RICHARD CORNELISSE

Tax Management Consultancy

0% RATE, AUTOMATED PROCESS, CONTROL, CUSTOMER MASTER DATA, DATA

ANALYSIS, DETECTIVE CONTROL, EROOR, EUROPEAN COMMISSION, EUROPEAN

UNION, FORMAT, GST, INDIRECT TAX, INVALID, KEY GROUP, MASTER DATA,

MATERIAL, MEASURE, NATIVE SAP, ONLINE DATABASE, PROCESS, RISK TOLERANCE,

RISKS, ROBBERT HOOGEVEEN, SAP, SAP AG, SYNTAX, TAX CONTROL FRAMEWORK,

TAXMARC™, VALID, VALIDATION, VALUE-ADDED TAX, VAT, VAT FRAUD, VAT

INFORMATION EXCHANGE SYSTEM, VAT NUMBERS, VIES, WARNING

Validation process of VAT numbers in SAP

In Audit Defense, Business Strategy, EU development, Indirect Tax Strategic Plan, Processes and Controls,

Technology, VAT planning on 07/02/2013 at 8:09 pm

By Robbert Hoogeveen (http://www.linkedin.com/profile

/view?id=13942200&locale=en_US&trk=tyah), CFO of the KEY Group

(http://www.key-group.nl/en/home/) and Director Technology of Taxmarc™

(http://taxnewsreader.files.wordpress.com/2012/10

/robbert_linkedin.jpg)

An important control measure in terms of material indirect tax risks is checking

whether the 0% rate is correctly being applied.

A prerequisite for the application of the 0% rate for cross-border transactions

within the European Union is a valid VAT number of the client.

The valid VAT number must also be mentioned on the invoice. Adequate monitoring of this is crucial

to eliminating risks as much as possible.

Validation of VAT numbers

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In native SAP is it 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. To this end, the European

Commission has provided an online database, VAT Information Exchange System (VIES) for the

validation of VAT numbers.

Standard SAP does not have an interface with the VIES database. In practice, it appears that 5 to 25

percent of the VAT numbers is incorrect or invalid. The KEY Group checked the VAT numbers

through a data analysis for a client:

Description Records Comments

Total in customer

master

9.194

Without VAT

number

2.972 These could also be ‘bill to/payer’ or

‘ship to customers’

Unique BE VAT

numbers

3.628 Only Belgium VAT numbers are

validated.

Validation in VIES:

Valid VAT number 2.777 77 percent

Incorrect format 35 1 percent

Invalid number 816 22 percent

The number of erroneous VAT numbers is close to 25%. From a VAT perspective this implies material

risks that exceed every risk tolerance (0 percent, client acceptance with regard to preventing VAT

fraud).

Taxmarc™’s solution for validation of VAT numbers in

SAP

Taxmarc™ can automatically check the VAT numbers when a VAT number is added to the customer

master data.

A real time link to VIES is made to validate the entered VAT number.

The client can choose to treat the result of the VIES validation as:

An “error”: it is not possible to enter invalid VAT numbers in the customer master data or

A “warning”: invalid VAT numbers can be entered but are reported separately.

The list could be used to check the VAT number with the customer.

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VAT numbers can expire or change due to changes in the legal structure of customers.

It is therefore important to periodically check the validity of the VAT numbers.

In Taxmarc™ it is also possible to periodically carry out these controls as detective controls within

the Tax Control Framework.

This can be done in a fully automated process.

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