Hungarian SAP health check: data in SAP incorrect and incomplete!

From 1 July 2018, taxpayers are as stated earlier obliged to provide within 24 hours invoice data for domestic transactions with a minimum VAT amount of 100,000 HUF (322 EUR).

Although we offer a fully SAP-integrated solution in SAP itself to submit required data in an automated way, it is essential to review whether the data in SAP itself is correct and complete.

The Key Group has recently delivered its Hungarian SAP health check pilot for one of its major clients, and the outcome was that quite some changes in SAP had to be made to avoid either future questions by the tax authorities or announcement of a tax audit when data is submitted mid-2018.

Please keep in mind that the Hungarian tax authorities are aware that SAP setup itself is often not in order and that tools outside the ERP system are used to remediate and manipulate tax data outside of SAP with the purpose to improve tax reporting.

The full automated legal requirement is to force taxpayers to remediate the ERP VAT setup itself and realize that taxpayers do not use workarounds as Excel sheets or similar tools outside the ERP system as human intervention is not allowed.

When the definitive EU VAT system becomes in force - expected in 2021 - these data requests become even more critical. The local tax authorities will use the acquired tax data to check whether sufficient tax revenue is received from the other Member State(s).

Based on this pilot we have designed an efficient and effective assessment process that will include not only an overview of gaps but as well our view how to remediate these gaps in SAP itself.

 The Key Group offers an SAP health check specifically on the Hungarian legal requirements defined in XML format.

Download: brochure
Read more: eInvoicing requirements in Hungary per July 1, 2018

eInvoicing requirements in Hungary per July 1, 2018

From 1 July 2018, taxpayers are as stated earlier obliged to provide within 24 hours invoice data for domestic transactions with a minimum VAT amount of HUF 100,000 (322 EUR). The ERP system must be able to detect sales invoices meeting reporting requirements: the minimum VAT amount. To be able to comply with the requirements and provide the data on in time, a taxpayer needs to develop either tooling or purchase a solution.

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Commission develops TNA software to identify fraudulent networks

To speed up the joint processing and analysis of data within Eurofisc, the Commission is currently developing TNA software for voluntary use by the Member States as of 2018.

In order to maximise TNA’s potential to identify fraudulent networks across the whole EU, Regulation (EU) No 904/2010 would make clearer provision for the joint processing and analysis of data within Eurofisc.

Involvement in such processing and analysis will remain voluntary. However, all Member States should grant Eurofisc officials access to their VIES data on intra-Union transactions through TNA.

In that way the software can identify all potential fraud networks, including those involving traders established in non-participating Member States.

Read more: Fair Taxation: Commission proposes new tools to combat VAT fraud

Towards a new and definitive VAT system for the EU

 

According to the Commission's proposals, VAT will now be charged on cross-border trade between businesses. Currently, this type of trade is exempt from VAT, providing an easy loophole for unscrupulous companies to collect VAT and then vanish without remitting the money to the government.It will be simpler for companies that sell cross-border to deal with their VAT obligations thanks to a 'One Stop Shop' (OSS).

Traders will be able to make declarations and payments using a single online portal in their own language and according to the same rules and administrative templates as in their home country. Member States will then pay the VAT to each other directly, as is already the case for all sales of e-services.The Commission also proposes a move to the principle of 'destination' whereby the final amount of VAT is always paid to the Member State of the final consumer and charged at the rate of that Member State.

 Source: Towards a new and definitive VAT system for the EU

Tax authorities demand more, faster and more frequent data

The fierce debate on a fair distribution of tax revenues by governments has reached new heights. Tax shift due to risk allocation of transactions to low tax rate countries and even globalization itself are under political discussion.

Protectionism is an important part of the strategic objectives of certain governments. Additionally, the discussion concerning BEPS and state aid have caused fiscal uncertainties that force companies to reevaluate risks. In some cases this can even lead to changes in the business model.

