Improve VAT Determination Accuracy

Many companies devote significant time and resources manually updating their SAP systems for VAT purposes. However, they may still incur penalties for incorrect VAT determination when SAP simply cannot handle the complex VAT rules and associated reporting requirements.

Standard SAP determines a VAT decision using five basic VAT determination characteristics:

• Tax departure country
• Tax destination country
• Customer tax classification 
• Material tax classification
• Customer VAT ID number (in the case of EU transactions)

As a consequence, condition records often have to be manually updated to enable SAP to cope with non-standard sales transactions.

An example of a non-standard sales flow  is Triangulation. This is one of the most complex areas in EU VAT. As such, ensuring staff correctly recognise when triangulation applies is a huge challenge.

The Meridian VAT Add- on provides automated “right first time” tax determination. The system driven logic will automatically determine the correct VAT, even on the most complex multi-country triangular transactions. Meridian’s solution teaches SAP all of the relevant VAT rules and as a result is able to achieve a compliant and fully automated tax determination directly in the SAP system. This eliminates instances where sensitive tax decisions are made by non-tax staff and reduces risk associated with manual processes which are inherently subject to human error.