By Arturo Pinazo, SAP FICO Consultant, delaware United Kingdom Most multinational businesses go through a highly complex tax submission process, spending more time filling out and submitting tax reports than they should. With SAP S/4HANA for advanced compliance reporting (ACR), taxes are much easier to manage, file, and submit for an organization. This is especially true for companies having to deal with many different countries and tax requirements. From managing tax items an entity wants to include in its tax declaration, to electronically submitting the tax reporting, SAP S/4HANA for ACR helps companies through the entire process. SAP is investing heavily in ACR and the new solution is updated with each quarterly release of SAP S/4HANA Cloud, essentials edition, each semi-annual release of SAP S/4HANA Cloud, extended edition, and on a continual basis with SAP S/4HANA via the support pack and OSS Note process. The main features of ACR are explained in this SAPinsider article. This article will focus on SAP S/4HANA Cloud, essentials edition specifically, and will show readers how to configure, execute, and submit a required tax filing for the UK. Note that, with the correct activation of the ACR best practice scope item and country localization, this concept/application approach is consistent across SAP’s S/4HANA for ACR offerings for each country. The configuration and functionality are available out of the box. We will start with some basics of ACR and then show how to configure and run this solution for a UK tax filing.

Understanding Your SAP S/4HANA for ACR License Options

SAP S/4HANA for advanced compliance reporting contains different levels of customization, including a design tool engine that fits even the most complex organizational tax reporting needs. The solution allows companies to prepare, generate, review, and submit statutory reports that comply with government guidelines. These functionalities vary based on the license that an SAP customer has. This section provides some background on the current licensing approach. Please note that this is subject to change per SAP as the solution offering evolves. SAP S/4HANA for ACR offers two different types of licenses. The example explained in this article only applies if a business has already implemented SAP S/4HANA Cloud, essentials edition or SAP S/4HANA Cloud, extended edition, or if the business is planning to implement SAP S/4HANA for advanced compliance reporting at a later phase of its project. Basic license—With this license a business gets 24 report runs per year as part of SAP S/4HANA Cloud. Advanced license—If the requirement or usage is more than the threshold noted, an advanced license is needed. In SAP S/4HANA cloud, SAP customers get the same functionality and features from the basic or advanced license with the only difference being the number of submissions granted. The key ACR functionalities used in SAP S/4HANA Cloud, essentials edition and SAP S/4HANA Cloud, extended edition include the following:

• Monitor the compliance status and due dates for supported compliance reports
• Generate and submit compliance reports
• Define reporting entities
• Perform embedded analytics for compliance reports using data analysis
• Track items considered for reporting under a specific report run (only for supported reports). This tracking helps analyze and audit documents
• Visualize and interpret output formats in a user-friendly and consistent manner using the data preview feature.
• Make manual changes to the document data after the document has been generated (Design Tool)

SAP Localization Hub (SLH)

In certain countries, tax authorities have enabled or require direct tax submission from their tax system (SAP and ACR for our purposes) to their respective government’s tax filing system. Examples include the United Kingdom (UK), Netherlands (NL), and Brazil (BR) but the list continues to grow each year as countries look for efficiencies and to digitalize the tax filing and submission process. SAP’s SLH service is a separately licensed offering that, together with ACR, supports and enables the connectivity from a customer’s SAP Cloud environment to each governments’ tax system along with transmitting the actual submission(s) itself. Let’s use the UK as an example. When running SAP S/4HANA for advanced compliance reporting for this country, a business would be able to submit their VAT tax return file in the last step to the government rather than relying on a third party to perform the electronic submission or building the technical connectivity in-house. The submission recipient is the HM Revenue and Customs (HMRC) department for the UK. Note: The metric for SAP S/4HANA for advanced compliance reporting functionality is number of submissions, meaning if a UK entity submits its VAT tax return quarterly, four submissions per year would be consumed for this entity.

