This blog post provides a structure you can use to evaluate localization requirement for a country in your roll-out project. The EASTR model: Entity, Attributes, Standard process, Tax, Reporting.
Except the basic country information such as language, currency, time zone, the EASTR model provides consultant a structure during further localization requirement discussions with the business user. The same requirement structure can be used by product engineers in system implementation or extension design.
Structure of Localization Evaluation
The EASTR model contains five basic elements to describe localization needs. Normally the requirement evaluation will follow the sequence as provided below:
- Standard processes
The business entity in the country needs to be clarified, such as legal entity, taxation entity (tax payer according to local legislation), sales offices and the corresponding system organization structure in SAP S/4HANA Cloud system. It is important to clarify the business obligations of such an entity when it is related to law or regulatory compliance.
For each identified entity it is important to confirm its key attributes, which needs to be kept in the SAP S/4HANA Cloud system. For example:
- Attributes to identify the entity (e.g. the taxpayer must have a Tax Registration ID. A legal entity is often identified with a business license number or registration number).
- Attributes essential for the business operations (e.g. address in local language is a must for correct invoice printing).
A country roll-out evaluation includes detailed screening of the standardized processes, which are normally the core of a global company process. In SAP S/4HANA Cloud system, the scope items provide good basis to start the evaluation.
Taxation is the most common compliance requirement source for localization. There are various perspectives to be considered:
- Type of taxes to be handled in the system
- Tax calculation
- Tax identification and validation (e.g. tax IDs in the organization and for a business partner)
- Tax evidence (e.g. invoices, deliveries)
- Mandatory government data interface
Reporting requirements mostly come from tax liability and their exposure obligation to the taxation authorities. For some industries it is also necessary to provide an additional report to the industrial authorities in the country (e.g. pharmaceutical and food production and distribution). The evaluation for reporting localization can start in the following sequence:
- VAT related reporting (e.g. VAT return declaration)
- Income tax related reporting (e.g. Balance Sheet and P/L)
- Custom tax related reporting (e.g. Import / Export reporting)
- Industrial reporting
The download link below contains an example that explains how to work with the EASTR structure. Company AAA has implemented its headquarters as Germany and offices/subsidiaries in several countries in the SAP S/4HANA Cloud system. Within its organization, AAA has several subsidiaries in countries, which are not available as standard localizations within SAP S/4HANA Cloud.
In the example we created a first evaluation draft for Bahamas. Here both the legislation reference and client business situation are noted at each element of EASTR. As the follow up step, a series of workshop can be conducted with business user, system engineer and extension developer to dive into the process detail and realization options in SAP S/4HAHA Cloud system.
Please be notice this example may not be up to date with all legal requirement in Bahamas and may not be used directly as specific project implementation reference.