SAF-T for Poland and SAP


From 1st July 2016 onwards it is required to provide SAFT-PL files (in Polish: “Jednolity Plik Kontrolny” or “JPK”) in XML format on request of the PL Tax authorities.


Filing SAF-T will be mandatory for large taxpayers: employ more than 250 people or 50 million EUR sales revenue irrespective of whether they are established in Poland or not. Per 1st July 2018 this extended to taxpayers with more than 9 employees or 2 million EUR sales revenue.

Foreign businesses not having a branch and/or fixed establishment but that are registered for VAT in Poland fall within the scope of the above reporting requirement when above conditions are met.

On 19 May 2016 the Upper Chamber of the Polish Parliament passed a bill on the amendment of provisions of the Tax Ordinance and of some other acts. According to the bill adopted by the Parliament, the obligation to generate VAT reports in a SAF-T data format and their monthly reporting to the tax authorities will apply initially only to the largest enterprises for each month begun on or after 1 July 2016.

It means that Large Enterprises will be obliged to file VAT reports in the SAF-T data format already on 25 August 2016. Thus, Large Enterprises will be obliged to submit in monthly period VAT register in SAF-T format (according to JPK_VAT structure 4 – VAT register) even if the VAT reporting period is quarterly.

Taxpayers will be obliged to submit the SAF-T format:

  • on request in the case of a preliminary tax inquiry, a tax audit and tax proceedings;
  • monthly mandatory – with respect to the VAT sales and purchases records only (Article 109(3) of the Value Added Tax Act of 11 March 2004 (VAT records) by submit monthly a SAF-T file that contains VAT sales and purchase records.

The first requests to submit audit files at their discretion will likely take place September 2016.  The monthly VAT reports on 25 August 2016.  Not complying with this obligation will not only negatively affect the position of taxpayers during a tax audit but also result in unforeseen tax costs as penalties will be levied.

‘Final’ version of the logical structures of the Standard Audit File (SAF) was published by the Ministry on 9 March 2016 including FAQ.

Besides introduced now in Poland similar EU obligations exist already in Portugal (2013) Luxembourg (2013), Austria (2009), France (2014), Lithuania (2015). More and more tax administrations around the world are implementing electronic auditing of a business’ financial records and systems.


SAF-T Poland and SAP


SAP developed currently only an extraction tool for SAP ECC 6 and higher version. The generation of the SAFT-PL XML files is not included. Certain companies use “older versions” of SAP and will not be supported by SAP.


Based on SAP’s OSS notes, SAP provides only at the moment a functionality for gathering and downloading the transactional data. However, it is not the complete set of data required and the creation of the SAF-T file for the tax authorities is also not included. The functionality will also only be available for companies established in Poland and not for companies with a foreign Polish VAT registration.

In order to be able to comply with the requirements and provide the XML file on request in time, tooling needs either to be developed or purchased.


Our solution


A SAFT-PL tool that already works for Portugal that includes also strategy for downloading the relevant data from SAP  for older SAP versions.


The basic design for a workaround solution is to extract the raw source data from the relevant SAP tables and use software tools to load the relevant data from the source SAP tables, perform additional mappings and data preparations and create the required XML files.

We offer 2 solutions:


  • A software application called Audit Command Language (ACL). This software is commonly used by auditing firms, tax authorities and internal audit departments. The process will be that the client will download the data from SAP and make it available to the Phenix. Phenix will then generate the XML files and some control reports and provide these files and reports available to client for submission.
  • A tool in MS Access in combination with a specific user interface for extracting the data from SAP. The result is a full in-house solution for the client.

Above process is based on our proven tool developed for the generation of the SAF-T files for Portugal.


Detailed information about SAF-T compliance and planning



Contact us for more information


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Learning Lab: ‘cross border movements in SAP’

We hosted the Learning Lab of the sharedserviceslink Conference – VAT compliance through SAP Control – in London November 19-21, 2014 on the topic ‘cross border movements in SAP’.  The objective was to facilitate and share knowledge on SAP and VAT. The learning lab slides have been transformed into a video as well.

Learning Lab Contents

Learning Lab in PowerPoint

Booklet: anticipate what SAP users would want

If full ‘VAT automation of Accounts Receivable (AR) and Accounts Payable (AP)’ and ‘being in control’ are objectives of your organization, it is important to know what exactly makes Standard SAP not functioning optimal from an indirect tax perspective. Only then it is possible to validate whether a company’s objectives can be achieved via upgrading Standard SAP functionality and/or implementing an external tax engine.

