Thank you to all who joined our Q&A on integrating indirect tax determination with your SAP solutions with Stefan Blumer of Thomson Reuters. Stefan took questions on topics including meeting the challenges of indirect tax and automating indirect tax determination, as well as the new indirect tax integration for SAP from Thomson Reuters, the Global Next release.
Review the replay here and read our edited Q&A transcript below.
SAPinsider Online: Join us for our Q&A with Stefan Blumer of Thomson Reuters as he answers our questions the pitfalls around indirect tax for global finance teams. The chat is moderated by SAPinsider's Kristine Erickson.
Kristine Erickson, SAPinsider Online: Welcome to today's Q&A on managing VAT, GST and other indirect taxes for your SAP global financial operations.
Joining us today is Stefan Blumer, Senior Director Technology with Thomson Reuters Tax and Accounting. Stefan was responsible for building a solution from Thomson Reuters, designed for multinational companies that are looking to automate their indirect taxes with SAP. So he can talk about that experience and take your questions on streamlining indirect tax determination processes.
Stefan Blumer: Hallo and good afternoon. I’m glad you can join us today for our Q&A on Thomson Reuters Global Next tax interface for SAP. I’m looking forward to your questions.
Kristine Erickson: Stefan, thanks for joining us! I wanted to start with a question for you on the broad trends and technical issues....
Staying ahead of changing GST, VAT and all the local and country-specific regulations has always been a concern for financials operations. What do you see changing with these kinds of indirect taxes, though, that makes them a more significant challenge now?
Stefan Blumer: Tax laws are consistently evolving and changing, at the same time auditors are getting more engaged in making sure that taxes are properly collected and reported. All of this is leading to a higher level of scrutiny and cost to a company managing taxes.
Kristine Erickson: Stefan, Just one more question – I know there are a lot of readers’ questions as well: Can you share some starting points to reduce tax code maintenance effort in SAP systems?
Stefan Blumer: That is a good question. Tax code maintenance in SAP is a real challenge. First of all tax codes are not date dependent, so each time a tax rate changes a new tax code has to be created. Not only is this labor intensive it also requires retraining of users, especially on the AP side, as they need to use new tax codes. Larger corporations, especially if using Plants Abroad, can run out of available two digit tax codes.
Global Next takes a new approach to tax codes in SAP. We are using SAP tax codes, but we only set them up once and reuse them, even if a tax rate changes. Our tax engine, ONESOURCE Indirect Tax Determination, will calculate the correct taxes and then return that to SAP, including the appropriate SAP tax code and account key.
Users will no longer need to select the tax code, or configure conditions records to populate a tax code, but rather a default tax code is used in SAP which then makes the tax call. That tax code is then replaced with the results tax code returned from Determination. That tax code and account key is then used to determine the G/L posting and do the compliance reporting.
Kristine Erickson: We're seeing a lot of questions from our readers about managing tax codes as well as Global Next specifically, Stefan. I’ll let you get started on those now!
Comment From Robert Miranda: Good evening, all.
Kristine Erickson: Thanks for joining us Robert. I know it's late for a lot of you – we’re so glad you could join us live!
Comment From Akanksha V: Our company is already going global in digital content distribution. Right now we charge consumers output taxes based out of Luxembourg. I believe in 2015 the rules are going to change, where output tax will need to be charged based on consumer location. What is your recommendation? Create multiple tax codes for all countries the company is live in? This can be a cumbersome activity.
Stefan Blumer: You are right in that the EU tax laws will once more change in 2015. While I’m not at the liberty to provide tax advice, you do want to review your tax policy and decide what the implications of this change mean to your business. With our seamless integration between SAP and Determination, such changes are much simpler to implement and support. In your example, as long as the consumer location is sent to Determination from the day the new law is in effect, we would use that location as the taxability driver and calculate tax on it. All would be seamless to the end user.
Comment From BN: We recently worked on CST Tax for India where we have to calculate additional 2% for intra-state trade. The requirement is to post the local tax and CST tax to different GL accounts. We achieved this using tax codes. Any other options or recommendations?
Stefan Blumer: Although this is a federal tax, states are responsible for collecting and remitting the CST. Therefore, there are state specific CST authorities in Sabrix. With Global Next we have options to use either two different tax codes, or use one tax code and two different account keys. Ultimately the driver would be on how your reporting and compliance requirements drive your tax code structure.
Comment From Tammy Brown: So how do transactions within SAP (procurement, invoicing, customer billings, etc.) pick up the correct tax code when posting to accounting?
Stefan Blumer: Tammy, the tax code/account key returned to SAP is stored in the SAP transaction, then that combination is used to look up the tax G/L account via the standard SAP tax account tables (T003K). So we use standard SAP process. Once the tax is posted to the G/L, it looks and acts the same as with standard SAP.
Comment From Robert Miranda: We have just started ops in Canada. We need to include and configure Canadian taxes with all our AP and AR processes. How do we go about this?
