ITL Suite

Real time will be the standard

The technical landscape has become more sophisticated with real-time operation tracking as the norm. Tax must be first-time-right as mistakes simply are not acceptable. Furthermore, tax authorities are increasingly linked directly to businesses. In some countries, invoices must first go to the tax authorities for verification before being sent to the customer. However, in other countries, matters are not yet so advanced, meaning that multinationals also have to work at different speeds.

Limitations of standard SAP in indirect tax determination

Many companies rely on SAP to determine and calculate the right taxes on their transactions, and to include these in their tax returns. In SAP, a tax code is added to a transaction. This indicates the VAT percentage in a particular country, and thus how much VAT is added to the invoice. However, SAP has a limited decision model for indirect tax determination. This causes problems for organisations that operate in supply chains involving multiple parties.

Standard SAP simply does not have the ability to look across a chain transaction and base its decision on all relevant tax drivers of all legs in the chain. In practice, this often leads to unmanageable work-arounds in IT systems, and to more complex and labour-intensive processes. ITL offers a smart way to enhance the standard SAP solution with SAP-certified add-ons.

Business value, scalability and flexibility

When it comes to indirect tax solutions, CFOs welcome those that are able to respond quickly to changing business realities. Furthermore, scalability is becoming a key requirement. The foundations for further development and growth must first be laid internally. In other words, business processes and systems must be configured properly. However, firms will also have other short-term and long-term ambitions. A good indirect tax solution should therefore already be prepared for future developments regarding, for example, sustainability or industrial standards.

Extracting valuable management information

Correct configuration of the tax process also provides valuable management information, which would otherwise not be available. This not only benefits tax and finance departments, but can also be invaluable to the Executive Board. Indirect tax has become important to all areas and operations within businesses.

The complexity of dealing with VAT

Multinationals must determine and declare the VAT due in each country of operation, a process that is inherently complex and challenging. VAT is not a standalone tax; it is deeply embedded within virtually every facet of an organisation’s operations — including purchasing, sales, inventory management, finance, and invoicing. As such, VAT considerations influence core business activities and decision-making processes at every level.

VAT compliance significantly impacts operational processes, as organisations must accurately track transactions and adhere to differing national rules. Financial risks arise from incorrect VAT treatment, which can lead to overpayments, underpayments, and errors in financial reporting. Additionally, non-compliance with complex and varied regulatory requirements exposes organisations to penalties, audits, and legal challenges, making effective VAT management a critical priority.