Below Booklet “Solving the real problem not a symptom” explains when Standard SAP requires additional VAT functionality, the root cause, the impact of patch up solutions that remediate a symptom and how the real problem is resolved.

It is shown in an easy to read format for both desktop or mobile devices. After ‘Click to read’, the menu bar contains a button for downloading in PDF.

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Direct Download Booklet in PDF

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Business challenge: complying with the mandatory SAF-T filing requirements

Across the globe many multinational companies are facing challenges in complying with the mandatory SAF-T filing requirements. SAF-T is the OECD’s Standard Audit File for Tax Purposes that is being adopted as common practice for tax administrations and will be the basis for IT-based audit tools to help to combat fraud and tax evasion.

We developed a lean and flexible solution which extracts relevant data directly from SAP® systems and transforms the data into the XML format in compliance with the legal requirements.

We are currently developing a SAF-T cockpit which will be fully integrated with SAP®. It includes individual templates that satisfy the data and format requirements of each country and provides an analytical reporting library to support monitoring controls for finance and tax.

Who we are and what we offer

Phenix Consulting is a joint venture company of LiNKiT Consulting and the KEY Group. This company is based in Amsterdam, Berlin and Cologne and provides tax, financial and control solutions for SAP. Phenix comprises 6 partners and a team of 30 consultants.

Phenix

Phenix Booklet

VAT Add-on for use with SAP

Taxmarc™ SAP solution2

Simply the best SAP Add-on solution to overcome pitfalls and shortcomings within SAP’s VAT determination and reporting logic.

During Big4 software vendor selections Taxmarc™ has been selected various times as the ‘best’ SAP Add-on solution for automating the indirect tax determination for both incoming and outgoing invoices including its integrated tax control framework with automated VAT controls.

Not only have we been recommended but also tested intensively prior to production by the Big4. Recently the outcome of a very detailed report was again that after intensive testing the solution works according to its specifications and could go into production. A good question to ask our client references. We stimulate such Q&A.

No external interface needed

Simply the best SAP Add-on solution to overcome pitfalls and shortcomings within SAP’s VAT determination and reporting logic.

  • Taxmarc™ draws upon 30 parameters at this level to be able to fully automate the VAT determination of all (chain) transactions in SAP on real time data. Via enhancement implementation extra Taxmarc™ functionality is added to standard SAP (no interface needed).
  • In analogy with a car, we have tuned up standard SAP (i.e. given it extra brain power) to realize that extra indirect tax performance. The result is that the VAT treatment of all incoming and outgoing invoices is automatically determined for also the most complex transactions. In fact you have a SAP built in designated driver that makes that happen.
  • Even important is that you keep on driving safely. It therefore includes all the necessary safety features such as an integrated Tax Control Framework that stops the car or shows a RED light in an emergency table when danger is ahead.

Where Taxmarc™ differentiates

  • After the SOW is signed our first effort would be that we sit down together with all in-house stakeholders (Indirect Tax, SD, MM, Finance, IT) to demonstrate in detail what we are going to change, explain why those changes are needed, what is accomplished with these changes and that these changes have a low impact on the current SAP set up.
  • Subsequently we perform own checks on the current system and discuss these VAT and set up findings to understand the root cause why certain developments or configurations have been made in the past or to get a clear understanding of the background of certain specific SAP scenarios.
  • We consider it important to spend time together with in-house stakeholders not only to get their immediate buy-in at the beginning of the project from a change management perspective, but as well to transfer knowledge back and forth by which also the solution will be tailor-made and future maintaining could be done in-house. The latter means process owners are appointed and we challenge decisions from a best practice perspective (what works for other multinationals).
  • Understanding your current set up is really essential for us as all our designed features have to work as promised and that means that for certain specific scenarios some extra development might be needed. That is included in our fixed fee as it is all about realizing the IT and indirect tax objectives as agreed.
  • We take a management role. We are the Subject Matter Experts and will take the lead in the project and install our solution ourselves. We do not shift responsibility as it is our core business and expertise. Simply ask our client references if this has been an appreciated and an effective approach.”

Our company statement is ‘promise only what you can deliver and deliver everything you promise’.

All our solutions are ‘implemented’, ‘tested’ and ‘in production’ at various listed multinationals.

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High level comparison between LRD, Commissionaire and Agent

If the reason of a business model change is to optimize company’s effective tax rate (tax opportunities), minimizing cash tax effect or cost reduction or realize efficiency overall such standardizing business processes, it is important that with regard to managing such change the indirect tax functions is timely involved (design phase) and also ascertains that proper implementation and executing of indirect tax planning has been taken place. That means that indirect tax issues should be addressed up front during the design phase.

