Time dependent taxes in SAP S/4 HANA Cloud - flexible management of changing tax rates

Companies often need to adapt, change and plan their tax rate changes for different periods of time to comply with law requirements. Due to COVID-19, governments are making changes to VAT rates and provide guidance on time-sensitive transition periods. For example, on 3 June 2020, the German parliament proposed to temporarily reduce the VAT rates from 1 July 2020 until 31 December 2020. S4Hana CE 1911 release allows users to respond to these changes by using time dependent taxes. 

On-premise version users can achieve similar configurations with PwC’s Taxmarc solution. SAP has certified Taxmarc software solution and its integration with S/4HANA.

What are the benefits of time dependent taxes configuration?

If time dependent taxes are not enabled, changes to tax rates require creating new tax codes and additional effort in maintaining multiple tax tables, as well as updating purchase and sales documents and master data. With time-dependent tax calculation (TDT), you can just add a new validity period to your existing tax codes instead. When the new tax rate becomes valid, all of your line-item calculations automatically use the correct rate. This significantly reduces risk of inconsistency between sales and finance documents.

What steps do I need to take?

1. Identify tax substance requirements and territorial scope of the configurations. The way certain features work in your SAP S/4HANA Cloud system can depend on the country country/region availability of the scope items.

2. Setup the process for tracking tax substance requirements. (e.g. using PwC GlobalVATOnline subscription service).

3. Enable configurations in quality systems.

4. Conduct user testing and document results in quality systems. 

5. Design the user guidance for the production system that covers process flow and data field requirements for postings. Remember to cover complex scenarios, for example, retrospective maintenance of tax rates.

6. Enable configurations in production and communicate changes to users.

How PwC can help you?

We are ready to assist you with the most challenging steps:

1. Identifying tax substance requirements that trigger the tax rate changes
2. Designing process documentation
3. Advising on configurations
4. Driving user adoption.