Many countries worldwide have defined their own tax reporting regulations and require companies to report tax information digitally to their tax authority. This can be in real-time, daily, monthly, quarterly, or annually for regulations such as the VAT Periodic Return, Withholding Tax, the EC Sales List, Financial Statements, Audit Files, VAT Sales and Purchase Ledgers, Transport Tax, etc. In any case, the tax data needs to be submitted in time and in formats, prescribed by law, such as e.g. XML, TXT or PDF. Quite a few of our customers have struggled to manage and monitor these different country-specific tax regulations in their SAP system and to keep track of which tax reporting was already submitted to a local tax authority for which company code and to centrally store those reporting files for archiving. For this purpose, SAP has released SAP Advanced Compliance Reporting (SAP ACR). SAP ACR is a standard SAP solution to disclose aggregated enterprise-related information to a local government agency and therefore to achieve compliance with global tax reporting requirements, such as VAT return, withholding tax, EC sales list, audit files requirements, etc.
In this blog post, I will explain how SAP ACR works as a central solution to manage and monitor country-specific tax reporting requirements in your SAP system, which compliance (i.e. legal, statutory) reporting is in scope of SAP ACR and how tax reports can be prepared and submitted using SAP ACR. Moreover, I will provide you with an overview of the countries that are currently covered by SAP Advanced Compliance Reporting and explain the differences between SAP ACR and SAP Document Compliance (also known as the SAP eDocument solution).
SAP Advanced Compliance Reporting (SAP ACR) as a strategic tax reporting tool for your global growth and international expansion
A major challenge of doing business internationally is ensuring compliance with the local legal tax reporting requirements. These can vary greatly between different countries and define their own processes and specifications. This diversity and complexity increases the need for a central solution to manage and monitor all different requirements.
That is exactly where SAP Advanced Compliance Reporting comes in. This is SAP’s standard solution to manage statutory reporting worldwide, enabling simple adoption of constant legal reforms in your digital business transformation strategy, while providing more transparency. SAP ACR is fully integrated with the S/4HANA On-Premise and Cloud editions and can also be made available for SAP ECC, using the SAP Localization Hub (SLH) – Advanced Compliance Reporting service.
The basic principles for legal compliance reporting with SAP ACR
In SAP S/4HANA, SAP ACR covers the end-to-end reporting process for almost all countries that have mandatory tax submission requirements. Please note that not all countries are available for ECC, when using SAP SLH – Advanced Compliance Reporting service.
SAP ACR basically provides all required tax information on time (being real-time, daily, monthly, annually depending on the country-specific requirements) in the legally prescribed formats, such as XML, TXT, PDF, XBRL, JSON, based on the source data from your SAP system. Next to generating the required tax reports, SAP ACR also helps you submit them digitally to the local tax authority and keep track of all communication. From a user perspective, SAP ACR is supported by a series of SAP Fiori Apps that provide additional analytics features for report data (e.g. SAP Embedded Analytics), real-time monitoring, full traceability features, flexible business rules and an extensible report design environment to ensure long-term compliance.
Because SAP have developed their strategy for legal tax reporting around SAP ACR, all future legal reports will be built for SAP ACR. This makes SAP ACR the most future-proof tax reporting solution for SAP and ensures compliance with constantly changing legal requirements on the long run. Old legal reports are currently being replaced by compliance reports for SAP ACR. This means that the old standard SAP ECC reports are not always supported anymore if SAP provides an alternative report in SAP ACR.
Countries supported by SAP Advanced Compliance Reporting
At the moment of writing this article (2nd October 2020), 40 countries are supported by ACR.
Some examples of available statutory reports in SAP ACR are:
- VAT Periodic Return
- Withholding Tax
- EC Sales List
- Financial Statement
- SAF-T Audit Files
- VAT Sales and Purchase Ledger
- Balance of Payments
- Asset Reporting
- GST Goods and Service Tax
- …
and also country-specific legal reports such as the Chart of Accounts Reporting in Mexico, the Domestic Sales and Purchase List in Hungary, the Inventory Ledger in Turkey, etc.
How you can use SAP Advanced Compliance Reporting for tax reporting compliance
Just as with SAP Document Compliance for e-invoicing, SAP has also defined a SAP ACR basic process for tax reporting compliance. As soon as a new country-specific tax reporting requirement is announced by a local tax authority, SAP adapts the SAP ACR basic flow to provide a compliant solution. The SAP ACR basic flow is illustrated in the following graphic:
The SAP ACR Cockpit indicates which tax reports are almost due to be submitted and by which date they are due. Especially, when you are doing business internationally, this will help you keep an overview. In case a specific tax report is almost due to be submitted, the only action you need to take is generating and downloading the report from your SAP system. After downloading the tax report in the required data format, this file can be submitted to the local tax authority portal.
