Harmonise VAT with ERP and

eliminate non-compliance.

Oracle e-Business Tax Specialists

About us
We provide an unparalleled service when it comes to Oracle Financials eBTax
integration, understanding the limits of the eBTax module but more importantly,
when those limits are reached we know how to work around the issue with proven
solutions so we can always meet your needs.

Your investement
When you have invested a significant sum in an
Oracle R12 or Fusion solution you want to avoid
unwelcome surprises resulting from a VAT audit.
Bearing in mind that the consequences for noncompliance could involve heavy fines in addition
to interest on unpaid VAT, you would be faced
with a potentially huge yet avoidable - cost and
embarrassment to your business.
You depend on your ERP system to ensure that the
correct VAT treatment of the transactions has been
taken into consideration and also ensuring optimal
reporting capabilities. In our experience however,
standard Oracle ERP systems do not necessarily
determine all VAT transactions correctly.
We often find:
a lack of control over the business processes
involved in VAT imposition
a failure to implement the correct tax logic with
respect to the relevant parts of a VAT transaction
a manual approach when a fully automated
solution is possible

The consequences can be expensive both in terms of

time spent dealing with tax audits and the inevitable
costs incurred.
There is a way to ensure that VAT is aligned with
Oracle ERP and have the peace of mind from
knowing that your VAT solution is the best it can be by allowing eBiz Answers to conduct a system audit.

The EU VAT system is in a mess.

It is a dizzying mix of rates with a huge
number of exemptions and special cases
across its 27 countries. The VAT gap is now
a stunning 100b which is steadily rising
due to fraud resulting from the fact that
there is no taxation on EU cross-border
purchases by businesses.
- Source: EY T-Magazine June 2012

Why you need an audit?

With a wrongly or a misaligned implementation of the VAT system, companies run the risk of making errors
they are not even aware of until they are discovered by the tax authorities. VAT compliance risk in the ERP
system can come from several different sources including:
Changes in business structures
Growth through mergers and acquisitions and
geographic expansion
Registrations to new country VAT regimes

Changes in logistics ows

Lack of tax training to new users
Policy changes by tax administrations
Legislation changes at jurisdiction or European
Commission levels

Consider some of the key issues which an audit would

be able to address.

it, with every location where the old tax rate was stored
having to be updated manually.

Manual Solution
It is a maxim that we reduce user error by reducing
user interaction, however the vast majority of the
clients we visit have a manual VAT tax solution in
place. This is the process of defaulting the tax rate
code from sources including items or customer sites
and then allowing the end user to override the tax rate
whether it is correct or not. Allowing an untrained
user to potentially select a wrong tax rate could go
undetected until a VAT audit! Any solution that relies
on user intervention to ensure the correct tax is almost
certainly exposed to error. With a complex tax situation,
do you want to rely on the under-qualified payables
clerk deciding if the tax rate should be exempt, zero
rated or out of scope? Instead, a solution should apply
additional determining factors in combination with the
user-entered data to determine the tax. In this way, the
onus of the determination is on the tax logic installed
and not on the decision of the user.
Not automated
An effective Oracle indirect tax solution should be fully
automated with minimal manual intervention. This is
particularly true for inter-company and receivables
transactions where all the information is at hand to
correctly determine the tax. For payables transactions
it is often impossible to be 100% automated as
purchases may be using an exempt or reduced rate
or there could be VAT rounding differences. Tax logic
should still be used to determine the majority of the
tax rates with only the exemptions requiring any sort of
controlled manual intervention.
Limitations of defaulting the tax rate
Many poor solutions will default a tax rate from a static
source, for example, from the customer site. This
poses problems. First, defaulting permits only one
value to be set and the tax rate could be different for
the same customer under varying conditions (sale of
goods or services). A further issue arises when the tax
rate changes and a new one must be used to replace

Missing or poor conguration

Missing, poor or inaccurate configuration is a frequent
issue. A typical example is that the seeded EMEA
VAT set up has not been carried out so all the rich
reporting capabilities designed for Europe are simply
not available. Often, configuration may have been
performed in an unprofessional way that not only fails
to meet all current requirements but renders the
solution extremely difficult to maintain or expand.
Knowledge
The Oracle Tax module is vast and extremely complex
and you dont know what you dont know is often
the case when VAT in Oracle is set up. The consultant
implementing it may have limited knowledge of
the eBTax module and this coupled with a limited
understanding of VAT legislation results in a poor
solution. A user who then has to maintain the tax
or enter transactions will only know what they have
been told - often by the consultant - and simply has
to accept it regardless of whether it is right or wrong.
Who and how can they challenge this?
Global solution
If your VAT accounting is based on an upgraded oracle
11i solution it is most likely that the structure is going
to be impractical, difficult to maintain and even more
challenging to try converting it into a fully automated
solution. In almost every case the tax rates have been
set up on a country-by-country basis rather than with
a structure that is designed to be global. It is better to
have a consistent design for your tax structure using
a common naming convention and recycling tax rules
to ensure ease of maintenance and issue resolution.
These are all matters that can be highlighted in our
review.
We recognise that some customers simply dont want
an automated solution and while there is a higher risk,
a manual process can remain in place.

What can you expect from an ERP tax audit?

Our System Indirect Tax Audit will analyse your existing solution and clearly identify what you have and
what is missing, but most importantly: propose practical ways in which you can move forward. We will take
a completely unbiased approach to this task, taking into consideration all relevant factors before making
recommendations. Furthermore, we can work with your tax partner to ensure that the VAT on all transactions
is being correctly determined. Our tax audit will comprise the following:
Analysis of existing set up of all tax regimes

Invoice formats and VAT

Review of existing VAT issues

(resolution if appropriate)

VAT reporting (including country specific reports

such as the European Sales Listing)

Understanding of user requirements

Interface review to see how the tax is imported

into and out of Oracle

Review of requirements from modules where tax

can be inuenced: Projects, Depot Repair, Oracle
Contracts, etc.

20-plus page report available within 72 hours of

the audit

For the first time you will have an accurate overview of your existing set up, potential future issues that you
may face will be agged up and recommendations provided on how to take your VAT solution to the next level.
Above all, you will have the reassurance of the advice and support required to reinforce the concepts within
your business and to implement necessary changes.

We found one company claiming VAT

on purchases at 23% when the correct rate
should have been 21% thus the company
was unintentionally committing VAT fraud!
As this had taken place over a six-month
period the subsequent audit, correction
payments and penalties would have
been substantial had we not spotted the
problem. This was all due to the reporting
being carried out incorrectly, a process that
was easily discovered in our audit.

Contact
Should you wish to contact us to discuss a VAT audit, Oracle R12 and Fusion tax conguration or any other
eBTax related issues then please contact:
EU: +44 208 123 2833

US: +1 818 435 6435

E: info@ebizanswers.net

www.ebizanswers.net

Oracle e-Business Tax Specialists