Monthly Archives: April 2021

SAP add-on for mandatory e-invoicing

Countries have introduced e-invoicing as a clearance model or as a post-audit method. The legal format is usually an XML or JSON file.

Post audit

Hungary and Spain introduced the submission of sales e-invoice data to combat VAT fraud as a post-audit method. The taxpayer will keep sending in the traditional way invoices to its customer, but he must submit to the tax authorities the sales e-invoicing in XML format almost real-time for tax audit purposes. In Hungary, it is within 5 minutes after the invoice is generated, and in Spain, the submission needs to be done within four days. 

Clearance model

Under a clearance model, the tax authorities will audit sales e-invoices near real-time and first validate and approve the supplier’s invoices before those invoices are sent to the customers by the supplier or the tax authorities itself.

In Italy, resident taxpayers submit their sales invoices to the tax authority’s platform for approval. The tax authorities forwarded any approved invoices to customers for VAT processing and payment approval. The invoice received by the tax authorities is considered to be the VAT invoice, and VAT can only be deducted based on that invoice.

In India, the taxpayer submits a GST e-invoice to the ‘Invoice Registration Portal’ (IRP). That IRP of GST will generate a unique Invoice Reference Number (IRN), and digitally sign the e-invoice and also generate a QR code. The digitally-signed invoice will be processed in the GST Network and e-waybill system within 24 hours. The taxpayer is returned the IRN. The customer is issued with the approved invoice. The invoice will be sent to both the buyer and seller mail IDs provided in the invoice.

In Egypt, certain VAT-registered businesses must issue electronic tax invoices that include the electronic signature of its issuer and the standard code for the good or service subject to the invoice approved by the Egyptian tax authorities.

E-invoicing in XML or JSON format

XML (Extensible Markup Language) is a text format with a distinguished set of human-readable and machine-readable rules. JSON (JavaScript Object Notation) is alike, but instead, it uses the syntax of the JavaScript programming language.

KGT SAP add-on solution for e-invoicing

KGT SAP add-on for e-invoicing extracts the data from SAP, transforms the data in either the XML or JSON format, and has a cockpit to submit the file to the tax authorities. The cockpit displays responses back from the tax authorities. The SAP add- on solution is capable of receiving, check and verify invoice data sent by the taxpayer with immediate access to accounting data.

E-invoicing methods and overview of new country rollouts

SAP add-on for mandatory e-invoicing

KGT SAP add-on for Malaysia SST exemption automation

KGT developed a fully automated SAP add-on solution to manage these 'sales tax exemption' between the various stakeholders.

Malaysia’s government abolished the GST Act, and from September 2018, the new Sales & Service Tax (SST) regulation is in force. In line with the new regulation requirements, organizations need to submit (quarterly) returns. Recently, MySST introduced new tax reporting requirements for the submitting the ‘sales tax exemption’ report (Schedule C) for all the raw pack items used in the manufacturing process for which organizations claim tax exemptions

The government prescribed it in a specific format listing down the inventory flow of such items starting from Name of Supplier, Opening stock (Qty & Value), Local purchase, Imported purchase, Used in Mfg, Sold/Others, and finally the closing stock. To comply with these tax rules, company’s often implemented a time-consuming manual process. Not meeting the requirements could result in substantial tax penalties.

KGT developed a fully automated SAP add-on solution to manage these ‘sales tax exemption’ between the various stakeholders. The SAP add-on arranges that whenever any new product comes in, the warehouse personnel notify the business to get the exempt certificate. Upon receiving the notification, business users check whether the certificate is applicable or not. When appropriate, relevant data is collected, and information is filed in the MySST portal to get the exempt certificate. If the warehouse users do not notify, it becomes a tiresome process for the business to get the exempt certificate, and the tax authorities could levy substantial tax penalties. That is what the SAP add-on avoids.

The SAP add-on facilitates the process of viewing and assessing the certificate details effectively. The user can add, via a straightforward process, new certification details. The warehouse personnel does no longer need to send the details of the ‘goods receipt’. If the certificate details are not maintained, the add-on will automatically notify the business. The timely involvement avoids substantial tax penalties.

