conference takeaways final1 - meridian global...

ConferenceTakeaways

SAP Control for VAT Compliance18 - 19 May, 2011Millennium Hotel Knightsbridge - London

© 2011 Meridian. All rights reserved.

Conference Survey Results

Conference Agenda - overview

Top tips

Continue the discussion

Contents


50%

34%

10%

3%

3%

VAT / Tax

IT / SAP

Process delivery / Process improvement

Finance / Controlling

Which of the following best describes your functional area?

Other, please specify

Pre-conference survey results


52%

27%

14%

7%

Which of the following best describes your position?

Expert / Advisor / Consultant

Manager / Influencer

Team leader / Supervisor

Director / Decision Maker

0%


€100 million to €500 million 0%

74%

€500 million to €1 billion 17%

< €100 million 9%

What is your company's global turnover?

> €1 billion


I was contacted by Meridian / sharedserviceslink.com 30%

I saw the event on a Website or social networking site (LinkedIn) 9%

Other, please specify 4%

A friend / colleague passed the event details into me 65%

How did you find out about today's event?


We know we have specific challenges or problem areas in SAP and are here primarily to learn how other business are dealing with them

44%

We are here primarily to discover VAT issues in SAP that perhaps we were not aware of, and how to deal with this 25%

What is your key reason for attending this Masterclass?

We are here primarily to network and learn what other business are doing 22%

We are either implementing or upgrading or migrating to SAP and are primarily here to get exposure to VAT 9%


0%

Increasing landscape: we use SAP, and anticipate migrating additional entities / business units onto SAP 64%

Changing landscape: we use an older version of SAP and will upgrading to a new version 14%

New landscape: we are implementing SAP 14%

Can you please advise which of the following best describes your SAP landscape?

Stable landscape: we use SAP across our company and have no plans to migrate additional entities or business units to SAP

7%



Automated VAT determination on sales / outgoing invoices, without need for manual user intervention

Automated VAT determination on purchases / incoming invoices, without manual user intervention

Intrastat reporting and reconciliation

SAP performance barometer: indicate how you feel SAP performs the following critical VAT compliance functions?



VAT return and EC Sales list reporting

Invoice layout Managing foreign plants and foreign VAT registrations


Managing complex VAT business flows , or industry-specific flows



Select one of the following changes that you feel has had (or will have) the largest impact on increasing VAT risk in your company?

Changes to supply chain structures and business flows 42%

Changes to corporate structure (acquisitions, disposals, company restructuring) 15%

Increased scrutiny from tax administrations into systems and processes 12%

Roll out of new SAP systems or system upgrades 12%

Changes to VAT legislation 8%



Staff retention / loss of knowledge and skills 9%


Select one item from the following list that describes the biggest obstacle to ensuring 100% VAT compliance across your organisation

Skills and experience managing VAT and SAP 70%

Budget and/or staff limitations impeding the investigation and implementation of effective controls and solutions 17%


Tax administration barometer: indicate whether you agree or disagree with these comments


Survey Summary

74% represent companies > €1bn turnover => multinational / complexity

84% of delegates in dedicated VAT/SAP roles, in-house => subject matter experts

69% of delegates are aware of problems (or want to identify risk) and want to learn from others how to fix => share best practice

Areas of poor / very poor performance in SAP: => known weaknesses Complex / industry-specific flows (61%) Intrastats (47%) Foreign VAT registrations (39%) Purchases / AP invoices (39%)

57% say biggest risk is change to supply chain & corporate structure => business change

70% say biggest obstacle is lack of VAT/SAP skills => lack of aligned knowledge

70% say tax administrations are looking at ERP system as part of audit => “big brother”



Top tips


Content


EP 4 (ECC 6.0) contains new functionality for partially exempt organisation see =>

http://tiny.cc/q15o4

The key items that SAP has on their customer “wish list” for VAT includes:– Increase tax code length, time dependency on tax codes, long text description– Time dependent tax groups– Validation of VAT ID, calling web services from tax authorities– More flexibility in CTC and MTC– Create different tax determination settings for SD / MM / FI– Service / delivery dates - logic and support through the whole process required– Additional data in VAT reports (to include ship to address and VAT ID )– Reconciliation for Intrastats & EC Sales Lists– Integrate filing (FOTV)– Currency handling (VAT reporting currency desired)

#Tip 1: Partly exempt organisations (Lars)


Ensure that you spend time to review and document your flows carefully before implementing a SAP design

Check your inco-terms and to see if these create unnecessary complexity (do you really need to build these into your access sequences and condition records?)

Even if you think you are only a goods company – check : you will probably invoice services as well. These need to be treated in accordance with the new rules and must follow place where your customer is established and not the ship to (standards SAP).

