Managing indirect taxes is extremely challenging due to frequent changes in tax legislation and interpretation, the complexities inherent with determining and reporting taxes, and the large volumes of data involved with tax determination and reporting.
Your business processes and related tax content have to stay up-to-date with complex rules and regulations. Everyone needs to accurately identify, calculate, and report sales and use taxes, GST, and VAT. Governments and jurisdictions are levying more, and increasingly complex, transaction taxes. Countries are “reforming” their transaction tax regimes, or changing tax rates as frequently as daily, as in the case of Brazil. Failure to comply with regulations, meanwhile, leads to severe penalties and endangers capital, credibility, and reputations. Maintaining tax rate tables manually can lead to inaccuracies and non-sustainable effort loads, to say nothing of potential penalties accruing to mistakes.
Compounding this is the problem of digitalization, which increases the need to automate tax functions. Tax authorities are increasingly requiring companies to make transactional and tax information available directly from transactional ERP systems, but creating these files means huge manual efforts and additional rounds of validation. And it in turn means that you need to reconcile your tax reporting data to reduce the likelihood of incorrectly declared data.
And digitalization isn’t coming just from the tax authorities. Companies’ tax departments are becoming increasingly centralized or working in shared service centers. This means that there is often less tax knowledge available in operational functions, which in turn means that people expect more tax determination processes to be automated.
SAP helps you manage tax calculation by providing both an internal tax calculation solution and an external tax calculation solution, where you work with a third-party tax partner.
Tax Calculation with SAP S/4HANA Cloud
Most importantly, whichever variant is right for you, SAP’s solutions help you fulfill most legal requirements for tax reporting and tax calculation.
SAP’s internal tax calculation solution helps SAP S/4HANA Cloud customers manage tax calculation and determination. More information on the internal tax calculation solution is available in the SAP S/4HANA Cloud Roadmap.
SAP’s External Sales and Use Tax Calculation solution for the US, meanwhile, links your SAP S/4HANA Cloud system with your tax partner’s system to help manage your tax calculation and reporting. The tax calculation engines are hosted by your tax partner, who delivers the calculation results back into your SAP system. For a list of certified tax vendors, please use SAP CSD.
Another option is SAP’s Tax Service, a cloud-based tax calculation and determination add-on that enables content to be provided from external tax vendors.
For more information on this, you can check out the ONESOURCE US Tax Integration for SAP S/4HANA Cloud or attend the upcoming webinar on Tax Determination in Challenging Times.