Differences between SAP ACR vs SAP Document Compliance (= SAP eDocument Solution)
It might have come to your attention that SAP has built two different strategic solutions to achieve compliance with different country-specific legal requirements: SAP Advanced Compliance Reporting and SAP Document Compliance (formerly known as the SAP eDocument Solution). The reason for this can be found in the type of legal requirements that needs to achieved compliance with.
- SAP has built SAP Advanced Compliance Reporting (SAP ACR) to prepare and submit tax reports electronically to local tax authorities. These tax reports contain summary information from your SAP system and only need to be submitted on a periodic basis (e.g. once per month/ quarter/ year or even less). As a result, a relatively small number of documents is issued through SAP ACR.
- SAP Document Compliance, on the other hand, was developed to prepare and submit more detailed transactional data electronically to local tax authorities. Examples are e-invoices, transport registration documents, etc. SAP Document Compliance is developed to issue a high volume of electronic documents (mostly in real-time, depending on what is prescribed by law). Whereas SAP Advanced Compliance Reporting does not provide a direct interface with the local tax authority systems, SAP Document Compliance uses a direct interface with these local tax authority platforms to cover the entire end-to-end process automatically and to have all communication with these external platforms flow back into your SAP system. If you want to learn how you can develop your own e-invoicing strategy with SAP Document Compliance, please read our blog post “SAP Document Compliance to meet legal requirements worldwide”.
Apart from ensuring compliance with different types of legal requirements, SAP ACR and SAP Document Compliance both provide a very user-friendly SAP cockpit to manage and monitor the different legal requirements for which they have been built. Both solutions cover the end-to-end process and help you create the required electronic documents in the required file format. As well SAP ACR as SAP Document Compliance are strategic, future-proof solutions that serve as a basis to which all future respective legal requirements will be added.
The benefits of SAP Advanced Compliance Reporting
In the past, it was also possible to generate statutory reports with SAP ECC. With SAP S/4HANA for Advanced Compliance Reporting, however, you have 1 centralized solution to achieve compliance with all statutory reporting requirements worldwide. SAP ACR brings the following advantages:
- With the built-in Reporting Dashboard you can view and monitor all your statutory reporting tasks, deadlines and submission statuses.
- SAP ACR is standard available in your SAP S/4HANA system (no additional configuration is needed).
- You can review and analyze your information in a data preview or tabular mode before filing.
- You can replicate data from non-SAP sources via APIs and Excel templates.
- The end-to-end process is covered: from the preparation to the manual or digital submission of the required legal reports to the authorized government portals. In case the reporting data needs to be transmitted electronically (e.g. MTD UK), SAP provides the required interaface.
- SAP ACR helps you generate all relevant country-specific legal reports in diverse output formats – such as XML, PDF, TXT, or XBRL – to meet specific government regulations.
- With the Audit Trail you can track relevant data under a specific reporting task for further analysis and auditing.
- SAP ACR provides Analytics functions that simplify the legal reporting process.
- Very user-friendly environment. External support will only be needed in exceptional cases.
- Detailed test scripts are available in the local language and facilitate the use of the reports.
Last but not least, SAP provides automatic system updates on a quarterly basis to ensure compliance on the long run. Therefore, the cloud-based ERP solution, SAP S/4HANA Cloud for Advanced Compliance Reporting, makes it much easier to achieve global compliance. As soon as a new legal tax reporting requirement is released, SAP will provide a solution for SAP ACR.
How PIKON can help you with your international compliance project
If you need more information on SAP ACR or SAP Document Compliance or if have any other questions regarding compliance with country-specific legal requirements (being tax reporting requirements, e-invoicing requirements, …) in your SAP system (ECC or S/4HANA), please don’t hesitate to leave a comment in the Comments section below or to request a web-meeting through the button above. I am happy to help you.
With our established “Competence Centre for Legal Requirements”, we have up-to-date knowledge about the different country-specific legal requirements all over the world, and how to ensure that your SAP system and business processes meet these requirements, with the desired customization for your company. This ensures that our team of experts are extensively trained and experienced thanks to the many projects we did over the years. These projects include 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, the Whitelist Check for Poland, next to more general accounting standards such as Lease Accounting under IFRS16 and SEPA.