An Overview of Taxes in SAP S/4HANA Finance

Sealinfotech
April 07, 2022

SAP is continuously working on making S/4HANA an “intelligent enterprise” application and tax becomes a vital component of this entire journey.

There are two types of Tax, namely Direct and Indirect where entire legal regulations and any mandatory changes create a high impact. Hence, the technology should be made quickly available and adapt to this situation for providing viable tax solutions.

Here, we will discuss how SAP S/4HANA is addressing and creating the required solutions for direct and indirect tax.

Indirect tax For this, SAP is already offering country-specific tax procedures and reports to make it even more standardized worldwide to tackle the emerging indirect tax requirements.

These are part of Global Tax Management solutions which supports tax determination calculation, reporting, and compliance.

SAP Tax compliance – This application is part of SAP Assurance and Compliance for SAP S/4HANA, and its add-on to SAP S/4HANA. Know more about SAP Support Services in UAE Uses:

To automate and manage various tax compliance checks
To find and permit the tax compliance issues
To increase the quality of tax data and
To reduce non-compliance risks, etc.

It can be used in tandem with Machine Learning (ML) and also can automatically execute tax corrections for a particular period.

SAP Document and Reporting Compliance – This is a combined package consisting of Advanced Compliance Reporting and Document Compliance into one product. It is used to work on all kinds of mandates from real-time e-business documents to reports and enables organizations to address a new number of transaction controls.

It helps organizations automate repetitive tasks, improves efficiency, and standardizes operations worldwide. It helps to fulfill the advanced emerging digital trends.

This is the unique and sole solution for the fulfillment of real-time and statutory reporting needs including the processing of transaction controls, online requirements, etc.

Know more about What is included in SAP Enterprise Support?

Electronic document processing – Every country has different requirements where technology progression and digitization of companies with the need of legal needs and submission of e-documents to the tax authorities have also increased towards continuous transaction controls.

Depending on the country, there are different deployment models:

PaaS (Platform as a service) Solutions – based on the customer-owned SAP Integration Suite; designed to cover e-invoicing and real-time reporting requirements in multiple countries.
SaaS Solutions – based on public cloud service that can send and receive compliant invoices based on external standards.

SAP Tax Service – Due to increased SAP solutions, even tax solutions got diversified. Also, different systems require different structures or coding. For example, the logic and setup in SAP S/4HANA, SAP Ariba, and the old SAP ECC are different. But if we want to make the tax processes similar in all these applications, we need to be prepared to invest greater efforts in terms of implementation and maintenance. Or instead, SAP Tax Service can be tried as another option. It is part of a service in the Cloud platform, SAP Localization hub, which has a tax calculation center and country-specific needs applied to govern and calculate the relevant tax codes for meaningful business transactions. As of Q2 2021, SAP has stopped any newer enhancements on Tax Service and confirmed maintenance mode only. In the Tax Service, the highly used is the S/4H integration to external tax centers. External tax engines – There are many external indirect tax solutions, most of them were available since the old SAP ECC. They are Vertex which handles VAT and GST, Meridian, Taxware, and so on.

Direct tax

Tax accounting solutions before SAP S/4HANA were supported by a normal ledger or a special ledger. There weren’t any localized tax solutions as it is for a statutory accounting system. Hence, additionally, automation opportunities are made available in SAP S/4HANA. In SAP S/4HANA Best Practices, you will still find three main ledgers/ accounting principles named Group, Local, and Tax. There is an extension ledger that can also be an option to be gauged for Tax. This option is suited where tax needs are just some variations from the statutory accounting principle. Corporate Income Tax Framework – This enables the automated classification of tax expenses, centralized review with continuous drill-down to the transactions, and manual handling of exceptions, all in the system of record.

Conclusion

SEAL Infotech being an SAP Certified Gold Partner offers customized SAP S/4HANA services and support to organizations.

If you want to actively engage and implement SAP products in your organization, call us immediately at the below contacts. Get more information about SEAL Infotech’s SAP S/4HANA Services either by calling us at +971-4-3670377 or by mail to info@sealinfotech.ae.