Don’t be afraid of the big bad wolf: why you should do a tax code restructuring

‘s-Hertogenbosch, 22-02-2022: Tax codes – why we recommend restructuring

Almost every company for which we implemented Taxmarc over the past years admits that their taxcode setup is a mess. We always recommend taking the opportunity to restructure your tax codes as part of a Taxmarc implementation. But although everyone recognizes the problem only a few companies are willing to actually push through this reorganization. Why is that?

Let’s see how most companies got to where they are. SAP comes with a predefined set of taxcodes and tax procedures, so you decide to use them. It looks OK.

But wait, your Dutch company also has a registration in Germany, so you need German taxcodes in the Netherlands procedure

Not as nice anymore. Then Germany announces a temporary rate change for Covid relief to 16%. So you need new codes in the German procedure

And of course also the Dutch company needs to apply these reduced rates in Germany

And pretty soon you can’t see the forest for the trees anymore. Your AR people need to know that really A3 = A1  and A4 = A2 etc. depending on what country you are in. Selecting the right code gets complicated and reviewing transactions and tax returns is cumbersome. 

Not to mention of some companies that run out of codes because they are registered in 3010 or more EU or even Non-EU countries. 

Taxmarc comes with a set of predefined taxcodes that are set up logically and can be used worldwide. And thanks to the Finance Taxcode solution module, these codes will NEVER CHANGE. And even better, all these taxcodes and the corresponding condition records for sales, purchase and finance are included in your Taxmarc installation. So the implementation of Taxmarc is a great moment to restructure. Your above setup would look a lot simpler and again WILL NEVER CHANGE. 

The taxcodes are constant and the correct percentage will be picked up based on the taxdate of the posting you are making. There is no need to define percentages separately in Sales, Purchase and Finance. All rates will come from the same source (finance).  

What are you afraid of…

What we hear a lot during our implementations is that we want to restructure our Taxcodes but not now, not as part of this project. We will do it later. The reality is that if you don’t do it know, you will never do it. Let’s address some of the concerns. 

• But I will have to redo all my sales and purchase tax conditions 

If you decide to use the Taxmarc taxcode template and install the Taxmarc sales and purchase engine, all sales and purchase conditions are included. You don’t have to do anything. 

• But what if I mistakenly post with the old codes 

Since the tax procedures are changed, the old codes can no longer be used. The only risk is that if you cancel a sales or purchase invoice or an FI posting, the reversal would copy the old code to the cancellation document and post it in the new period. We can’t have this. Taxmarc will prevent cancellation of any document created before the restructuring so no mixed taxcodes can occur. 

• I will have to retrain my users to use the new codes 

This is true. But this is a worthwhile investment. You train them one time and never again. With your old setup you have to instruct them to use different tax codes any time there is a rate change. And you have to rely on them to pick the correct code based on the posting date. With Taxmarc they always use the same code and we make sure the correct rate is picked up. In addition different companies will use the same consistent set of taxcodes 

When you implement Taxmarc that is the right moment to take a hard look at your taxcodes and restructure them. And as part of this project you will have partner that can guide you through the process from A-Z.  

So, take it from the people who have done it, a taxcode restructuring is not as scary as you think and it is an investment that will definitely pay off, in the form of less training, less work, clear indirect tax reports and fewer mistakes.  

You’ll be thanking us for talking you into it!