presenters...the number of allowed tax codes. no limitation on the number of tax drivers –any...
TRANSCRIPT
Presenters
Sarah FaneHead of Content
sharedserviceslink
Wendy FischnallerBusiness Development
DirectorVertex
Lucibeth HammondSenior Manager, Indirect
Tax Systems and Governance
PWC
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AgendaContext
As digital transformation efforts are accelerating, many companies are overlooking how tax fits into their digital transformation strategy.
While migrations to ERPs such as SAP S/4 Hana are helping finance teams move to the cloud, many businesses are realizing the platform doesn’t have the right tax functionalities for complex, multinational enterprises.
Today we explore:• Tips to define a global template to standardize processes, harmonize
data and document process specific customizations• How to reduce risk in your Hana S4 transformation• What regimes should be considered during the early phase of the project
from US to EU
Digital Transformation and Tax: Is SAP Fit-for-Purpose?Webinar presented by PwC and Vertex 24th June 2021
Wendy FischnallerBusiness Development DirectorVertex Inc. E: [email protected]
Presenters
Lucibeth HammondIndirect Tax OperationsPwC UKE: [email protected]
Presenters
Content
Learning objectives• Tips to define a global template to standardize
processes, harmonize data and document process specific customizations
• How to reduce risk related to indirect tax in your SAP S/4HANA transformation
• What regimes should be considered during the early phase of the project from US to EU
Indirect Tax – The Changing Landscape
Data requirements, tax obligations, tools and software
requirementsGap analysis of existing active data
and cleansing activities to take place prior to project inception.
Requirements gatheringA global design drives efficiency in implementation and drives down risk.
Global design
Create a system which matches today’s world – it's critical to
create a solution which can evolve over time.
Fit-to-Standard / LocalisationsFlexibility and maintenance
01 02
0304
Approaching a Global Transformation in a Changing Landscape
What step-outs are required?Which countries will need something more?
Complex
US
Brazil
EU
India
Which tax regimes require special consideration?
China
IDENTIFYRISKS
CONTROLRISK
ASSESSRISK
REVIEWCONTROLS
Indirect Tax Risk comes from deficient or missing controls and not managing the
complex requirements in global tax regimes.
Assess risk by cconsidering all relevant tax jurisdictions including areas of exposure around indirect tax including tax reporting and input tax recovery
Implement changes in indirect tax as part of the S4 Transformation with
regular follow ups to ensure controls are being implemented.
After the assessment phase, its necessary to determine what risk areas are of highest concern whether it’s a volume of transactions, particular jurisdiction or largest financial impact.
Governance and controls
ContentHow can PwC help?
• Business case / tax function support
• Global requirements gathering
• Global design
• Localisations and "Fit-to-Standard" design
• Business Integration / System Integration role for:
• SAP / finance system – maximising system-based capabilities
• Tax engine (including automated testing capabilities)
• E-comms (Tax Authority Comms / E-invoicing, etc.)
• Indirect Tax reporting
• Technology managed services for ongoing maintenance and assurance
• Governance and control support
14
Is SAP Fit for Purpose?
15
Apply tax intelligence to optimize VAT processes
Correctly apply standard rates and exception every time.
Easily support complex VAT transactions in SAP.
Visualize chain flows and ensure correct application of tax.
10 countries with tax
authorities and rules, reporting
and invoice requirements.
Minimal complexity but
41 countries applying VAT.
Mix of new VAT regimes with
changing rules and established
regimes.
17 Countries across Asia
Pacific
European CountriesComplex place of supply rules, ecommerce marketplace rules
and product taxability. Increasing complexity around
SAF-T and compliance reporting.
Classification of goods and services for tax
US has 14,000 jurisdictions with rates
ranging from 0% to 9.55%
Services are sometimes taxable.
Canada is a mix of VAT and Sales Tax Authorities.
Russia
17
Improved tax classification efficiency
Whatif you could apply correct taxability every time?
Manually classifying and maintaining each product individually
Every single material in your system must be coded with a tax classification indicator.
Each country individually defined.
Only need to map exceptions
Doesn’t require updates when a tax rate changes, or a country specially rates a product.
Global activity, eliminates per country effort.
VS
18
Apply tax intelligence to optimize VAT processes
Correctly apply standard rates and exception every time.
✓ Global Setup
✓ Vertex Tax Research handles all changes
✓ Supports goods / services rules globally
✓ Correct tax result and simplified reporting.
Easily support complex VAT transactions in SAP.
Visualize chain flows and ensure correct application of tax.
Global VAT rules are complex
20
Automate VAT rule complexity
Whatif you aren’t a global VAT expert..but responsible for global VAT?
SAP native tax functionality cannot support complex transactions.
IT lacks VAT expertise
Manual processes require time, manpower and workflows but lack consistency and controls.
Vertex O Series maintains all complex VAT rules
This includes jurisdictional rules, place of supply and related VAT functionality.
Global solution with country specific applications. In built controls and visibility over changes.
VS
21
Apply tax intelligence to optimize VAT processes
Correctly apply standard rates and exception every time.
✓ Global Setup
✓ Vertex Tax Research handles all changes
✓ Supports goods / services rules globally
✓ Correct tax result and simplified reporting.
Easily support complex VAT transactions in SAP.
✓ Achieve the correct tax result automatically without manual interference.
✓ Vertex supports VAT rules globally
Visualize chain flows and ensure correct application of tax.
Can SAP support complex chain processes?