Besides the above the following benefits apply:

  • A proper hierarchy to which the notifications will be sent during various stages of the Purchasing process
  • Facilitates the process of inclusion of K1 number in the Importation
  • Business does not need to make the MySST report manually now, thus reducing manual intervention
  • Release Strategy workflow for contract
  • Configuration table for storing C1 and C3 certificate information
  • User Exit/BADI for storing K1 Document number in MIGO transaction
  • User Exit/BADI for storing K1 Document number in MIRO transaction
  • E-mail notification if the exemption certificate is not available for vendor/material combination
  • Validation report for C1 and C3 Report
  • Quantity check functionality with tolerance limit (Keep the function and will be activated by a user based on the future requirement from SST)
  • C1 and C3 Report Generation for Custom office-based on material movement data

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SAP add-on for rounding off conflicts

When the rounding off set up in standard SAP conflicts with the decimal tax requirements, it would usually mean that the SAP setup has to be changed. That is a time-consuming change management process that could take months to implement. The taxpayer can also not in meantime adequately test the tax reporting requirements as many test scenarios would fail during UAT due to this reason. In practice, it will be a showstopper for a go-live and do the first submission in time.

KGT has developed an SAP add-on that recalculates the rounding off to the current tax rules in an SAP table and has a cockpit that shows the numbers in standard SAP and the changes to meet the decimal sign requirements of the tax authorities. It contains an audit trail of the differences between the rounding off in standard SAP and the SAP add-on. That is essential from a tax risk management perspective that the taxpayer can explain and disclose the differences to the tax authorities.

The solution contains an option to quickly deactivate this decimal sign solution when the tax authorities approve the decimal tolerance currently set up in standard SAP. The deactivation results that the standard SAP values are used for reporting.

Above solution is operational at a multinational when we installed our Egyptian e-invoicing solution. We saved months of work, and were able with feature to go-live in time.

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SAP add-on to clone and tailor an SAP kernel to execute an M&A Divestiture deal

M&A Divestiture deals during planning and execution present lots of SAP challenges. Time and IT costs are critical drivers for such deals. Using our patented solution (M&A Divestiture Patent – US9330094B2 for SAP) and approach, organizations significantly reduce the cost and delivery time for successful SAP data separations.

The traditional SAP data separation methods used in practice are time-consuming, and the costs are significant to get a company or business unit operating independently. Our application yields the least amount of reconciliation, design time, and working hours for meeting readiness.

KGT ensures a sound delivery approach with execution teams. IT Executives can be engaged sooner using the Agile development methodology to leverage their organization early with the planning stages of divestiture to gain valuable synergies upfront and uncover any potential, unexpected difficulties.

Our application yields the least amount of reconciliation, design time, and working hours for meeting readiness.

Our teams can test divestiture scenarios and analyze results as early as possible to maximize team effectiveness. Management can view daily or weekly snapshots of a divestiture project’s progress. We ensure a sound delivery approach with execution teams. IT Executives can be engaged sooner using the Agile development methodology to leverage their organization early with the planning stages of divestiture to gain valuable synergies upfront and uncover any potential, unexpected difficulties.

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SAP add-on to reduce storage amount of your SAP data

Data is the most valuable asset for any organization. It is being generated at unprecedented speed and already drives decision-making processes and generating extraordinary value. Whether organization SAP database expansion results from new features & functions, additional users, intensified use of particular applications, or mergers & acquisitions, we can help reduce the stored amount of your data. Our effort will increase technical ROI and maintain system sustainability and reduce end-user and IT workload.

Data is the most valuable asset for any organization. It is being generated at unprecedented speed and already drives decision-making processes and generating extraordinary value.

Whether organization SAP database expansion results from new features & functions, additional users, intensified use of particular applications, or mergers & acquisitions, we can help reduce the stored amount of your data. Our effort will increase technical ROI and maintain system sustainability and reduce end-user and IT workload.

  • The business challenges for adequate data management
  • High transactional data volume in SAP
  • Rapid data and document volume growth could cause system underperformance
  • Higher data maintenance costs
  • Manage long-term database expansion resulting from organic growth or M&A
  • Improve operational efficiency and productivity
  • Safely and securely purge data for system upgrades and migrations
  • Reduce total cost of ownership
  • Reduced long-term database growth

KGT has developed an innovative data purging application (Patent – US9330094B2 for SAP). Our solution’s output is future-proof, scalable, cost-efficient, and ensures long-term integrity and data protection. 
Companies can reduce costs by reclaiming valuable primary data storage space, optimize operational and server performance, and quickly meet compliance regulations.

