates and reporting (filing and/or ICL listing)
  • Conditions tables, records and decision tree logic
  • Incorrect VAT treatment/code and returns 
  • The derivation from VAT registration numbers on the invoice of the partner functions used – sold_to, ship to, payer and bill_to
  • Incorrect VAT number on the invoice, no 0% rate possible 
  • VAT code descriptions for invoices
  • Incorrect sales invoices
  • iDoc tables, if applicable
  • Incorrect exchange rates applied

 

For questions please contact us.


 About us


Further detailed information


 Fact sheet SAP review (UK)


 Fact sheet SAP review (German)




Take aways 

Anticipate what users would want

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

What do we like to achieve

  • 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

‘As is’ assessment, actions and business case

  • 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

Risk and reward

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

Technology tools & systems integration

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

Change and project management

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.

Effective communication and teaming

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

Risk: a domino-like effect

With indirect taxes intertwining through the day- to-day operations of a company—raising sales invoices, moving inventory, paying suppliers, collecting cash—indirect tax risk can have a distinct and domino-like effect on the commerciality of an organization.

Tax audits and new technology

More than 80% of businesses are still using spreadsheets to manage their VAT compliance in at least one jurisdiction in which they operate, despite tax authorities around the world investing in better tools.

OECD's Standard Audit File for Tax Purposes

The SAF-T standard, originally created by the OECD (similar as BEPS), is intended to give tax authorities easy access to the relevant data in an easily readable format for both corporate income tax as VAT.

What if there are glitches in your data, input errors, empty fields, awkward descriptions in fields or apparent inconsistencies?

Measurement of performance

Identify the lowest performing indirect tax processes that have the most direct impact on the company’s business and tax objectives. These are then targeted for improvement. Generate and select a set of solutions to improve the performance.

Tax Risk Management

The tax department risk management strategy differentiates between strategic, operational, financial and compliance risks and contains detailed action plans for managing these risks. Managing risk is about making decisions at all levels of an organization, to limit the effect and likelihood of threats happening and to increase the effect and likelihood of opportunities.

Implementation of tax planning

Assess that tax advice given is also correctly implemented:

  • Factual pattern has not change
  • Procedures and risk monitoring functions accordingly
  • Configured in system(s) or manual processes
  • etc.


And impact of changes in business, laws and regulations on implemented tax planning.

Quantify tax risks

In order to quickly gain insight into the level of tax risks (i.e. calculation of the potential assessment), statistical sampling can be used. By selecting a few elements (euros), the reliability of the composition of tax items can be determined to a high degree of certainty.

Wrong use of 0% VAT rate: financial impact

If not correct, the tax authorities might seek to recover tax due from this supplier via a levy of a tax assessment. If the applicable VAT rate is 25%, the tax assessment will be 25/125 of the consideration charged. This assessment will be increased with interest and penalties to determine the total tax burden.

Focus on effective solutions

In order to solve a problem, we also have to identify it completely, and not just settle for the most apparent symptom of that problem.

Symptom of a bigger issue or solve the real problem

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. 

Analyze defects

Define the causes of defects, measure those defects, and analyze them so that they can be reduced.

Root cause analysis

  • How did the results happen?
  • Why did they happen?
  • What specifically caused them to happen?

Verify the implemented VAT configuration

An ERP review should highlight where the VAT configuration could be improved or if additional control measures should be added to the business’s Tax Control Framework.

VAT / GST under management

In order to get senior management's buy-in for change and accept indirect tax priorities it is important that proper visibility exist of the amount of VAT/GST under management in the key jurisdictions.

Reputational risks

To avoid any reputation damage and negative publicity around taxes, through building a tax control framework.

Keep a logbook – risk register – of all identified inconsistencies

The internal tax function should always have insight into the areas for attention through this logbook. The risk register should contain the following labels: number, name of the risk, risk definition, cause for the risk to occur, risk category and the risk owner.

External audit and internal audit changes to be expected?

  • Apple’s and Coca Cola’s tax assessment might exceed $2,5 bn
  • Material and reputational risk
  • Will ‘tax assurance’ mandatory be reviewed by External Auditors
  • What information will be requested?
  • What will be the impact on Internal Audit?
  • How will review likely take place (e.g. Big Data discussions)
  • What is the overlap with tax authorities tax audit approach?

Internal audit reviews

Ascertain that unacceptable but existing tax risks will be identified.