Current business models are put under a magnifying glass, but also the change of business models – for instance from commissionaire to limited risk distributor – will get attention from the tax authorities.

 A reorganization in the Dutch Tax and Customs Administration has established the objective that routinely and labor-intensive, yet relatively simple control activities are to be taken over by automated processes.

That is, modern technologies appear to substitute to role of the ‘traditional’ tax auditor. The idea is that new computer systems and data analysis software will allow data files from different source systems to be connected, thereby enabling more efficient tax control and requiring fewer ‘traditionally educated’ employees.

The objective also holds that the tax authorities have earlier and faster access to relevant tax data and that this data is periodically provided by tax payers in a format that is prescribed by the government and that can easily be read and immediately reveal inconsistencies in fiscal activities.

Transfer pricing and/or VAT regulations are still not sufficiently taken into account in the development of VAT-automation regarding business processes.

This makes that the data that is captured in a vast amount of financial administration, can ‘impossibly’ be compared with that which is stated on the tax returns.

All chapters

1. Introduction: Relevant tax data from Transfer Pricing and VAT: explaining the ‘Why’, ‘What’ and ‘How’
2. The auditor is not (yet) a risk analyst
3. New tax legislation in the UK: 'Tone at the top'
4. More attention for Transfer Pricing
5. More attention for VAT
6. Tax authorities request more, faster and more often tax data
7. SAF-T rolled out in more countries
8. 'The impact on in-house tax function' and 'Preaudit before submit'
9. Realise a joint tax responsibility
10. Read: complete article with all chapters and links to follow up articles (in depth)

Above is a translation of article published in Vakblad Tax Assurance. Dutch version can be downloaded for free: Download click the link

Tax Risk Management - submitting tax relevant data to the tax authorities

Tax authorities are besides optimizing traditional tax reporting systems increasingly implementing in addition electronic (almost) 'real-time' transaction reporting systems. It is expected that tax authorities due to technological innovations become increasingly better and faster in executing their tax audit.

Complementary to the existing and more traditional tax reporting in countries like Austria, France, Lithuania, Luxembourg, Norway, Poland, Portugal, Spain already (close) to real time data request have to be submitted and/or should be available on short notice when a tax audit is announced. 

In countries like Austria, France, Lithuania, Luxembourg, Norway, Poland, Portugal, Spain already (close) to real time data request have to be submitted and/or should be available on short notice when a tax audit is announced. 

What is next?

Italy, the VAT invoices data informative reports must be filed with the tax authorities on a six-monthly basis starting by September 18, 2017. From 2018 the deadlines will be on a quarterly basis. For Hungary realtime invoicing is postponed to 1 July 2018. Companies need to have a solution implemented that is capable of real time data transfer by 1st of July 2018 at the latest.

It is however not clear how the tax authorities actually will analyse the data received. That might change soon as their strategy is an improved and faster tax audit including combatting VAT fraud as an overall EU priority.

Let me explain

Being ready for GCC VAT introduction when operating SAP

The Governments of the Gulf Cooperation Council (GCC) - Bahrain, Kuwait, Oman, Qatar (status unknown due to GCC politics/friction), Saudi Arabia and the United Arab Emirates that make up GCC - are committed to form a common framework for the introduction of value added tax (VAT) in the region. In order to achieve conformity within the GCC, it is anticipated that the six member states will all aim for implementation of VAT during the period commencing 1 January 2018 or by the end of 2018.

VAT as a process will affect many aspects of businesses operating in the GCC and will require significant time to plan, and integrate into existing processes.

Setting the objectives

• 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
• To 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)

Based on above objectives the PDF document 'More detailed description of Work in booklet' established the scope, schedule and means of initiating the work to be performed by the service provider and describes or references the specifications, instructions, standards, and other documents, which the service provider shall satisfy or adhere to in the performance of the work

The KEY Group is supporting one of the largest multinationals with the setup of the GCC VAT rules in SAP itself

Read more: Being ready for GCC VAT introduction when operating SAP

Contact us for more information

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