Any change has impact on current processes and controls and its effectiveness. Business model change such as centralized operating model result often in an increased number of transactions and indirect tax obligations across many geographies.

Operational changes have a tax consequence due to the change in transactional flows and the change in a company’s assets, functions and risks profile. Important is to ensure that the new operating model is not only implemented correctly from a tax perspective, but also ensures that business processes are tax aligned realizing support of the business in the areas of compliance, finance & accounting, legal IT systems, indirect tax and regulatory matters. That means teaming is a necessity with with various work streams.

In many Asian countries the Commissionaire concept is not known. In several Asian and Latin- American countries centralized ownership of raw materials, work in progress and finished inventory is not possible. In most countries outside Europe having to register for VAT/GST/Consumption Tax will often results in a full taxable presence, including a liability for Corporate Income Tax.

One of the key processes relate to ERP system. A wrong perception in the design phase can lead to substantial tax and commercial risks. It could also impact the company’s reputation as also customers, suppliers, external auditor, senior management, tax authorities could become stakeholders when it goes wrong.

A condition for success of any ERP solution is involvement by the indirect tax department in design phase, teaming with other workstreams.

The change of a business model can create not only VAT risks, but as well commercial risks such as logistics problems in getting goods into a country and delays and hold off of shipments resulting in disruption of daily business. Some root causes: the company forgot to register for VAT or procurement forgot to agree with supplier who was importing the goods.

SAP change: the perception of Plug And Play

For ‘simple’ business models (AB scenario’s) standard SAP functionality works.

However when business models are more complex, standard SAP VAT functionality is insufficient due to the company’s business model, organizational structures and/or VAT requirements. To manage the correct VAT treatment additional features need to be implemented.

In practice, configuration – the amount depends – is needed when companies deal cross border and/or complex business model are set up such as a centralized principal structure with for example “Limited Risk Distributor” or „Commissionaire”. The latter also known as principal-toller-agent model (PTA).

The company’s principal bears – contractually – from a business deal perspective the major risks (business responsibility). Principals are in the main rule still owner of the goods when these are sent to customers. For corporate tax reasons, such principals have their residence in low tax countries.Tollers are manufacturers that produce on behalf of other parties (e.g. the principal). The toller receives as consideration a tolling fee.

Commissionaires only act as intermediaries to the customers. The principal pays them a commission fee. In a strip-buy-sell model not an agent but a reseller (LRD) is part of the supply. The difference is that a resellers becomes owner of the goods.

VAT Automation of complex business models

In the last decade, companies have increasingly automated their business processes. The most common method is by using an Enterprise Resource Planning (ERP) system. Such a set up can be hugely complex. This is definitely the case where it relates to European based indirect tax. As manual processes are subject to human error, automation could – under circumstances – result in performance improvements and savings.

There are all kinds of business reasons for setting up such centralized models. The challenge from an implementation perspective is indirect tax.

What Makes It Complex?

LRDs and Commissionairs have neither legal ownership to the inventory during storage nor during transport as the Principal is at that stage still the legal owner. It is often the case that the Principal delivers the goods physically and directly to the final customer.

This creates only one physical departure of goods (`goods issue’) in the ERP system. However, two invoices should be raised (one from Principal to LRDs/Commissionairs and one from the LRD/Commissionaire to the final customer.

In the ERP system, the correct ‘ship from’ information at the LRD and Commissionaire level is missing so that the VAT treatment by the system is determined based on the ‘ship from’ and ‘ship to’ information present at the Principal level. In principle, for cross-border transactions this results in the incorrect VAT treatment.

Therefore, in practice, it is time consuming to correctly configure the ‘tax determination logic’ set up. You need to know your practical workarounds, preferable in the design stage.

Even more bottlenecks in case of a commissionaire structure

A “Commissionaire Model” has some more bottlenecks. Since according to civil law, the “commissionaire” does not have ownership, the commissionaire does not own any inventory not even temporarily. That is different with the LRD as a LRD becomes owner via flash title for a very short period.

A “commissionaire” is never the legal owner of the goods. From a VAT perspective, the commissionaire however acts as though he was the owner and a fictitious supply takes place to and subsequently by the commissionaire. The commissionaire has to issue invoices in his own name which can create problems if there are no bookings with respect to inventory.

High level comparison between LRD, Commissionaire and Agent

A sales Principal located in non-EU country will create more complex registration and trading issues. VAT treatment for Commissionaires and LRDs in principle similar (buy and sell), but with different legal flows.

A LRD creates opportunity to have local inventory on LRD books, provided all relevant aspects have been resolved. Different accounting rules exist for LRDs compared to Commissionaires.