Current Scope Covered by SAP S/4HANA ACR

In this section we show the current scope covered by SAP S/4HANA for ACR. SAP also provides an Excel version of this scope so an organization can easily align their reporting countries, filing types, and submission needs to identify if deltas exist. Deltas are then evaluated with SAP’s ACR product roadmap for future releases and SLH services to confirm if they will be covered in the near term. If not, the ACR design tool engine previously noted and third-party submission solutions should be utilized to ensure a complete fit with your company’s needs. Figure 1 shows ACR built-in legal reports. Figure 1—ACR Built-In Legal Reports Source: https://help.sap.com/viewer/4de200b26d5d42bbacae69c6bf6b9923/2002.500/en-US/dc83d8f3328040859201f50c23b7f409.html

Sample Configuration for the UK Only

Configuration for ACR in SAP S/4HANA Cloud is already delivered by SAP. This occurs as part of the country localization SAP performs when setting up each country and activating the ACR best practice scope items in SAP S/4HANA Cloud. This is a significant improvement from the past where expert tax and SAP knowledge was required to set up the system properly to meet each customer’s needs on a project by project basis. Now, users with the appropriate roles and authorizations can access this configuration to investigate further and make minor changes only if necessary.

Step 1

Configure Your Solution Figure 2 demonstrates the following configuration path: Manage Your Solution --> Configure Your Solution --> Enter Application Area “Finance, and Sub Application Area Statutory Reporting” --> Click Go. Figure 2—Configuration screen for ACR in SAP S/4HANA Cloud

Step 2

Click on Basic Settings (Figure 2) Basic Settings: This is where an authorized user can define basic settings for ACR. For example, changing the report’s fiscal year variant. Additionally, users can clean up unwanted reporting tasks from the Run Compliance Reports APPLICATION (see figure 3, step 2). This is very useful if the fiscal year variant is changed after the first report run. Without doing this, the report will not update its fiscal year variant. Electronic Communication (SLH): If a business wants to use SLH functionality they would enter the parameters needed for each relevant company code to enable the electronic communication between your company and the government, for example, for the purpose of submitting tax returns.

Step 3

Click on configure Setting Up Your Compliance Reporting. Figure 3 Shows basic settings required for ACR. Figure 3—Basic settings screen for ACR configuration

Step 4

Navigate through different folders in the dialog structure and click Configure. Users will be able to navigate through the different configuration screens available for each report. Note: If a user wants to know more about a certain configuration area, they can just click on the down arrow next to “configure” (see Figure 3), and go to configuration help. Figure 4 shows setting up your compliance reporting screen. Figure 4—Setting Up Your Compliance Reporting Each report category has their own configuration, and it can be seen by selecting for example GB_VAT_DCL (see Figure 4) and clicking on each folder on the left. Users would be able to see for example Fiscal Year Variants, Company name, VAT Registration number etc.

Performing Advanced Compliance Reporting in the UK

The following example explains how to run SAP S/4HANA for ACR in the UK.

Step 1

Click into the Run Compliance Reports Application (Figure 5) in your Fiori Launchpad. Figure 5—Run Compliance Reports

Step 2

Filter by country Great Britain and reporting year 2020 for this example. Once you arrive at the list of advanced compliance reports available for Great Britain (GB) (Figure 6), users can search reports by filter and track report status. Figure 6—Advanced Compliance Reports Available for Country GB

Step 3

Explore each activity shown in Figure 7, which shows a list of activities a business can perform for a VAT tax return for country GB. Figure 7—List of GB VAT Return Activities It’s important to understand each activity, as explained in the following:

• Manage Tax Items: The Manage Tax Items reporting activity allows a G/L accountant to move one or more tax items between reporting periods by changing the tax reporting date. However, if the tax reporting date is not available, the system considers the posting date or the document date, based on the country the business is reporting to.
• VAT Tax Return Statement: This is your actual VAT Tax Return, where logs and submissions are available.
• Post Tax Payable: This Application allows businesses to pay tax amounts by posting the balances of input and output tax accounts to a tax payable account. The Application does not require entry of a tax code, enabling manual adjustments to tax accounts directly. Postings can be made to all relevant general ledgers for the accounts users are responsible. In the Run Advanced Compliance Reports Application, after the VAT return has been generated, this activity helps a user to post documents directly. It eliminates the need to enter the amounts manually for VAT posting.

