How to prepare SAP for the new 2020 COVID-19 VAT rate cut in Germany
The Corona COVID-19 pandemic has massively disrupted the global economy, resulting in an economic collapse. In order to rebuild and boost the economic development, the coalition committee of the German federal government has introduced a stimulus package, the so-called “Corona-Steuerhilfegesetz”. With this initiative, the German MwSt. (= VAT, value added tax) will be reduced from 1st July 2020 until 31st December 2020. More specifically, the extended VAT rate of 19% will be lowered to 16% and the reduced VAT rate of 7% will be cut to 5%. In this blog post, I explain the impact of these measures for your business, the SAP-modifications that need to be made and how we at PIKON can help you with this on a very short term.
How the temporary German VAT rate cut impact your sales and purchasing processes
These new tax relief measures apply to all organisations that have a legal entity in Germany and provide German customers with invoicing goods or services, as well as organisations that receive goods and/ or services from German suppliers. If you, as an organisation, are affected by these measures, you need to act fast and make the necessary SAP adaptions before 1st July 2020. More specifically, the new 16% and 5% German VAT rates need to be implemented for both sales and purchase invoices in your SAP system because not only your outgoing invoices to your customers but also the incoming invoices from your vendors will have the reduced VAT rate in this period. It is important to avoid VAT risks that could potentially exist from 1st July 2020 as a result of an incorrect VAT rate statement.
How to adapt your SAP FI and SAP SD settings to comply with the new German VAT standard rate cut from 19% tot 16% and with the reduced VAT rate from 7% to 5%
In order to make your SAP ECC or SAP S/4HANA system compliant with the new German VAT rate changes, we absolutely advise against changing existing tax codes. We recommend creating new SAP tax codes with 16% and 5% to use in the period from 1st July 2020 untill 31st December 2020. In the future, for these kinds of scenarios, also time-depending tax codes will be available in SAP S/4HANA. At the moment, however, these cannot be used yet for the SAP S/4HANA On-Premise edition.
Next to the new tax codes and VAT rates, also new VAT conditions need to be created in SAP. Please note that such changes will also apply to all kinds of rebates, commercial invoices, credit notes, etc. In case a credit note, a return or a debit note is created in the reference to the invoice with 19% VAT, then the document will have the same VAT rate. In addition to making all necessary technical SAP changes, it is also important that your people get a user-training to learn how to work with the new German VAT settings in SAP.
Since this temporary VAT cut in Germany affects both the purchasing and sales processes, the new tax codes/ tax calculation will not only need to be created for your SAP FI module but also for your SAP SD documents. When creating the new tax codes, also the relevant customizing settings need to be adapted in your SAP SD environment. In addition, it might be necessary to manually adjust documents. When booking incoming invoices, please bear in mind that the new tax codes should still be available after the period ending on 31st December 2020, as some purchase invoices could be posted later in 2021.
In order to make these necessary SAP changes on time in your own SAP ECC or SAP S/4HANA system, you can rely on our expertise and services. We at PIKON are happy to support you and have composed two consultancy packages for this: our Basic and our Standard package. With the standard package, you get everything from the Basic package, including our dismantling and testing services as soon as the regular VAT rates will be recovered in Germany. All services will be provided remotely and on time, so you don’t have to worry about the deadline and any potential interruption in your business processes. Please click on one of the buttons below to request more information and/ or order your desired package. We will then plan a web-meeting with you to agree upon the next steps.
Other planned, SAP-affected changes in Germany’s stimulus package (Corona-Steuerhilfegesetz)
As part of their “Corona-Steuerhilfegesetz” to kick-start the economy, in addition to the confirmed VAT rate cut, Germany will temporarily allow descending depreciation for fiscal years 2020 and 2021 at a rate of 25% annually for movable fixed assets (limited to 2.5x of the current linear depreciation rate). Since all details and conditions for this still need to be published in an official government document, the full impact of this initiative is still unclear. However, we expect, in order to comply with this, a new SAP depreciation key, that is suitable for this particular decreasing balance method of depreciation, will be needed. Because of these changes in the AfA-table (Abschreibungstabelle für allgemein verwendbare Anlagegüter, depreciation table for assets), there will be a change in the fixed assets in SAP.
How PIKON can help you in the area of compliance with country-specific legal requirements in SAP
At PIKON, we have established a “Competence Centre for Legal Requirements”. We are a strategic partner who ensures that your SAP system and business processes meet different country-specific legal requirements on the long run all over the world. Our team of experts combines SAP expertise and extensive knowledge of country-specific regulations and has gained a lot of project experiences over the years. This ranges from country-specific legal requirements, such as e-invoicing in Mexico (CFDI), Italy (SDI), Spain (SII), Hungary (RTIR), VAT reporting in the UK (MTD-VAT), e-accounting with SAF-T in France, Portugal and Poland to accounting standards such as lease accounting under IFRS16 and SEPA. We do this with standard SAP solutions, such as SAP Document Compliance, but also with lean, own-developed SAP Add-Ons. Please do not hesitate to contact us for more information.