SAP Native
Tax Engines
SAP is delivered with a standard access sequence
for tax determination
Tax Engines have infinite options to
configure for complex
transactions.
1. Plant or Company Code Country
2. Ship To Country3. Customer Tax Classification4. Material Tax Classification
SAP Standard Tax Drivers
• Ship From Country• Ship To Country• Commodity Code from
Material Master or Mapping to Material
• Plant• Document Type• Destination Country• VAT Registrations of
Counterparty• Inco Term• Data Elements from
related transactions such as intercompany transactions
Tax Engine – limitless configuration
23
Automate VAT rule complexity
Whatif you could make tax determination correct..for each leg of a transaction?
SAP native tax functionality cannot support chain transactions.
Valuable IT time spent modelling transactions to support VAT requirements.
As the business grows, the tax solution cannot keep up and eventually becomes obsolete.
Vertex’s Chain Flow Accelerator is a visualization tool that allows tax users to create chain transaction models which can be used for the global business.
This leverages O Series VAT rates, product taxability and place of supply rules.
Visual, intelligent mapping makes life easier – no more worrying about an S4 journey.
VS
24
Apply tax intelligence to optimize VAT processes
Correctly apply standard rates and exception every time.
✓ Global Setup
✓ Vertex Tax Research handles all changes
✓ Supports goods / services rules globally
✓ Correct tax result and simplified reporting.
Easily support complex VAT transactions in SAP.
✓ Achieve the correct tax result automatically without manual interference.
✓ Vertex supports VAT rules globally
Visualize chain flows and ensure correct application of tax.
✓ Tax is able to support changes in business flows or tax requirements, less reliance on IT
✓ Reduce risk in S4 transformation
Ea s e o f a d o p t i o n f o r t a x c h a n ge s a n d s c a l a b i l i t y a r e ke y d i f fe re n c e s .
Solution consists of tax codes and condition records which are relatively quick to configure.
Simple: 4 tax drivers including Tax Classification Indicator to be assigned to Materials and Customers to determine taxability.
Tax Code assignment for purchasing is largely manual, some automation could be achieved by applying a TCI to materials or account assignment.
Tax Law Changes are burdensome, new tax codes and/or condition records are required.
Tax Codes are defined without tax rates making the solution scalable. There is no worry about exceeding the number of allowed tax codes.
No limitation on the number of tax drivers – any master data or transaction element can be sent to the tax engine to make a tax decision.
Changes in business model, new markets or product flows are easily adapted, generally without changes in SAP.
Native SAP can still be used for reporting purposes or the tax engine will seamlessly integrate with a compliance tool.
Cloud solution means country rate and product taxability changes occur seamlessly.
SAP Native Tax Engine
Complex chain transactions, triangulation or unique taxation requirements in EU countries often results in manual workarounds.
Vs
SAP Native vs Tax Engine
SAP Native vs Tax Engine - Business as UsualKe y B AU & S u p p o r t d i f fe re n c e s .
Automated month-end process, reporting on exceptions.
Business/Tax Team own the responsibility for tax rate and product changes. .
The tax ax team will rely heavily on IT resources for change enhancements relating to tax.
Tax technology production support is the responsibility of Tax & IT teams.
Lengthy manual processes using excel for month-end reconciliations .
The tax engine provider owns the responsibility of rate and product taxability charges, often this occurs seamlessly.
Tax team can manage a large proportion of change enhancements using the engine interface, less reliant on IT.
Tax technology production support can be outsourced to indirect tax technology experts. Less burden on internal IT.
A tax engine can be configured to stop a non compliant transaction and submit for review.
SAP Native Tax Engine
Transactions will most likely need to be monitored manually to correct errors.
Vs
The Tax Journey within the customer ecosystem
27
Data IntegrityChecks
Vertex O Series Calculation Engine
Source Systems (SAP)
ERP, eCommerce, Billing, Procurement & Others
Vertex Global Compliance
Statutory Reports
28
In Summary
+ Change in the Regulatory Environment is relentless
• Budgetary issues results in greater scrutiny
• Digitisation is disrupting the decades old compliance lifecycle.
• Authorities can examine companies from every angle.
+ Tax Transformation must “see the future” and be defined in a way that systems and solutions can evolve.
• Automate tax calculation for greater accuracy and to reduce risk
• Create a global process where possible
• Be ready for change.
+ First step is to determine whether SAP native tax is a fit for your company.
• Don’t allow your IT team and the SIs to dictate solutions that your tax department must live with.
• Tax Engines and Compliance tools are global while e-invoicing solutions are regional or country specific.
➢ Align people processes and tech to not only manage but pre-empt changes and inquiries.
➢ Consider your choice of tax technology partner in the journey.
➢ Don’t allow time and budgetary pressures to override the need for tax technology.
+ Founded in 1978
+ Global organization with growing European presence
✓ ~60 staff members located in Europe
✓ Offices in UK, Ireland, Belgium, Netherlands, Germany and Sweden
✓ VAT research, product management, customer support
✓ Significant SAP and customer expertise
+ Over 50% of the Fortune 500 trust Vertex
+ 19,000 tax jurisdictions
+ Over 300 million data-driven effective tax rules
+ Over 250 VAT customers In Europe
+ 100+ Tax professionals provide real-time rule and rate update
ContentVertex - the most trusted name in indirect tax automation
ContentQ&A
Wendy FischnallerBusiness Development DirectorVertex Inc. E: [email protected]
Lucibeth HammondIndirect Tax OperationsPwC UKE: [email protected]
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