Step 4

Run GB VAT Tax Return Activity. To run the VAT Tax Return for GB, go to the second activity (see Figure 7) called GB VAT Return Statement and click on new run. Figure 8 shows how to run a VAT return for country GB. Figure 8—Great Britain VAT Return

Step 5

Click run. Figure 9 shows the standard selection criteria for a VAT return statement. Figure 9—Selection Criteria for a VAT Return Statement After performing the step 5, the system shows status “in process” (Figure 10), and after refreshing the window on the top right corner, the status changes to “Generated Successfully” (Figure 11).

Step 6

Refresh window shown in Figure 10. Figure 10—Status of the VAT Return for GB Usually it takes from 1 to 5 minutes for the status of the report to change from in process to generated successfully. Figure 11—GB VAT Return Report Status is Updated

Step 7

Click in “Generated Successfully” highlighted in red in Figure 11.

Step 8

After running the report (Figure 11), click on the VAT Return Statement by clicking on the blue hyperlink (Figure 12). Figure 12—VAT Return Document

Step 9

Click on Submit (Figure 12). The format of this report is JSON (JavaScript Object Notation) (see Figure 12). After viewing the report output, the responsible user would hit submit (see Figure 12) (SLH functionality needed).

Step 10

Download the VAT Return Statement. If a business decides not to take advantage of SLH functionality, the responsible user can download the file and submit it to the government via other means (see Figure 12). Once the submission step is completed, click on “update submission status” and set it as completed (see Figure 13 and Figure 14).

Step 11

Click on Update Submission Status (Figure 12) and confirm the pop-up message (Figure 13). Figure 13—Confirmation Change Status Message At this stage, The VAT Return is completed and accepted by government (Figure 14). Figure 14—Content Accepted by Government

Step 12

Click back once to display the main screen of the VAT Return (Figure 15). Figure 15—Content Submitted to Government

Step 13

Click back once more. In process and completed activities are displayed. At this point, there is one completed activity (see Figure 16). To complete the other two remaining activities, the responsible user selects Manage Tax Items Activity first, and sets it status as completed (see Figure 17).

Step 14

Select Manage Tax Item activity, and click Set Completed (Figure 16 and Figure 17). Figure 16—In Process and Completed Activities Figure 17—Completed Activities Let’s do the same with Post Tax Payables activity:

Step 15

Select Post Tax Payables, and set in process first, then set completed (Figure 18). Figure 18—Set to Completed Post Tax Payables After setting this last activity as completed, the screen shown in Figure 19 is displayed. Figure 19—Completed Activities

Step 16

At this point, GB VAT Return is fully completed and accepted by the government. To check the overall status of VAT reports go to the main Run Advanced Compliance Reports screen (Figure 20), and filter as needed. Figure 20—Overall Status of Compliance Reports Apart from running and submitting standard delivered ACR reports, business key users and business configuration experts can use the design tool for more advanced formatting features. The Run Compliance Reporting Application is extensively supported by the Define Compliance Reports Application. SAP S/4HANA for advanced compliance reporting provides preconfigured or standard report definitions. Responsible users can choose to use the existing report definitions, create their own report definitions, or extend the ones delivered by SAP based on business requirements. The Define Compliance Reports Application provides the user with the steps required for creating report definitions. While creating report definitions, users can choose the reporting mode as either Classic or Enhanced. For more details about using the Classic mode, see the document “Adopting Classic Mode” attached in SAP Note 2465179. To find out more about SAP S/4HANA for ACR, it’s always best to refer to the source. The following link contains the standard SAP documentation for this solution: https://help.sap.com/viewer/7a60944343e543a1ab99e9b2904dab09/CLOUD/en-US.