If you are charging for “training” type services, be careful as the UK seem to offer conflicting advice as whether to treat under default rule, or where supplied from 2011

#Tip 2: Managing complex VAT flows (Alex)


To simplify tax code structure, consider TAXEU procedure – which means: You won’t need to duplicate tax codes between procedures (for foreign VAT registrations)

Maintenance will be reduced (in case of tax rate changes).

Don’t forget about daily rates (e.g. Poland). You will need to incorporate this into your VAT reporting, but it will require a modification to SAP

#Tip 3: Plants abroad (John)


Best practice is to create new tax codes (not re-use existing ones)

Reusing AP tax codes might be possible, but only where you have very tight visibility and control over your AP processes with good exception reporting

Sales condition records updates (VK11 / VK12 ). Make sure this is done.

Don’t forget to update automatic tax determination on your AP invoices (via iDocs)

#Tip 4: VAT Rate Changes (Julian)


There are various possibilities to determine the Tax Date in SAP.

None of the options is 100% accurate

The newly introduced FI field “VATDATE” adds some more possibilities

#Tip 5: Date of supply (Franz)


Clever trick is to group all EU 27 members states in a destination country “EU”, via small user exit logic

The benefit of this tip is that only one line has to be set up per departure country

This will help to lower volume of condition records and limit the maintenance effort

Caution…..if you group member states in a destination country "EU", you need to be mindful of domestic reverse charge rules within Member state countries in terms of VAT treatments of non-established / established customers etc.

#Tip 6: Grouping Country Codes (Robert)


Add the FI document number to the intrastat report – which will facilitate easier comparison and reconciliation to the VAT report

If your advisors are saying that reconciliation report can’t be done (or is too difficult) –then it’s time to consider looking for new advisors

#Tip 7: Reconciling Intrastats to VAT returns (Reka)


Make sure you validate your supplier VAT ID’s for those countries that require you to submit EC Purchases Lists:

Poland

Hungary

Spain

Italy

#Tip 8: Supplier VAT ID for EC Purchases lists (Franz)


Create (general) non-stock materials

Make sure you use SD functionality to create sales orders

Complete foreign trade data in your sales order

This would provide all the required master data to ensure correct treatment in the Intrastats

#Tip 9: Including ‘non stock’ materials on Intrastat (Charles)


Create a VAT tool, to structure and control the identification of the correct tax code

Train people on how to use it

Introduce sampling process and ensure consistently reviewed

Can use SAP – BI for sampling and error detection

#Tip 10: Tips for Manual AP environments (Belinda)


You can influence how SAP present the list of tax codes for AP clerks to select, by using a common naming convention

This will help improve accuracy

You can also specify which tax codes are presented for specific transactions

Caution.... If you use filter technique, there is danger that required tax codes are hidden. Ensure that maintenance is applied against these setting to mitigate risk

#Tip 11: How to ‘sort’ list of AP VAT codes for relevance (Hugo)


A tax engine can facilitate VAT compliance and reporting across a global business in a shared services centre environment

Provides a strong platform to manage risk of VAT error

May be a cost effective solution

Caution.... If you already have a SAP landscape within your organisation, the ROI may not stack up and native SAP solution night be more appropriate

Caution....as this is an external software, it can influence the sales and shipping process

#Tip 12: Tax engine or native SAP? (Patricia)


If an entity is registered in multiple jurisdictions, it is recommended to use separate GL accounts for the VAT postings.

Separating GL accounts for this purpose would enable more efficient reconciliation between the VAT reports per jurisdiction and the VAT postings in the GL

Especially useful if the entity also uses a calendar different from the Gregorian calendar.

Caution…the number of GL accounts will be multiplied. Especially if the company uses a global chart of accounts, this could cause a (procedural) issue.

#Tip 13: Optimal GL account combination (Hugo)


Many businesses have manual procedures in place to interfere with the VAT characteristics of sales orders, in order to manipulate a VAT result

This leads to tax decisions being made by non-tax staff

Best practice is to eliminate this , or only allow in very restricted cases.

Run a report to identify how many manual changes are made to your sales orders to asses extent of this weakness

#Tip 14: Manual changes to sales orders (Roger)


Consider a common Tax Procedure if you have multiple VAT registrations. Advantages:– enables more efficient tax code maintenance

– if an entity is already live on SAP, changing to a common tax procedure would create the possibility to start with a clean set-up of tax codes

– avoids 'classic' problems associated with the interface between SD and FI, e.g: Maintain a duplicate set of tax codes on both procedures and doubling maintenance thereof

difference in how SD and FI use the tax departure country (SD most likely uses the country of the plant, and FI ,the country of the company code)

Caution…before using this approach, consider:– if you are already live on SAP. Changes to a common tax procedure requires modification to

the VAT report, to allow reporting on 'old' postings

– if more then 1 company code exists in a country, all companies must agree to the new tax procedure and must be 'converted' to the new tax procedure (as a country can only have one tax procedure assigned)

#Tip 15: Common “TAXEU” procedure (Roger)


conference takeaways final1 - meridian global...

Documents