The time has come around again for us to tell you a bit more about the extended functionality of zap Audit. With the new release, zap Audit 2.1, 26 new data indicators (audit questions) have been published. These include some new indicators on the subject of VAT, which I will present below.
Taxes, a never-ending story
Recently, we have seen renewed interest in VAT issues. In the past, we have already reported on how important it is to have a properly functioning internal control system for taxes (also known as "Tax ICS"). You can also find more discussion on the topics of VAT compliance here, here and here.
Already in earlier versions of zap Audit, there were various indicators on the subject of VAT ID and intra-Community deliveries, i.e. clearly European VAT-related topics. An indicator on tax-free supplies (or services) to third countries (i.e. non-EU countries) was still missing. As a rule, these are exempt from VAT. So there must be some good reasons if VAT is nevertheless still shown on the invoice. This is why the new indicator is now available:
Service or supply to customers in third countries (non-EU member countries) with VAT
In principle, such deliveries are tax-free if they are export deliveries (Section 4 (1) of the German VAT Act (Umsatzsteuergesetz – UStG)). In the case of other services (e.g. services), these are also exempt from VAT if the recipient of the service is an entrepreneur and is domiciled in a third country (Section 3a (2) of the German VAT Act (UStG)). There are exceptions to this (Section 3a (2) of the German VAT Act (UStG)), e.g. in the case of services performed on a property in Germany.
The indicator is therefore defined as follows:
An outgoing invoice is marked because the business customer is domiciled in a third country and VAT has been invoiced. As a rule, such services are exempt from VAT. However, there are exceptions. Check whether such exceptions exist.
The risk is the invoicing of unnecessary VAT.
Another tax indicator concerns the frequent correction that is necessary when a vendor is paid with a cash discount deduction. In this case, the input tax amount posted is too high and must therefore be reduced by the cash discount percentage rate. This may be forgotten, meaning that too much input tax is then deducted by the tax office. Our indicator for this is called:
Input VAT not corrected during cash discount posting
And this is defined as follows:
An accounting document is selected because it is a cleared vendor invoice for which cash discount was taken and input tax was posted. In the clearing document, no correction was found for the input tax that would have been necessary due to the cash discount.
The risk is that the tax office will reimburse too much input tax without authorization, causing trouble.
We came across another new indicator, that is, we compared purchase orders in SAP with the corresponding invoices. We noticed that one purchase order item can appear on several invoices and can do so with different VAT codes (which then control the handling of input tax). We thought this looked suspicious in principle when we first encountered it, so now the following indicator exists:
Different VAT codes used for a purchase order item
And this indicator is defined as follows:
A purchase order item is selected for which several different VAT codes have been used on the corresponding invoices.
The risk is the ambiguous handling of the input tax from such a procurement.
All new indicators in zap Audit are first available as beta indicators and are available immediately for use in processing. After processing, these indicators are marked as (beta) in the application. We look forward to receiving your feedback on how we can make the most efficient SAP audit even better. If you want to find out more about what else zap Audit 2.1 has in store, please read our release notes here.
About the author:
Prof. Dr. Nick Gehrke is a member of the board of the Artificial Intelligence Centre Hamburg, and a professor and course leader at the Nordakademie Hamburg, and Co-Founder and Data Scientist at zapliance. He started zapliance after meeting Alexander Rühle at PWC and set their eyes on the same goal: Changing the way business professionals of the future work with data.