SAP add-on solution for VAT Information Exchange System to validate correctness of VAT numbers (2020)

'The VIES validation add-on allows a company to validate VAT numbers in SAP via a batch with the VIES database at any time'.

From 1 January 2020, four Quick Fixes will be introduced to simplify and harmonize the EU VAT rules of intra-EU supplies of goods, that will address the vital importance of VAT number check again.

Local tax authorities often raise VAT assessments because businesses cannot meet local requirements to prove the use of the zero-rate. The Quick Fixes offer an opportunity to implement a harmonized process to collect the proof of dispatch across all EU Member States. Obtaining the customer’s VAT number is a mandatory formal requirement to be able to zero- rate intra-EU supplies of goods. 

From a VAT perspective, this is a material tax risk area as the 0% VAT rate might have incorrectly been applied for sales to customers with an invalid VAT number:

If the customer’s VAT number is missing, the supplier needs to charge local VAT at either standard or reduced rate. 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.

Businesses, therefore, should make sure that proper processes concerning customer’s VAT numbers. To this end, the European Commission has provided an online database, VAT Information Exchange System (VIES) for the validation of VAT numbers or cross border transactions on goods or services.

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In Standard SAP it is possible to check the syntax – the format of the VAT number, including the number of positions. However, it is not possible to check whether the VAT number is valid. Standard SAP does not have an interface with the VIES database. With transaction ZTMVIES such an interface is realized with the VIES database.


What do we offer

Our add-on can automatically check the VAT numbers when a VAT number is added to the customer master data. A real-time link to VIES VAT number validation website is made to validate the entered VAT number.

VAT numbers can expire or change due to changes in the legal structure of customers. It is, therefore, again, important to periodically check the validity of the VAT numbers.
With our add-on, it is possible to periodically run the validation of VAT numbers report as detective control within the

Tax Control Framework and as part of master data cleansing/maintenance. This batch job can be done in a fully automated process with a scheduled batch job, for example, last Sunday of the month. That batch job will validate all VAT numbers in customer master data.

'With our add-on it is possible to periodically run the validation of VAT numbers report as detective control within the Tax Control Framework'


What is an SAP add-on?

An SAP add-on enhances standard SAP itself.

Add-on components are extra functionalities that do not come with the main SAP product. Different organizations have different requirements. SAP has recognized that and facilitated that additional functionality can be added and that such functionality as a component can be integrated with standard SAP.

An add-on is permitted by SAP – the code 'ABAP' is written and transported where SAP allows it. That means these add-on components sit above the core and access the same dictionary objects or repository objects and perform the required functionality. It contains custom authorization objects according to SAP standards.

SAP add-on solutions are, therefore, without an external interface or external software and can be implemented with minor or no SAP impact in any other area. An SAP add-on does not change the programming code of SAP. As a result, SAP upgrades do not lead to any problems, and maintenance is straightforward.

Additional functionality is added to standard SAP:

'User-friendly, manageable, scalable, extendable, upgradeable, reliable, sustainable, SAP integrated, VAT compliant, audit trail'


Take aways 

Formal support and active involvement of senior management

Optimum process improvement or business transformations will not likely be realized by the sum of individual independent efforts.The risk is that individually everybody knows what needs to be done within his or her own area of expertise, but what is lacking is overall direction and thus progress.

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.

Set up a project plan

  • Set up a project charter that will take effect preferable during feasibility but ultimately during design
  • Write a business case and problem statement
  • Define scope of the project
  • Define objectives and goals of the project
  • Involve stakeholders and define priorities
  • Set measurable milestones
  • Ensure that the right sponsors provide buy-in.
  • Identify (project) risks and how to manage them
  • Jointly validate and refine the project plan and develop a roadmap to success
  • Hold regular meeting to track progress of the various work streams