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Our SAP add-on for European VAT reporting with VAT controls

We have developed MacroExcels (audit trail of changes and password protection) to support the VAT reporting process for all countries in Europe. Those MacroExcels are currently used by a multinational to extract the data, prepare the VAT returns, and perform vital VAT controls.

We used these MacroExcels to develop the SAP add-on for European VAT reporting. The SAP add-on extracts all the relevant VAT return data from Standard SAP to calculate the boxes of the VAT return:

The SAP add-on cockpit, the VAT return process owner can add manual adjustments or relevant VAT data. The SAP add-on displays these changes made and therefore contains audit trail functionality. In the add-on and standard VAT controls to test whether the source data contains VAT errors.

Functionality for effective and efficient management of VAT in SAP is possible via the SAP add-on cockpit:

  • The SAP add-on cockpit, the VAT return process owner can add manual adjustments or relevant VAT data. The SAP add-on displays these changes made and therefore contains audit trail functionality. In the add-on and standard VAT controls to test whether the source data contains VAT errors.
  • All information is available in SAP or can be archived on a local server. The company can provide quickly to tax authorities when those authorities request such data for tax audit purposes.
  • Manual corrections in the add-on with an audit trail of the VAT result, i.e., easy to follow initial results +/- modifications to final VAT result. The digital underlying VAT accountancy data is archived in SAP and can be stored on a local server.
  • Reconciliation of VAT result and GL balance on VAT accounts
  • Reconciliation VAT results and other reports if applicable, e.g., VIES, Intrastat, etc.
  • Linkage with clients existing calculation files if applicable or requested
  • Any enhancement is feasible as the add-on can be tailored based on client demands.
  • When the tax authorities support the VAT return process owner can submit the VAT reporting directly from SAP

Depending on client request, the above can be quickly be developed for countries outside of Europe as it is a reuse of existing know-how and an easy tailor exercise to the local VAT reporting rules.

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Norway and Romania and (new) SAF-T requirements

Norway has announced changes regarding VAT returns that should come into force starting in January 2022. The main objective is to submit VAT returns from ERP systems. The VAT return will be based on SAF-T coding.

Romania has announced the introduction of SAF-T reporting requirements in 2022.

We can develop any new country introductions within two months as we reuse the know-how of the e-invoicing R&D of countries currently operational at multinationals. Installation time will be 3-4 weeks as our solutions work standalone and do not share client-specific objects, so retesting other country modules installed is not needed during implementation. New country SAP add-on installed never impact other country modules already operational.

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Germany and introduction of mandatory invoicing via clearance model

On the Germany Bundestag, "Introduction of a Digital System against VAT fraud" (February 10, 2021), the German introduction of mandatory e-invoicing is considered based on the Italian clearance model. In Italy, resident taxpayers submit their sales invoices to the tax authority's platform for approval. The tax authorities forward any approved invoices to customers for VAT processing and payment approval. Only the e-invoice is the VAT document for VAT deduction.

On the Germany Bundestag, “Introduction of a Digital System against VAT fraud” (February 10, 2021), the German introduction of mandatory e-invoicing is considered based on the Italian clearance model. In Italy, resident taxpayers submit their sales invoices to the tax authority’s platform for approval. The tax authorities forward any approved invoices to customers for VAT processing and payment approval. Only the e-invoice is the VAT document for VAT deduction.

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France and introduction of mandatory invoicing via clearance model

France introduced in its recently eFinance Law for 2021 mandatory e-invoicing. It will be launched in a phased approach. The requirement to provide e-invoices to businesses is combined with a condition to transmit the e-invoice data to the French tax authorities as part of an e-reporting mechanism. Under the new Law, these requirements will be phased between January 2023 and January 2025 depending on the company's size: 2023 for large companies (2023); mid-sized companies (2014); and small and medium companies (2025).

France introduced in its recently eFinance Law for 2021 mandatory e-invoicing. It will be launched in a phased approach. The requirement to provide e-invoices to businesses is combined with a condition to transmit the e-invoice data to the French tax authorities as part of an e-reporting mechanism. Under the new Law, these requirements will be phased between January 2023 and January 2025 depending on the company’s size: 2023 for large companies (2023); mid-sized companies (2014); and small and medium companies (2025).

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