Stefan Blumer: Robert, Congratulations in growing your business into Canada.
You can use multiple approaches to address your tax needs in Canada. One is to use standard SAP tax codes and condition technique. This works usually for a smaller lesser complex business.
But if you have a mix of products, services, etc., you might consider using a tax engine like our Determination product. We not only automate the tax calculation, we provide tax research for all the taxes required and levied. Integration is quite simple by setting up tax procedures, pricing, and some conditions to hook the tax system into your SAP environment.
Comment From Tammy Brown: What is the average 'time to implement' a legal tax change to Global Next once a government has published legislation for a tax and/or rate change?
Stefan Blumer: Legal changes are happening quite frequently, so being able to adapt to them quickly without too high a cost is imperative. With ONESOURCE we deliver the tax changes as part of our monthly content updates automatically to our customers - usually a month ahead of the start of the new tax. In most cases, this is all that is needed to make that tax apply.
If the tax change is complex or requires new reporting then there might be a need for a new tax code in SAP and the proper mapping in our tax engine. We also have a patent pending Flexible Field Mapper in SAP that allows users to provide an array of data elements to make tax decisions.
Comment From Robert Miranda: Is Global Next only about tax code maintenance?
Stefan Blumer: Robert, not at all. Global Next provides a totally now unique way of integrating an SAP ECC system with a tax solution. We use an open interface built on SOAP technology that allows us to exchange a much wider set of data between SAP and Determination. We can return tax details never seen before to SAP for reporting and compliance.
The system is entirely built in SAP using SAP technology, providing the user an unparalleled experience with our tax configuration user menu similar to the SAP IMG. All setup and configurations are following SAP's change management process, so you can easily move them from one system to the other.
Lastly, we can provide direct views into the tax calculation process with our logging feature in SAP, where you can see tax details, the decisions made, and why the tax was calculated as shown.
Comment From Atul: What are best practices when an implementation or rollout is being carried out specifically for taxes?
Stefan Blumer: Atul, tax implementations are complex. First each company’s tax setup and needs are different, so you would want to do a tax assessment to fully understand what taxes your business is subject to. Then you would want to build your tax policy around that.
Our suite of solutions allows you to then build that tax policy into our systems by using our pre-configured taxes for over 180 countries, and enhancing them where your company has unique needs. Our Global Next integration with SAP will allow you to map additional fields between SAP and the tax engine with a Flexible Field Mapper rather than writing extensive ABAP code in SAP.
Lastly we are able to return tax details to SAP in support of reporting, like running the SAP VAT Report (F.12), and provide the needed data for your compliance needs.
Tax projects can be a few months to years depending on the size and scope. We just rolled out a larger EU implementation in 39 countries which took about 8 months from the blueprinting to go-live.
Comment From Guest: How easy is it for a company to transition from a third-party tax engine to Global Next? What are the challenges?
Stefan Blumer: Moving from one tax solution to another one really depends on the complexity of the business. We've done some in a few weeks to months. Others might require a redesign. In essence tax codes/procedures, pricing procedures, and tax fields will need to be reviewed and adjusted.
Comment From Noel: Our challenge is that we have SAP, POS, Transportation Planning system, etc., with each system needing to be updated every time there is a tax change. Does the integration apply to other systems besides SAP? Is this an existing capability or something you are working toward? If you can expand on how that is done I would appreciate it.
Stefan Blumer: Noel, This is one of the great benefits of our ONESOURCE Indirect Tax Suite. The tax engine is a centrally located instance which can be used by all your transaction systems; SAP, eCommerce website, POS, etc.
You set up and maintain your tax policy in one central place; our monthly tax updates keep the content always current, and reporting can be done consolidated across all these systems.
We provide standard interfaces to some of the leading ERP systems on the market, not just SAP. And we have an open architecture via SOAP interfaces allowing integration into virtually any system that needs a tax calculation.
Comment From Ramesh: What is different in Global Next when compared to other third-party SAP tax packages?
Stefan Blumer: Global Next is a radical change from the traditional SAP Standard Tax Interface. SAP's solution is RFC based and has a limited set of fields available to calculate taxes and enhancements can be challenging. Additionally the interface is designed for US/CA/PR only.
Global Next is built on over 10 years of deploying tax integration in SAP globally. Our customers have provided feedback on the limitations and needs they have. We've built Global Next independent of the SAP RFC interface, allowing us to close these critical gaps.
Comment From Guest: Stefan, how does OneSource maintain historical rates if it utilizes the same tax code in SAP? Does it have the capability of providing validity dates on these tax code/tax rate combinations?
Stefan Blumer: Global Next returns the actual rate to SAP and stores that rate in SAP's BSEG/BSET tables allowing downstream reporting. We dynamically update these rates in SAP, and we store them in Determination based on their dates.
