Bad Master Data and VAT automation

Clean master data is not a pre-requisite for starting a VAT Add-on project.

Bad master data as an objection to VAT automation

Some  clients may have have poor underlying master data, and believe that this  makes automated VAT determination difficult. They may believe that having clean master data is a pre-requisite for starting a VAT Add-on project. 

The Meridian response

As part of a VAT Add-on implementation Meridian would analyse the client's master data set up and recommend a best in class set up. In practice, a VAT Add-on project is a great opportunity to also clean up VAT relevant master data. 

In respect of legal partner settings, Meridian will recommend a default setting whilst still allowing customer specific over-rides (via a VAT Add-on table). This can often remove the need for dummy VAT ID maintenance (e.g. against a ship-to party). Furthermore, Meridian will also recommend the best practice approach for maintaining domestic and foreign VAT IDs of customers and vendors. With the activation of the VIES module there will be an automated mechanism within the system to validate such VAT IDs. 

Simplifying and cleaning master data using VAT automation

When it comes to Customer Tax Classifications (CTC), clients are normally able to simplify their master data set up significantly (for example,  set up 99% of customers as liable for tax). This is because the VAT Add-on is able to dynamically update the CTC within sales orders for complex EU VAT requirements (such as triangulation or extended reverse charges for example). This makes the job of the master data team much simpler when it comes to maintaining VAT relevant master data and they are no longer required to be VAT experts. 

Furthermore, many companies struggle to set up correct VAT determination for purchasing scenarios. As such, the VAT Add-on has a number of work arounds to determine the Material Tax Classifications (MTC),  (one example is to determine this at a material group via a VAT Add-on table). This means that companies can still achieve automated VAT determination on purchasing flows where the underlying MTC is missing. 

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VAT Relevant Sales Master Data in SAP

Customer and material tax classifications in your SAP master explained

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