While SAP can validate the syntax and format of VAT numbers, it cannot confirm their real-world validity, leaving businesses exposed to significant tax risks. KGT’s VAT Number Validation add-on automates the verification of VAT numbers, linking directly to the VAT Information Exchange System (VIES) to ensure accurate, compliant master data and minimize indirect tax risks.
Key Features
- Real-Time Validation: Automatically validate VAT numbers during entry into customer or vendor master data using a live VIES connection.
- Result Categorization:
- Error: Prevent invalid VAT numbers from being entered.
- Warning: Flag potentially invalid VAT numbers for review, allowing periodic verification.
- Periodic Checks: Schedule regular validations as part of your Tax Control Framework to maintain ongoing compliance.
- Cross-Border Compliance: Supports correct application of 0% VAT rates in EU transactions, ensuring invoices include valid VAT numbers.
- Seamless SAP Integration: Fully compatible with SAP ECC and S/4HANA, integrating without additional software or interfaces.
Benefits
- Reduced Tax Risk: Minimize exposure to audits, assessments, and penalties arising from invalid VAT numbers.
- Improved Compliance: Ensure the correct application of 0% VAT rates for cross-border transactions within the EU.
- Data Accuracy: Maintain high-quality customer and vendor master data to support VAT reporting.
- Operational Efficiency: Automate VAT number verification and ongoing monitoring, reducing manual effort and human error.
- Enhanced Control Framework: Integrate validation checks into the Tax Control Framework as preventive or detective controls.
Standard SAP only checks the format of VAT numbers but not their validity. This can result in significant tax risks, especially in cross-border transactions. The KGT add-on ensures real-time validation.
Invalid VAT numbers can lead to incorrect application of the 0% VAT rate. During audits, this may result in tax assessments, interest, and penalties that create a substantial financial burden.
KGT’s SAP VAT health checks show that between 5% and 25% of VAT numbers in customer and vendor master data are incorrect or invalid.
It connects directly to the EU’s VAT Information Exchange System (VIES) to verify VAT numbers in real time when they are entered in SAP.
Error mode: The invalid number cannot be saved in SAP.
Warning mode: The number can be saved but is flagged for review, allowing the business to correct or confirm changes.
Yes. Numbers can expire or change if a customer’s legal structure changes. That’s why periodic revalidation is essential.
Yes. It can perform regular checks as detective controls within the Tax Control Framework, and these can be fully automated.
By ensuring only valid VAT numbers are used, it minimizes the risk of incorrect 0% VAT applications, prevents costly tax assessments, and strengthens overall VAT compliance.