Tax in SAP S/4HANA
As SAP S/4HANA enables more and more the ‘’intelligent enterprise’’, the topic of tax also becomes a key part of this journey. Tax, both direct and indirect, is also an area where legal regulations and the mandatory changes have a high impact and where technology would need to quickly adapt in order to continue providing viable solutions.
In this blog post, I will bring into discussion how SAP S/4HANA is addressing and developing the solutions for direct and indirect tax.
- Indirect tax
For indirect tax, SAP has been offering already for a while – country specific tax procedures and reports.
Within SAP S/4HANA, there are now new solutions even more standardized worldwide to cater with the latest requirements emerging in the indirect tax space.
These solutions are included in the SAP solutions for Global Tax Management and they support tax determination calculation, reporting and compliance in an integrated approach. I will detail below this set of solutions.
For an end-to-end solution overview, watch the vide below:
SAP Solutions for Global Tax Management: End-to-End Walk-Through (ondemand.com)
SAP Tax compliance
Link to help: SAP Tax Compliance for SAP S/4HANA – SAP Help Portal
SAP Tax Compliance is part of SAP Assurance and Compliance Software for SAP S/4HANA, and it is delivered as an add-on to SAP S/4HANA.
It can be used to manage and automate different compliance checks, to find and enable remediation of the tax compliance issues to increase the quality of tax data and reduce the risk of non-compliance – amongst others. It can automatically trigger tax corrections in the relevant period, and it is also possible to use it in combination with Machine Learning.
Update Q4 2021
SAP Document and Reporting Compliance
SAP Advanced Compliance Reporting and SAP Document Compliance have now been combined into one product – SAP Document and Reporting Compliance.
SAP Document and Reporting Compliance is the one SAP solution to fulfil all types of mandates from real time electronic business documents to statutory reports and enables enterprises to address the emerging number of continuous transaction controls.
The solution helps enterprises to remain compliant and it goes beyond: it allows to re-think business processes by automating manual repetitive tasks, improving efficiency, and enhancing operational sustainability by standardizing operations globally.
This is meant to provide a complete solution – from electronic documents to statutory reporting to fulfil the latest emerging digital trends.
For additional information about SAP Document and Reporting Compliance please check SAP S/4HANA 2021 – E-invoicing and statutory reporting made easy with SAP Document and Reporting Compliance, a holistic approach to compliance reporting regulations | SAP Blogs.
Customers already using ACR or DC, will be able to continue to use the corresponding content/features, as the solutions are still going to be fully supported and maintained with legal requirements.
Regardless if you are using already the ‘’old’’ ACR/DC, in terms of naming convention, we will now refer only to SAP Document and Reporting Compliance – Statutory reporting and SAP Document and Reporting Compliance – Electronic document processing.
The content of this blog has been updated to reflect these changes.
SAP Document and Reporting Compliance – Statutory reporting
Link to SAP help:
What Is SAP Document and Reporting Compliance? – SAP Help Portal
SAP Document and Reporting Compliance – Statutory reporting component refers to former SAP solutions for advanced compliance reporting that enables enterprises to fulfil statutory reporting worldwide. It aims to replace a wide-ranging and diversified set of reports, where post manual processing is regular and where the options for extensibility are limited.
Under the former name- ACR- the solution used to be available in two options:
- A ‘’Basic’’ ACR version – this represents the part of the product where no additional license is required, and it provides mandatory statutory reports per country.
- An ‘’Advanced’’ ACR version – this option would require additional licenses, but adds additional relevant legal reports and a framework for managing these reports, and includes additional features like the possibility to define new reports, embedded analytics, etc.
These two ‘’flavors’’ are not relevant anymore for SAP Document and Reporting Compliance.
SAP Document and Reporting Compliance is the sole solution available for the fulfilment of real-time and statutory reporting requirements including end to end processing of transaction controls, digital link, and on-line requirements.
The download of the country content in scope is available as part of the S/4HANA for manual and offline preparation / submission processes (it can rely on manual data enrichments and formats preparation).
SAP note 2480067 provides up to date information on which legal reports have been succeeded by the new SAP Document and Reporting Compliance – Statutory Reports, from which SAP S/4HANA release and what is the end date for the support of any specific report.
For example, if you have a company code in Italy, and you implement SAP S/4HANA 1909, you will have to use the VAT declaration from SAP Document and Reporting Compliance, as the one in SAP S/4HANA has no longer been updated with the legal requirements since June 2019. The program is still available, and it can be used, but the maintenance is no longer provided anymore.
From a configuration point of view, the help documentation explains the settings required per region/country report – by navigating to Country/Region – Specific Reports.
Similar content can be imported via a BC Set (FIN_LOC_SRF_FISCAL_YEAR and HBCS_FIN_LOC_SRF) as explained in the Administration Guide (see SAP note 2584083). This will provide part of the required content and accelerate the implementation as only the customer specific related settings (delta) have to be added.
In order to keep up with the relevant notes please check also SAP note 2620211 and 2771695.
SAP Document and Reporting Compliance – Electronic document processing
The progression of technology and the requirement to digitalize companies is gaining greater traction, and with that the need of legal requirements to submit electronic documents to the tax authorities has also increased moving toward continuous transaction controls. These requirements are as expected, different per country.
