SAP Central Finance – Tax Checks after Central Payments
In general if Central Finance is to be used only for financial reporting system where all finance operations including open items, payments, clearings etc will remain in source system then tax reporting will also remain in the source systems. However, in an operational Central Finance scenario where CFIN becomes the system of record, tax reporting becomes mandatory in CFIN under certain circumstances. This happens after activation of Central Payments
To ensure that the tax reporting is correct SAP has provided some tools and it in this blog I have added some of the experiences from various projects.
VAT Consistency Check
This is mandatory with Central Payments. You can also activate it without CPAY in order to prepare for future CPAY activation.
Tax Customizing Consistency check
With this SAP replicates the data of tables T001, T005, T007A etc (mentioned in image) to CFIN in shadow tables like FINS_CFIN_T001, FINS_CFIN_T005 which ensures that data is available for checks in cFIN as well as it doesn’t impact the T001 and other original tables in S/4HANA (I should not be telling you how important and complex these tables are)
There is a general consistency check report also for which you should read below blogs
Other Important factors to be considered on same line are
- This is mainly EU countries concept and activation is at client level. Below combination of source & target system is supported by SAP
- Taxes that are not reported during posting of invoice but after are recognized once the invoice is paid. This is a legal requirement in some countries (e.g. France). Tax amounts are posted on a special deferred tax account and only after the payment is made, the tax amount is transferred from the deferred tax account to the corresponding normal tax account and reported to the authorities
- In Past Central Finance did not support deferred taxes during the initial load. For releases S4/1909 & S4/2020 the SAP Note 2787790 will enable deferred taxes during the initial load. This new function will allow customer to move the tax reporting to the Central Finance system and will allow to activate Central Payment for countries where the deferred tax process is required by law
Initial load of deferred taxes
- Extraction of items type = ‘IN’ (invoices which include deferred tax codes).
- New reference procedure (AWTYP) DTAX to help distinguish from normal open items (APAR)
Correction report (RFINS_CFIN_CORR_DEFTAX_ITEM)
- This report needs to be executed after initial load is complete. This will add missing entries PA (payment), RL (tax transfer) in the DEFTAX_ITEM table.
- By default during initial load only the IN entries are replicated into CFIN
- This report ensures that DEFTAX_ITEM table has the same information in Central Finance as in the source system
External Tax Engine
- External tax engine are only supported for USA, Canada and Puerto Rico
- External tax engine must be certified for Central Finance Scenarios in S/4 Hana.
- Thomas Reuters: ONESOURCE Indirect Tax Integration
- Vertex Indirect Tax
- Sovos Global Tax Determination
- External tax engine should be identical between source system and Central Finance system
Central Finance ONLY supports Extended Withholding Tax in source systems. Withholding taxes are calculated in the source system and transferred to the Central Finance system exactly as they are posted in the source system. They are not recalculated in the Central Finance system. Once Central Payment is active, withholding tax works without restrictions for countries where deduction takes place at the point of invoice posting as well as countries where deduction takes place at the point of payment (accumulated withholding tax data is not available in the Central Finance system for WHT at time of invoice, i.e. accumulation data will not be transferred from source to central finance.
Below tables are part of consistency check
Will share more in my coming blogs, stay tuned and keep reading/learning