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SAP VAT Implementation

KGT has the practical experience and understand SAP's VAT possibilities and its limitations and thus have the know-how to free up resources, reduce manual activities, and manage risks. We implement the VAT rules in SAP and are well equipped to enhance standard SAP for both the VAT determination logic of outgoing and incoming invoices and optimize VAT reporting.

Concerning the possibilities, we can express the wishes to the external SAP consultant in his language, and we can demonstrate how to achieve it in SAP.

For nearly every company, the accuracy and efficiency of local-country VAT compliance are almost entirely dependent on the functionality of the underlying ERP system. Operational malfunctions in a system that is used to manage VAT compliance can lead to substantial financial risks.

There are countless examples of the mismatching of VAT treatment of purchases and sales in chain transactions, double payments of VAT and 'forgotten' manual adjustments to the VAT filing, all attributable to shortcomings in SAP’s automated VAT solution.

Companies have to ensure that the VAT determination logic in the SAP systems is correct, easy to implement and remains also moving forward VAT compliant. In practice, specific functionality intended for the support of VAT objectives does often not get used - due either to reluctance (not within budget) or a lack of VAT SAP knowledge during design. Client's objectives typically are:

  • To be ready in time and a need of an effective and efficient work process between tax function, IT function and its third-party consultants
  • To optimize its VAT deduction and to automate this VAT process as much as possible in SAP
  • Limit VAT risks and meet VAT reporting obligations (e.g. reverse charge mechanism to avoid non VAT compliance)
  • To automate VAT processes via enhancing the SAP 'as is' functionality where possible
  • Set up processes and controls when VAT automation is not feasible
  • To test new SAP functionality prior to go-live (sandbox)

There are two distinct phases for the VAT system implementation, the Solution Design (phase 1) and the 'System Implementation (phase 2). This scope of works identifies in detail the requirements for phase 1 and phase 2.

Phase 1 - Design a Business Blueprint outlining the implementation of VAT in SAP and supporting systems. Develop this blueprint through understanding and incorporating the VAT requirements, Client's VAT strategy, detailed business requirements and current system landscape.
Phase 2 - Implement the blueprint in conjunction with the Client's IT team, including testing, training, documentation and go-live support. Develop the appropriate reporting for compliance with VAT requirements between client's SAP system and government authorities.