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_1_compare_LRD_etc

Implementation

Once a commercial and tax-efficient structure is determined—one that addresses both historical and potential risk—it is time to take the theory behind the structure into the realm of practice.

Will using a classic principal structure in the new entity help keep maximum profits in low tax jurisdictions? If so, one entity will own title to inventory throughout the various jurisdictions and the principal would require a VAT registration in each location where inventory is held.

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In some countries, particularly Asia and Latin America, a VAT registration will crystallize a permanent establishment for corporate income tax purposes. This could mean for example an increase in the US corporation’s foreign tax compliance obligation and could increase the amount of tax due as well as the workload.

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From Global Indirect Tax Management by Richard Cornelisse

Indirect tax function effectiveness: SAP’s Transaction Tax Engine

The Transaction Tax Engine (TTE), which manages Tax outputs, handles high volumes of transactions often generating billions of dollars of tax revenue. In simple terms, it uses the decision tree to make tax event determination, which in turn generates the applicable tax type and tax rate.

Like other SAP modules the TTE can be customised according to corporations’ specific requirements. The Tax and Finance teams are the end-users of the data and rely on it to generate tax lodgements to tax authorities and to produce financial accounts.

With high turnover, accuracy is critical and any minor inconsistency in the master data set-up can result in tax and accounting errors which can go undetected for long periods of time. While ‘End User Testing’ used in pre implementation stages is designed to prevent this, multiple operational models in a complex organization often produce outcomes that are unsatisfactory and require subsequent manual input to get the right transactional outputs.

What makes the problem even more complex is that implementing SAP over an established tax platform does not necessarily ensure the underlying processes are fully aligned to the new system – contrary this is often left over to the system end-users who are ill equipped to deal with these types of issues.

SAP implementation are drawn out lengthy projects often running into millions of dollars and getting things right upfront is imperative for the end-to-end process to function.The experience with large multinational corporations is that over reliance was placed on post-fact back-end, detective type of controls.

Typically this involves exception reporting used to detect tax data errors once the tax returns have been compiled and lodged with the Tax Authorities. The time frame can range from a few weeks to up to a year before a particular control is implemented, and even then the approach is based on transactional scenarios rather than having assurance all contingencies have been covered off.

In a nutshell, there is a significant room for financial exposure for the Head of Tax and CFO resulting in the underpayment or overpayment of tax – ultimately leading to margin erosion, penalties and reputational impact with Tax and statutory authorities, and customers alike.

The diligence in the approach is required at the front-end, designed to capture any master data inconsistencies in SAP before the transaction even occur. Typically, SAP inputs required for the transaction to interface correctly are wide spread.

Whilst, TTE is often controlled by the respective Tax team, other SAP master data inputs are not. For example, if the process maps and flow charts used to carry out customer set-ups are not done correctly or the system is not equipped to deal with the transaction, an error is very likely to occur.

Front-end controls which can customised to suit the corporations’ operational model and business type are key to ensuring the error free landscape.

They can be designed up-front and tailored to cover a range of different business scenarios. Their optimal performance is in environments where there is emphasis on internal controls and corporate governance.

Via SAP and Transaction Tax Engine Functionality

Tax Code Structure remains the same during VAT rate change

Business Challenge

Many SAP clients have multiple VAT registrations. Due to principal structures, centralized functions, complex business models for sales of goods, cross-border and drop shipment transactions, these companies often use more than 900 SAP tax codes. These organizations will face difficulties regarding the standard SAP tax code design which will cause not only tax compliance, but commercial issues as well.

As a Standard SAP tax code consists of only 2 characters, the number of possible tax codes is limited. Numerous companies use a considerable amount of tax codes and risk facing a “shortage” of the necessary tax codes. Multinationals have asked SAP for a solution over the last couple of years, but to date SAP has not provided a proper solution.

To our knowledge, SAP has developed a solution with a 4-digit tax code for one company. However, we understand that this SAP 4-digit tax code solution will not be expanded to other customers because of risks concerning the stability and robustness of the solution. This means that multinational companies still have insufficient options when facing issues with the limited number of available tax codes.

In many countries around the world, the VAT revenues make up an important part of the total revenues of the governments. Combined with the financial crisis and the need to reduce the budget deficit, VAT rates are changed frequently.

The change of a VAT rate has a significant impact on a SAP system. Due to the standard set-up in SAP, for every new VAT rate multiple new tax codes must be created. As a consequence, a significant amount of additional changes are required to get the new tax code up and running for all SAP transactions.

Alternative market solutions

The following alternative solutions are available in the market. However, all have considerable drawbacks.