Comment From Ali: Does Global Next have integrated reporting capabilities or is there a bolt-on tool for it?
Stefan Blumer: Ali, Global Next enables reporting within SAP, like the standard VAT report (F.12). We also have reporting capabilities outside of SAP in the ONESOURCE products, and we also provide compliance solutions for many counties.
Comment From Atul: What are the additional benefits that are available in Global Next specifically with regards to errors in tax determination/calculation? Standard SAP does provide some functionality which points to possible issues. Does Global Next have some additional features?
Stefan Blumer: Managing errors and providing visibility into them was a key design consideration of Global Next. A user can look up tax transactions details in SAP via a transaction we provide. It provides all the details of the transaction. We also have error reprocessing, reconciliation, and a means of a fallback tax code to still post a transaction even if the tax account can't be determined.
Comment From Ramesh: So, does Global Next cover all Asian and European countries tax systems and what kind of local, state and central taxes covered?
Comment From Tammy Brown: We find tax requirements in Latin America and some Asia countries quite challenging, requiring multiple discussions with Local to fully understand tax and related reporting requirements. What solutions have you put in place to ensure that tax requirements in these regions are being met?
Comment From Tammy Brown: “Global Next will modernize the compliance process for any global business with a complex supply chain and structure and will work seamlessly with SAP ERP in over 180 countries around the world” - What countries are not included?
Stefan Blumer: Let me answer a few similar questions in one reply.
Our tax engine allows for tax calculations in most if not all of Asian and European countries, as well as LATAM. We have all the indirect tax content at all the tax levels: federal, local, and in many cases special jurisdictions as well. Our tax research is done in-house by our experts, who are located in the regions or countries they do the research for.
Comment From Atul: So Global Next would sit in between a tax engine - say Vertex, Sabrix, etc. - and SAP? Does it give any insight into the typical errors that beset tax calculation in a live environment?
Stefan Blumer: Global Next is the tax integration with ONESOURCE, formerly Sabrix. Global Next does not work with other third-party tax engines.
Comment From Tammy Brown: Does the Global Next solution provide tax reporting that includes file downloads and uploads to local tax authorities through the many government web portals now in existence?
Stefan Blumer: Yes, our compliance solution allows for creating the reports and files to send to the authorities.
Comment From Troy: Aside from the Flexible field Mapper, what are the key improvements from previous versions?
Stefan Blumer: Global Next is a whole new tax interface built entirely by Thomson Reuters to enable seamless tax integration for all countries, not just US/PR/CA like the SAP Standard Tax Interface supports. The solution comes preconfigured with a SAP user menu, authorizations, the ability to highly customize it to meet the most complex taxing requirements, while keeping it simple and easily manageable. The interface uses a SOAP-based interface, which can exchange over 700 data elements on the head and line level between SAP and Determination, allowing for the most precise tax calculations.
Comment From Tammy Brown: We have complex tax logic (especially in Europe) with many 'if this, then use that tax code/rate’ scenarios. Tax rates can be dependent upon the type of product billed, certain customer master attributes, etc. Does Global Next have the capability to manage these matrix type tax determinations?
Stefan Blumer: In short yes! Our tax engine can evaluate over 300 taxability fields to make a tax decision, with Global Next we can quickly map them within SAP via configuring to our tax interface so that the data can be sent for tax determination. We also have TransEditors which allow for logical expressions being setup to allow for complex tax scenarios.
Comment From Guest: Can Global Next also support statistical reporting like intrastate? And can you explain the differences between tax reporting and statistical reporting?
Stefan Blumer: Global Next doesn’t do the reporting per se; Global Next is the interface between SAP and Determination that provides all the necessary data to do the reporting. SAP-based intrastate reporting can be done, as well as ad hoc reporting, out of our ONESOURCE Indirect Tax Reporting solution.
Comment From Tammy Brown: How transparent is the tax calculation in Global Next to the local affiliate for their reporting/auditing?
Stefan Blumer: The tax calculation results are stored in the standard SAP BSEG/BSET tables, just like any SAP tax would be stored. SAP reports can be run to do local reporting and reviews. In addition we have our own Global Next tax table in SAP that allows for additional data being stored as desired. Customers can use our Flexible Field Mapping for this purpose. We also have a rich transaction logging framework that allows a user to view the tax details on a transaction if desired and configured to do so.
Kristine Erickson: That wraps up our Q&A! Thanks again to all of you who joined us today.
Before we go, I want to again thank Stefan Blumer of Thomson Reuters for taking all these questions today and getting through as many as possible in the hour.
And again, for everyone who joined is, if you are looking for more on this topic, view the Thomson Reuters recent webinar with KPMG on this same topic, as well as Stefan's article and other related content on our Financials channel.
Stefan Blumer: Thank you all for a set of great questions. I'm delighted about the interest you all showed in Global Next. We're looking forward to engage more with you on solving your tax challenges. Have a great day.