Where standard SAP falls short on indirect tax

Many organisations discover the same thing when they adapt SAP to new indirect tax requirements: the standard functionality covers part of the problem, and the rest has to be built and maintained by hand.

Reviewing SAP's functional and tooling capability across the areas that matter in practice, three groups emerge.

Partially covered by standard SAP

Standard functionality exists, but usually needs extending to cover real business scenarios end to end.

• EC sales listing
• Intrastat
• AB sales
• Invoice requirements

Severe gaps and limitations

Something exists, but not enough to rely on without significant custom work.

• Tax ID check
• Time- and date-stamped tax codes
• EDI / IDoc improvements
• ABC sales
• Smart customer VAT number determination
• Smart condition technique
• Purchase tax engine
• Automated regression testing tools
• Third-party drop shipment (ABC and ABCD)

No functionality or tooling

Standard SAP does not address these at all.

• Real-time blueprint access
• Data analysis tool
• VAT management cockpit and dashboard
• Proof of export
• Import/export indicator and country
• Tax control framework and workflow

Why this matters

SAP is highly limited when implementing complex indirect tax requirements, and the constraint becomes most visible when moving custom code from ECC to S/4HANA.

Because of those limitations, tax departments spend a considerable amount of time on manual corrections — and carry the risk of not being compliant, through filings that are incorrect, incomplete or not timely.

Costly extensions of standard SAP tax logic are required to give complete end-to-end business coverage. Every one of those extensions then has to be maintained.

The alternative

To eliminate the manual corrections afterwards, companies choose to implement a tax engine. A tax engine extends the standard SAP indirect tax logic to meet real-time indirect tax requirements — the determination happens as the document is created, inside SAP, rather than being corrected later.