As the latest digitalization trends are transforming compliance regulations, tax departments are facing new challenges to keep the business running smoothly. With SAP S/4HANA and SAP S/4HANA Cloud, SAP can support you in the topic of tax compliance while transforming a perceived tax burden into value-adding transformation opportunities.
Legal authorities continuously evolve mandates for corporations with the goal to increase tax controls, prevent tax evasion and maximize efficiency of tax collection.
In the past decades, many changes in the legal requirements have continuously increased the complexity of compliance for enterprises, potentially putting at risk operational efficiency. Yet, all these changes to tax processes have been incremental. For example, authorities have increased the amount of detailed data to be disclosed, while they have continued to rely on periodic ‘tax bills’ (returns prepared and paid periodically).
As a more recent trend, changes to tax legislations are more disruptive: companies are required to alter their well-known business processes, that might have been optimized for long periods of time, as well as the way they handle tax compliance. While some countries still require only periodic aggregated data, another trend is clearly gaining momentum: with the introduction of electronic business documents, the world has been evolving toward continuous transaction controls (business processes extended with an additional step that sends business documents to the tax authorities for registration / approval). These translate to tax authorities becoming gatekeepers controlling, validating, or even approving tax transactions before they can take place and, as a result, tax authorities becoming the source of truth of the tax liabilities to be settled.
The digitalization of tax clearance not only translates into tighter controls with higher risks of business disruptions, it also forces a paradigm shift with inversion of traditional roles in compliance: enterprises, as a taxable party, will find themselves transitioning from preparation of periodic reports to audit the draft returns prepared by authorities. And they will need to do this in no-time within the existing or even decreasing operational capacity.
While it might sound simple, audit activities can involve the analysis of thousands or even millions of records, so automation and technology are quickly becoming essential to prevent unacceptable explosion of tax compliance costs.
Fig. 1: The journey of business compliance
To provide enterprises with an arsenal of abilities to address these challenges, SAP has combined SAP Document Compliance and SAP solutions for Advanced Compliance