A SAP add-on to be able to cope with SAF-T and e-tax audits

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Tax authorities around the world want to receive more frequent and faster tax relevant data for e-audit purposes to analyse Corporate Income Tax (CIT) and VAT positions taken to combat VAT fraud and to determine whether actually a fair share is paid (Base Erosion and Profit Shifting: ‘OECD’s BEPS’).

More countries will therefore move to data request to monitor and electronic audits (e-audits) taxpayers. SAP itself does not provide an E2E solution to meet these (new) legal requirements.
More an more countries will implement ‘the Standard Audit File for Tax Purposes (SAF-T) developed by the OECD. This format is intended to give tax authorities easy access to the relevant data in an easy readable format. This leads to much more efficient and effective tax inspections.
E-audits will be performed – using data analytics – on data submitted electronically by the taxpayers.

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Converting the sales middleman function from Commissionaire to LRD

The objective is to bring commissionaire arrangements within the framework of dependent agency PE. Companies are converting commissionaire to LRD. Once a commercial and tax-efficient structure is determined— one that addresses both historical and potential risk – it is time to take the theory behind the structure into the realm of practice.

Moving away from commissionaire structure

As businesses are facing global challenges it makes sense that the existing business model is reevaluated and amended when necessary to meet the new PE environment. A less risky model is the limited risk distributor (LRD).

That most likely means moving away from a commissionaire structure. Principal company sells to a master sales company (e.g., in the same country as the principal company) under a LRD agreement, and the master sales company resells through its local branches.

Note that the tax authorities might have an extra interest in auditing the conversion.

Read more: Converting the sales middleman function from Commissionaire to LRD

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Standard Audit File for Tax Purposes in OECD format

Creating XML SAF-T Structures directly in SAP ECC. SNI SAF-T is a SAP add-on that runs over SAP ECC, is compatible with OECD standard and covers the steps of creation of necessary structures in XML format including E-submission with signature and encryption.

Tax authorities, due to technological innovations, have become increasingly better in executing their tax audit. The probability that the Tax Authorities will issue additional assessments and penalties in the near future because errors in indirect tax are detected, increases by the day.

The SAF-T standard, originally created by the OECD, is intended to give tax authorities easy access to the relevant data in an easily readable format. This leads to much more efficient and effective tax inspections.

Tax authorities collect and analyze already indirect tax data (e.g. SAF-T for VAT). The focus is not only about timely and accurate VAT reporting but as well whether on high risk areas an effective tax control framework is in place. Tax risk management methods are assessed.

Source: Standard Audit File for Tax Purposes in OECD format

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Brexit – The benefits of a SAP add-on

Although the EU VAT regime will remain in place until negotiations between the UK and the EU will be concluded, it is most likely that new UK VAT legislation will come into force in the spring of 2019. It seems you have enough time, but I highly recommend to anticipate on these law changes as soon as possible.

In order to implement Brexit, SAP settings have to be changed. From an operational perspective processes and controls of companies have to be updated to the new situation at hand. SAP must reflect these changes which means that tax determination logics, tax codes, invoice and reporting requirements have to be assessed and the new rules should be implemented.
Besides assessments by the tax function, a considerable effort by the IT department is required to implement Brexit. Change management processes follow strict IT policies and specific and extensive test rules apply before changes can go to the ERP production system. Those mandatory test cycles are time consuming and have a huge impact on resources.
When manual processes and controls are set up to manage complex VAT transactions that include dealing with the UK, new guidance should be drafted and ongoing review should take place to check if these new procedures are actually complied with.
A thorough and effective preparation should include a stakeholder analysis and the development of a SAP roadmap for change. This will provide insight into the work effort and the amount of time and money that you’ll need to invest. To help you manage and process changes, such as ‘Brexit’ or the accession of a new EU member state, PwC developed the SAP add-on tax engine Taxmarc. When this add-on is up and running in your SAP environment changes become transparent and easy to manage.
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Italy new – submit quarterly data: ‘VAT invoices’ and ‘VAT calculations’

Quarterly informative report VAT invoices data

Starting from 1 January 2017 a new informative report of VAT data related to AP and AR invoices, including related credit and debit notes and customs bills, has to be filed by taxpayers on a quarterly basis (former Spesometro).

