SAP add-on for immediate Supply of Information (SII) in Spain

SII (“Suministro Inmediato de Información”) in Spain is about changing the current VAT management system which has been in place for 30 years, introducing a new bookkeeping system for VAT on the AEAT online system, by providing all billing records virtually immediately. 

The new Immediate Supply of Information accelerates the gap between recording or booking invoices and the actual realisation of the underlying economic transaction.

It is introduced because the current technological situation allows its implementation at this time, to improve both taxpayer assistance as taxation controls (e-tax audits).

SAP add-on solution

In Spain a new VAT reporting system will enter into force on the 1st of July 2017. The new Spanish requirements will have a huge impact on many (multi)nationals that run SAP.

Businesses classified as large companies will just have a couple of months left 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. The goods news is that we developed already a SAP integrated SII solution.

That is not new for us as we have developed similar SAP add-on solutions before when SAF-T in Poland, Lithuania and Norway was introduced. SII is our next step in supporting clients that face IT business challenges.

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.

Our SII for Spain is ready and functionality can be demonstrated via our own SAP environment.

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

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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From tax trends to assessment to implementation

Lets just assume that tax transparency and disclosure of tax risks to the tax authorities is mandatory in force in every country and that the effectiveness of a tax control framework should be proven.

• Are OECD's Standard Audit File for Tax Purposes data requests (monthly and on request) - now rolled out in various European countries - the start of a new beginning for better audits by the tax authorities?
• Is it likely that tax authorities will get access to more sophisticated tax analytics tools?
• Do companies need better risk management tools to meet tax objectives set derived from business objectives?
• Do companies face additional tax risk due to (close to) real time data requests of the tax authorities - implemented for example in Brasil and will be in force in Spain per July 1, 2017 - and does it impact a company's audit defense, tax risk management, ERP systems and tax technology?

Without doubt, the answer to all questions is a resounding yes.

Source: From tax strategy to artificial intelligence to automating the tax adviser | Richard H. Cornelisse | Pulse | LinkedIn

From tax strategy to artificial intelligence to automating the tax advise

Innovation' and 'Tax strategy' have my interest. In the UK the Executive has to sign off the company's tax strategy and publish. The strength of the UK approach is that the Executive has to take position and also keep its promise as a public statement has been made.

This legal change realised that it has now become an Executive owned KPI to manage overall tax risks resulting that the supervisory board and external auditor have a responsibility to audit 'being compliant' as the company might face reputational risks when that promise is not kept.

Without such Executive sign off not much would have changed tax function wise. At least that is the lesson learned from the Dutch initiative: 'Horizontal Monitoring' where such a sign off and public statement was missing.

Do you see the difference from a governance perspective?

Source: From tax strategy to artificial intelligence to automating the tax adviser | Richard H. Cornelisse | Pulse | LinkedIn

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

OECD – Consumption Tax Trends 2016

Tax revenues collected in advanced economies have continued to increase from last year’s all-time high, with taxes on labour and consumption representing an increasing share of total tax revenues, according to new OECD research.

The 2016 edition of the OECD’s annual Revenue Statistics publication shows that the OECD average tax-to-GDP ratio rose slightly in 2015, to 34.3%, compared to 34.2% in 2014. This is the highest level since the Revenue Statistics series began in 1965. An increase in tax-to-GDP levels was seen in 25 of the 32 OECD countries that provided preliminary data in 2015, while tax-to-GDP levels fell in the remaining seven countries.

Consumption Tax Trends 2016 highlights that VAT revenues are the largest source of consumption tax revenues in the OECD, and have now reached an all-time high of 6.8% of GDP and 20.1% of total tax revenue on average in 2014.

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A cost efficient way to submit SAF-T files and perform risk management

To support the development of this guidance the OECD has laid out the Standard Audit File for Tax Purposes (SAF-T). This guidance establishes the standard to be used for the exchange of tax data between companies and tax authorities. 

The aims of the CFA guidance are to simplify tax compliance and audit requirements by clarifying the information required from business and accounting systems for tax reporting. As a result SAF-T is intended to give tax authorities easier access to the tax relevant company data (corporate income tax and VAT) in a consistent format leading to more efficient control and audit of tax regulations. 

Every company with a SAF-T-requirement is now facing the challenge of finding an easy and reliable way to deliver the required data. Multinationals have the further challenge of providing a range of country-specific information in a controlled and efficient manner. Efficient use of technology lowers costs of data collection and compliance. 

As a result more and more tax administrations around the world are implementing electronic auditing of business’s financial records and systems as part of their compliance regime. Countries might have their own specific local SAF-T requirements but in case the basic required data are covered in the OECD framework it could be managed with country specific variants. 

You can compare it with the EU VAT requirements: EU Directive as framework with some country specific rules based on the options in the EU Directive. Taxpayers will be obliged often to submit the SAF-T format:

• - on request in the case of a preliminary tax inquiry, a tax audit and tax proceedings;
• - monthly mandatory VAT SAF-T

The SAF-T VAT file should reconcile with the numbers of the VAT return to avoid a higher risk of a VAT audit. Often I hear that the on request is given a lower priority. Be aware that audit defence is an important building block for a sound tax strategy.

Although it is an 'on request' obligation it is important to run this requests regularly and archive. This data will be used by the tax authorities for a tax audit to check whether tax positions taken in the tax reporting and /or rulings closed (corporate income tax and VAT) actually reflect the data in the SAF-T files.

It is critical that your in-house tax department has sufficient time to assess the 'on request' data for any unacceptable tax risks. I recommend use this functionality in-house as a pre-audit prior to the law being in force.

A SAF-T SAP add-on solution developed together by 'Tax Assurance and certified SAP add-on specialists' is now available for Poland, Lithuania and Norway and is scalable. The SAP add-on is extendable to countries that uses the OECD framework as the basis for SAF-T reports.

Note that countries might have their own specific local requirements but in case the basic required data are covered in the OECD framework it could be managed with country specific variants. Certain countries such as France, Portugal, Austria, Luxembourg, etc. - have already SAF-T in force.

Richard H. Cornelisse, Tax Assurance specialist - access PowerPoint for further explanation