The difficult choice of VAT for purchasing documents in SAP: shall we solve this problem?

By Alfredo Menin, Co-founder and CTO of Homine

I've been working with SAP for over 20 years, helping companies overcome their challenges, including meeting tax obligations, adapting ERP to legislation, automating processes for better team productivity, just to name a few.

A difficulty common to companies, and which I face on a daily basis, is the correct filling in of the VAT code (tax code) in the purchase documents. It is a detail of the process that, if poorly handled, can cause a lot of headaches for the tax area.

When creating a purchasing document in SAP – be it purchase order, contract, scheduling agreement – most users are unsure about selecting the correct VAT code, which results in many purchase orders with the wrong tax rate. This situation generates tax inconsistencies and rework in the areas of logistics and tax.

The problem brings up an old discussion: who is responsible for inserting the correct VAT code on a purchase order? The buyer or the inspector?

The person responsible for the taxes is the inspector, but the person who generates the purchase document and inserts the VAT code is the buyer. It is common for the document to be returned to the inspector so that he can verify the tax. When this occurs, the inspector enters each item in the order and validates the VAT code entered. All this manually, with a lot of rework and wasted time.

As we know, our tax legislation is extremely complex and requires very specific tax knowledge. The buyer, therefore, cannot be held responsible for errors when defining the tax rate. Each purchase process may have VAT variations that depend on numerous criteria to be considered when creating the order.

So how to solve this problem?

The most usual option is to acquire external solutions, in the form of addon SAP, which automatically calculate and insert VAT in purchasing documents. However, the acquisition of this solution brings extra expenses, in addition to generating yet another contract to be managed with a new supplier.

What many companies are unaware of is that there is a cheaper and simpler alternative, which does not require Z development or the purchase of an external solution. Using Artificial Intelligence and through parameterizations standards in SAP, it is possible to assign the VAT code automatically in purchasing documents. It is enough for the company to hire only the consulting service for the MM module (Material Management), whose consultant will apply the functionalities standards of the system itself to resolve the issue.

Although this customization is not new, I realize that few consultants in the market dare to do it. It is not our case. At homine, we have already tested the operation with several items of a purchase order, always with satisfactory 100% results.

The automation of VAT codes brings many benefits to the company. It reduces operational work and user intervention, leaving the user free to focus on other tasks. It also generates more fiscal security in the creation of purchase orders, eliminating rework. It is important to emphasize that the automatic determination of VAT allows revision and/or adjustment by the user, according to the authorization rules defined when parameterizing the system.

All of these advantages combined make the tax department act more proactively and less correctively with each generated purchase document. That is: more efficiency and agility for the entire purchasing process.

If you work in the purchasing, tax or logistics area and face this problem in your company, send us an email to comercial@homine.tech with your questions or share your experience. I would be happy to hear from you and, above all, to help you and your company face this challenge.