There are different deployment models available depending on the country:
- PaaS (Platform as a service) Solutions – based on the own customer tenant of SAP Integration Suite; designed to cover e-invoicing and real-time reporting requirements in multiple countries.
See SAP note 2378414 for additional information.
- SaaS Solutions – based on public cloud service:
SAP Document and Reporting Compliance, cloud edition; a public cloud service that can send and receive compliant invoices based on external standards (e.g., the Peppol and ZUGFeRD standards) across multiple back-end systems (S/4HANA, SAP Business One and more in the future).
The same is offered also for NF-e in Brazil via SAP Document Compliance, outbound& inbound invoicing options for Brazil.
SAP Tax Service and external tax engines
SAP Tax Service
Link to SAP Help:
What Is the Tax Service? – SAP Help Portal
With the increase of SAP solutions (mostly new cloud products), some because of acquisitions, statutory tax solutions have also become more heterogenous. There are different systems involved where the structure/coding logic can be different. For example, we have a certain logic and setup in SAP S/4HANA, a slightly different setup in SAP Ariba and potentially there could be additional systems like an old SAP ECC. If we wanted to harmonize the tax processes among all these landscapes, we would have to be prepared to invest high efforts – for both implementation and maintenance.
Or alternatively, SAP Tax Service could be investigated as another option. It is offered as a service in the Cloud platform, part of the SAP Localization hub. It includes a tax calculation engine and country specific requirements applied in order to determine and compute the relevant tax codes for the relevant business transactions.
Update Q2 2021
Unfortunately, SAP has decided to stop any further enhancements on Tax Service, and to put it into maintenance mode only. The mostly used part of Tax Service, the S/4H integration to external partner tax engines, especially for Brazil, will continue to be offered through SAP Integration Suite, which is SAP’s standard solution for external integrations. The tax engine part of Tax Service will not have a successor solution.
External tax engines
To a certain extent and with individual variations, the same objective can be targeted by the external tax engines.
There are lots of external indirect tax solutions on the market – most of which have also been available from the days of SAP ECC – from Vertex which addresses both VAT and GST, to Meridian, Taxware, and others.
When deciding for an external tax solution, you could also refer to note 1497956 and 2226759.
Before SAP S/4HANA, tax accounting was supported either by a special ledger or a normal ledger. Not including here exceptional cases (some countries have developed ‘’consulting’’ solutions for tax based on special ledger), there was never a let’s say ‘’localized’’ solution for tax – in the same way as it is for statutory accounting rules.
New additional simplification and automation opportunities are made available with S/4HANA:
- The universal journal represents the foundation to enable continuous review of latest accurate figures and automated tax calculations (e.g. leveraging sample content available in SAP Profitability and Performance Management).
- The SAP S/4HANA Best Practices still include 3 main ledgers/accounting principles: Group, Local and Tax.
- The extension ledger can also be an option to be evaluated for Tax – this could be a suitable option where tax requirements are just some variations from the statutory accounting principle. However, this will involve an evaluation of the processes where there are differences and assess if these processes are supported by the Extension Ledger (for example Asset Accounting is a common area where there are tax relevant differences, and this is not supported by the Extension Ledger).
- Corporate Income Tax Framework: on top to either parallel or extension ledgers, it enables automated classification of expenses, centralized review with seamless drill-down to the underlying transactions and manual handling of exceptions, all in the system of record.
The scope of this solution is currently limited to CIS countries (Russia, Ukraine and Kazakhstan).
Link to SAP Help: Corporate Income Tax Framework – SAP Help Portal
This would be most of the solutions available for tax in SAP S/4HANA. And if the above version is too long, see below the short version.
In a nutshell:
Is there any other product you think we should include here and or maybe enhance with details? Let me know your comments and thoughts!
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Thanks for sharing :). This is really good summary but I think there is more to tax . We need to consider solution for
– managing tax processes( internal and external)
– tax analytics
– International tax (transfer pricing)
– document storage
And integration of all these aspects.
Indeed the tax world is big. Thank you for your feedback! I will consider your inputs in a future update of the blog! 🙂
Nice document Sorina. I read the whole document and then noticed it was from you.
Thanks Jon! 🙂
It looks like in the 2021 OnPrem version the Corp Tax Income Framework comes available for all countries (Fiori App is available for 2021: https://fioriappslibrary.hana.ondemand.com/sap/fix/externalViewer/#/detail/Apps('F5732')/S21OP). I cannot find a best-practice for this though. Next to that in the Advanced Compliance Reporting, where it should be available as well, I cannot find it either. I have a 2021 system available in 2 weeks 🙂 let's see then.
Corporate Income Tax Framework is at the moment available only for Russia, Ukraine and Kazakhstan. The solution is also available only for OP releases so indeed there is no scope item in best practices.
according to the roadmap explorer it seems to be available for all countries as of S/4HANA OP 2021. Or is the exporer not accurate.
What's your view on this.
It seems that the documentation needs to be adjusted. I have reached to the colleagues with the your feedback.
this is an excellent piece.
I would like to ask if there is any addition to the growing SAP Tax landscape with regard to BEPS 2.0?
Thank you in advance
An item addressing this topic is planned for Q2 2022- please see below the roadmap explorer:
SAP Road Map Explorer
As it currently in the planning stage, not all the details are finalized but the main idea is to provide tools with sample content where customer specific rules can be maintained.