Checklist for VAT Rate Changes in SAP _ Tax Management Consultancy

RICHARD CORNELISSE

Tax Management Consultancy

ANALYSIS, BUDGET SHORTAGE, BUSINESS PROCESS, CATEGORY M, CATEGORY MS,

CATEGORY V, CHANGE, CONDITION RECORDS, CONDITION TABLE, EDI, ENTERPRISE

RESOURCE PLANNING, ERS, FINANCIAL CRISIS, FTXP, GL ACCOUNT, GLOBAL TREND,

HEADER, HR SYSTEM, IDOC MAPPING TABLE, IDOCS, IMPLEMENTATION COSTS, INTRA

EU ACQUISITION, INTRASTAT REPORTS, MAINTENANCE, MEK3, ML53, MWST, NEW TAX

CODE STRUCTURE, PO, POSTING, PURCHASE, PURCHASE ORDER, PURCHASE PROCESS,

REAL ESTATE FUNCTIONALITY, RECORD, REDUCTION, REV-TRACK, REVERSE CHARGE,

RFUMS, SALES SYSTEM, SAP, SAP AG, SAP EDI, SELF-BILLING, STANDARD, STANDARD

TEXT TABLE, T076M, TAX LAW, TAX REVENUE, TAX-PROCEDURES, TAXMARC, TCODE

SO10, UPLOAD, VALUE-ADDED TAX, VAT, VAT CODE, VAT CODE MAPPING, VAT RATE,

VAT REGISTERED, VAT REPORTING, VK13, VLOOKUP, WEBSHOP SYSTEM, WORKING

HOURS, ZVST

Checklist for VAT rate changes in SAP

In Indirect Tax Strategic Plan, Processes and Controls on 04/03/2013 at 12:33 pm

By Robbert Hoogeveen, CFO of the KEY Group and

Director Technology of Taxmarc

(hp://richardcornelisse.les.wordpress.com/2012/09/robbert_linkedin.jpg)There is

a global trend toward increasing VAT rates and broadening the grounds for

charging VAT. Governments increase their tax revenues in this way as a means of

combating increasing budget shortages due to the nancial crisis and/or for

nancing the reduction of direct taxes (corporate tax, income tax, etc.).

Numerous multinational companies use very many dierent tax codes and risk

facing a shortage of necessary tax codes. Companies face bolenecks with SAPs

2 character tax codes and the many necessary modications in SAP in the event of

VAT rate changes.

It seems therefore a straightforward maer, however in practice a considerable amount of activities

are required to get this properly implemented in SAP.

Checklist for VAT rate changes in SAP | Tax Management Consultancy http://richardcornelisse.com/2013/03/04/checklist-for-vat-rate-changes-...

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The reason is that VAT codes in SAP are not set-up with validity dates and therefore for every VAT

rate change a new VAT code has to be created. Due to the complexity in SAP, the creation of a new

code is just the starting point to get SAP up and running.

Below you nd a non-exhaustive list of required activities in case of VAT rate changes. It depends on

the current conguration of VAT functionality whether all activities listed below are required. The

opposite is also possible that more activities are necessary.

Create a Rev-Track that will capture all required changes in SAP1.

Dene all involved stakeholders within the Business, Tax and IT-Support and set up periodic call

to get all parties aligned.

2.

Analyse the existing VAT codes and identify which new tax codes need to be created.3.

Newly created tax codes with the new rates (FTXP) are not only necessary for local transactions

where the new rate will be applicable but also for purchases when the reverse charge calculation

is applicable (e.g. Intra EU acquisitions). An additional check needs to be performed whether

foreign VAT registered companies also use similar VAT codes.

4.

Check account determination seings and the use of new VAT codes in other companies/tax-

procedures in order to avoid incorrect postings on GL accounts after implementation.

5.

Check all interfaces that send VAT codes/ For example feeder systems such as point of sales

systems, webshop systems, HR systems. Contact responsible sta for feeder systems and

determine which new VAT codes are required.

6.

The VAT codes used in purchase info records, purchase orders and purchase contracts have to be

converted to new VAT codes.

7.

When using SAP EDI/iDocs, the VAT codes in the iDoc mapping table (T076M) have to be

changed new entries with new rates but for reverse charge type of VAT codes the old entries

must be replaced at time of rate change.

8.

When using self-billing for purchases (ERS) all the transactions that should have the old rate must

be seled rst. Only after this selement any new VAT code for the new VAT rate can be added to

purchase orders or scheduling agreements. It is a very complicated process and timing/planning

is critical.

9.

Review all applicable condition tables with tax conditions (i.e. MWST, ZVST) as the VAT codes

are represented in the condition table items and the conditions themselves in the condition table

header. The header and item condition table records must be combined (using Vlookup

functionality in excel) for analysis purposes. That encompasses retrieving all conditions with the

old rate and dening the condition records that need to be end-dated and created with the new

VAT code. In practice this could easily cause over 1,000 condition records having to be changed.

Note that this is not only applicable for Sales (VK13, Category V) but for purchases (MEK3,

Category M) and Services (ML53, Category MS) as well.

10.

Check customized tables for VAT code mapping, i.e. for scanned purchase invoice.11.

The real estate functionality in standard SAP uses VAT codes in a dierent way. Therefore, the

VAT codes must be changed in the real estate transactions/contracts as well. This exceptional

process is not very familiar to most SAP support sta.

12.

Check existing transactional data. There is no issue regarding the sales transactions because VAT

will be re-determined in the standard pricing procedures. The purchase process SAP is however

not always re-determining the VAT code and therefore the VAT code on the Invoice tab must also

be changed (manually or via mass upload). For purchases of services (i.e. Planned services or

Limit POs) with service entry sheets it might sometimes even be required to back-date the

conditions for the new VAT codes (an audit trail issue).

13.

In case the VAT invoice text message is not copied from the VAT code description but derived

from standard text table (Tcode SO10), all text messages have to be reviewed and new entries

14.


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have to be added.

When the VAT reporting (RFUMS) is based on selected VAT codes, the existing templates

(variants) must be updated to include the new VAT codes.

15.

When Intrastat reports (purchases) are based on selected VAT codes, the existing templates

(variants) must be updated to include the new VAT codes.

16.

Apart from the required changes in SAP, all VAT reporting templates (i.e. excel or OneSource) must

be updated to incorporate the new VAT codes correctly.

Due to design limitation in SAP, all above-listed actions are required. For every VAT rate change new

VAT codes must be set up in standard SAP and a signicant amount of additional changes are

required to get the new VAT codes up and running for all SAP transactions. You can imagine that the

costs of implementing these changes, including test cycles, will be signicant.

The new tax code structure in Taxmarc (hp://taxmarc.com/en/services/taxmarc-standalone-

products/unchanged-tax-code-structure-made-possible.html)oers an eective tool for ecient

deployment of employees. With this, the solution underpins more ecient business processes and

increased productivity and implementation costs of any VAT change will be reduced to a minimum:

the solution enables a substantial reduction of the working hours that are spent on maintenance.

Why?

There are no new VAT codes required and only the eective VAT rate needs to be changed in SAP. It

is almost as easy as changing a sales price in SAP. The risk of a shortage of tax codes will be

eliminated and the name and description of the tax code in de SAP pricing procedure remain the

same. This makes any control activity or outsourcing more eective and ecient.

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Checklist for VAT Rate Changes in SAP _ Tax Management Consultancy