This new report should include the following data:

  • The parties involved in the transaction: VAT number, name, address, fiscal representative
  • Date and reference number of the invoices
  • Taxable basis, VAT rate and VAT amount
  • Type of transaction, reason of VAT exemption
  • For correction invoice the reference to the reported original invoice

The deadline for filing will be the last day of the second month following each calendar quarter (e.g., 31 May 2017 for the first quarter of 2017). Penalties apply in range from a minimum of € 2 to a maximum of € 1,000 per quarter will be imposed for any omission or incorrect filing of each invoice.

Quarterly VAT calculations report

As of 1 January 2017, on a quarterly basis the figures for calculating the periodical VAT settlements – periodical VAT calculations as well as VAT calculations showing a VAT credit – have to be reported and submitted electronically. The deadline for filing will be the end of the second month following the each calender quarter (e.g., 31 May 2017 for the first quarter of 2017).

The tax authorities will perform a consistency check between the data reported and the VAT payments made. In the case of inconsistencies, penalties could apply from a minimum of € 500 to a maximum of € 2,000 for submitting an incomplete or inaccurate report.

We offer a new SAP add-on solution by which the quarterly informative report can be submitted timely via our integrated SAP solution in an automated fashion. We can provide support as well with implementing the right processes and controls of the quarterly VAT calculations.

Source: SAP – submitting close to real time data to tax authorities

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Poland – create automatically the VAT SmartPdf file from SAP

Companies selling across European Union borders have to submit EC Sales List (ESL). This should contain the details of sales or transfers of goods and services to other VAT registered companies in other EU countries summarized per VAT registration number. The tax authorities in the EU use the listings to check whether VAT is declared by the parties involved in cross-border transactions (e.g. no mismatches).

In Poland a specific extra local requirement applies. From 1 January 2017 taxpayers making transactions with EU members will be required to submit mandatory the declaration only in electronic form. The aimed is earlier identification of possible abuse. The summarized amount per VAT registration number for the sales of goods, acquisition of good and services need to be reported separately to the authorities in PDF.

The PL Tax Authorities provides a VAT Smartform Pdf that a company has to fill in with the requested information. That Smartform has to be mandatory used to meet the requirement and without support the data has to be entered manually by the company.

Entering data is a time consuming process. Besides the impact on internal resources, such manual activity increases the risk of data errors, i.e. with entering the VAT registration numbers in the Smartform Pdf.

Stricter penalties apply for individuals involved in tax fraud and penalties are introduced for taxpayers who do meet the legal requirement of submitting declarations in electronic format.

We offer a new SAP add-on solution that creates automatically the VAT SmartPdf file from SAP. When our SAF-T SAP add-on solution has been purchased this additional functionality will be managed under SAF-T cockpit as a different report.

Source: SAP – submitting close to real time data to tax authorities

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Spain – submitting close to real time data to tax authorities

In Spain a new VAT reporting system “Suministro Inmediato de Información” (SII) will enter into force on the 1st of July 2017 that will impact approximately 62,000 companies. These companies have to submit electronically to the Spanish tax authorities data from all AP and AR invoices within 4 days after an invoice is either issued or booked. In the first 6 months – as a transitional period – the companies will have 4 extra days (8 days in total) to submit these invoices.

Automated extraction of the invoice data will be essential to meet the new rules in an automated fashion. The required invoice data has to be transformed in the required SII format (XML) and due to the short deadlines for submitting the report it is preferred to do it in the source system where the invoices are captured. For most companies the required data are already available in the SAP system. When e-submission of invoice data is implemented the administrative burden will also be lowered as only certain tax self-assessments has to be filed and certain cumbersome declarations no longer need to be submitted.

Businesses classified as large companies will have just over 6 months to adopt this new requirement in its processes, controls and systems. It will be a real challenge. Failure to comply in time could result in penalties and increased risk of a tax audit.

We developed a SAP add-on solution by which the e-submission of the required data from AR and AP invoices is fully integrated in SAP without an external interface or use of external software. With this add-on the submission of the requested invoices can be done automatically and in time.

Source: SAP – submitting close to real time data to tax authorities

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