  • Use the special characters ($,/,\,& etc.) for the tax code – even with the extended number of tax codes some companies will be running out of available tax codes and tax codes with these special characters are not user friendly to work with
  • Purchase external tax engine – besides high purchase and maintenance costs external interfaces have to be used, which for certain clients is in conflict with their own IT policy, as the use of standard SAP is preferred
  • Renaming of tax codes (SAP’s System Landscape Optimization projects: SLO) where the existing tax codes are archived and a new tax code design could be created. Such restructuring will however not avoid creating multiple new tax codes in the future when the VAT rate is changed. Companies will face shortages again in the future.

What do we offer?

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Data Analytics on all VAT relevant data within SAP

IIn Taxmarc™ Tax Engine all VAT relevant transactional data of legal entities operating on the same SAP platform could immediately be made visible and accessible, as this information is stored separately in one table in SAP. That means real-time insight – without facing run-time issues – into the company’s blue print without the need of performing a manual transaction mapping exercise first.

A clear understanding of key risk factors in real numbers is possible as detailed and relevant data used for your organization are available. There is no need for “informed guessing” anymore. Auto-generated reports based on the relevant data will be available in any format. Examples include specific reports for cross-border transactions, intercompany, per transaction type, per tax reporting country, per dispatch country, per SalesOrganisation/Division.

The Taxmarc™ set-up is flexible and can be tailored to the tax’s or other departments’ specific needs and wishes including the amount of transactional detail that needs to be reported.

Detective control for indirect tax and beyond

Taxmarc™ Data Analytics provides a ‘Continuous Controls Monitoring’ tool that could also be used by stakeholders beyond indirect tax. The method of ‘guessing the numbers’ is something of the past. It enables that company’s resources and external advisors to focus on what really matters because they do not need to spend time on further reducing risks because they will already be at an acceptable level.

Without incurring additional costs, the company is more in control and can act proactively as transactions can be reviewed and quantified in real-time.

Impact analysis and forecasting

This enables foreseeing future risks long before they manifest themselves:

    • By linking your business strategy to advance analytical possibilities, decision-making capabilities can be improved. A business change can be simulated via ‘what if’ with real-time data and its impact can be quantified.
    • Beyond indirect tax this should improve processes for management of e.g. transfer pricing, for logistics and warehouse locations management, cash flow planning, etc.
      Many stakeholders can benefit from this functionality; it is accessible real-time and it should improve both internal and external effective communication because you can ‘talk numbers’.
    • It will contribute to buy-in from other departments and ease the writing of problem statements. In addition, it will support business cases with the aim to realize sponsorship for change and better management of the Executives own KPIs as real numbers have actually been used.

Data Analytics on all VAT relevant data

In Taxmarc™ Tax Engine all VAT relevant transactional data of legal entities operating on the same SAP platform could immediately be made visible and accessible, as this information is stored separately in one table in SAP. That means real-time insight – without facing run-time issues – into the company’s blue print without the need of performing a manual transaction mapping exercise first.

A clear understanding of key risk factors in real numbers is possible as detailed and relevant data used for your organization are available. There is no need for “informed guessing” anymore. Auto-generated reports based on the relevant data will be available in any format. Examples include specific reports for cross-border transactions, intercompany, per transaction type, per tax reporting country, per dispatch country, per SalesOrganisation/Division.

The Taxmarc™ set-up is flexible and can be tailored to the tax’s or other departments’ specific needs and wishes including the amount of transactional detail that needs to be reported.

Detective control for indirect tax and beyond

Taxmarc™ Data Analytics provides a ‘Continuous Controls Monitoring’ tool that could also be used by stakeholders beyond indirect tax. The method of ‘guessing the numbers’ is something of the past. It enables that company’s resources and external advisors to focus on what really matters because they do not need to spend time on further reducing risks because they will already be at an acceptable level.

Without incurring additional costs, the company is more in control and can act proactively as transactions can be reviewed and quantified in real-time.

Impact analysis and forecasting

This enables foreseeing future risks long before they manifest themselves:

    • By linking your business strategy to advance analytical possibilities, decision-making capabilities can be improved. A business change can be simulated via ‘what if’ with real-time data and its impact can be quantified.
    • Beyond indirect tax this should improve processes for management of e.g. transfer pricing, for logistics and warehouse locations management, cash flow planning, etc.
      Many stakeholders can benefit from this functionality; it is accessible real-time and it should improve both internal and external effective communication because you can ‘talk numbers’.
    • It will contribute to buy-in from other departments and ease the writing of problem statements. In addition, it will support business cases with the aim to realize sponsorship for change and better management of the Executives own KPIs as real numbers have actually been used.