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Tax in SAP S/4HANA

As SAP S/4HANA enables more and more the ‘’intelligent enterprise’’, the topic of tax becomes also a key part of this journey. Tax, both direct and indirect, is also an area where legal regulations and the mandatory changes in this area 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.

Direct tax

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.

The same is still applicable in SAP S/4HANA.

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).

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 even more standard solutions available which cater specifically for indirect tax.

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.

SAP Tax compliance

Link to SAP help: https://help.sap.com/viewer/product/SAP_ASSURANCE_AND_COMPLIANCE_SOFTWARE_FOR_SAP_S_4HANA_-_SAP_TAX_COMPLIANCE_FOR_SAP_S_4HANA/1.3.0.2/en-US

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 different compliance checks and to find and mitigate tax compliance issues – 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.

SAP S/4HANA for Advance Compliance Reporting (ACR)

Link to SAP help:

https://help.sap.com/viewer/3cc1da1e1e364fadb9b1af653a9597d2/1909.002/en-US/4975ec570b01f032e10000000a441470.html

ACR is the ‘’to be’’ solution for legal 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.

ACR is available in two options:

1. 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.

SAP note 2480067 provides up to date information on which legal reports have been succeeded by the new ACR 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 ACR, 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.

 

In order to implement a report, SAP note 2584083 contains an attachment with the required documentation.

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.

2. An ‘’Advanced’’ ACR version – this option does 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.

eDocument or eDocument Processing with SAP Document Compliance

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. From e-invoicing to electronic transmission of VAT returns, governments move more and more towards mandatory requirements for electronic submission of tax reports. All these requirements are as expected, different per country.

There are few deployment models available for SAP Document Compliance:

1. PaaS (Platform as a service) Solutions – based on SAP Document Compliance on-premise edition and SAP Cloud Platform Integration; designed to cover e-invoicing and real-time reporting requirements in multiple countries.

See SAP note 2378414 – SAP Document Compliance, on-premise edition for additional information.

eDocument flow:

2. SaaS Solutions

2.1 SAP Document Compliance- cloud edition; it can send and receive compliant invoices based on the Peppol and ZUGFeRD standards.

2.2. SAP Document Compliance, outbound& inbound invoicing options for Brazil

SAP Tax Service and external tax engines

SAP Tax Service

Link to SAP Help:

https://help.sap.com/viewer/f4360fb43e114654a7ee39e9288ceebe/Cloud/en-US

With the increase of SAP solutions (mostly new cloud products), some as a result 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.

External tax engines

To a certain extend and with individual variations, the same objective can be targeted by the external tax engines.

There are lot 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 – External tax calculation only for US, CA, PR in SAP Standard and 2226759 – SAP Partner ABAP add-on for value-added tax (taxes on sales/purchases)/sales tax/use tax does not work as expected, modifies or contains enhancements.

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!

Brought to you by the SAP S/4HANA RIG

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