How to Solve One of the Biggest Problems with VAT stated

While you can find the customer’s Value Added Tax (VAT) ID in the master data in SAP and it is used as a template for invoices, the stated amount of VAT is found in the transaction data. As a rule of thumb, if a delivery or other service is delivered to a company in another European country, VAT is not to be stated. But if you have mistakenly stated VAT, the Tax Authorities take the easy way out…

… and you still have to deduct the VAT according to Section 14c (1) of the German VAT Act (Umsatzsteuergesetz – UStG):

“(2) Any person who states an amount of tax separately on an invoice, yet is not entitled to state the tax separately (unauthorized statement of taxes) shall be liable for the amount stated.”

But before we go on to answer the question of how to correct such issues, let us first examine some cases in which VAT was incorrectly stated.

What is the SAP table for the VAT stated and what other fields are required?

The stated VAT can be found in the BSEG (Accounting Document Segment) table. You can take a look at the table by performing SAP transaction “SE16N”. However, further fields are required for the analysis of incorrectly reported VAT in SAP to be able to exclude deliveries in Germany. We are also interested in whether the delivery or service has taken place within the EU, whether the country of delivery and destination differ, whether the customer is not a natural person and whether it is a debit claim.

But first things, first:

The attentive reader will already have noticed that we are talking about deliveries and other services. In the case of other services, however, there is no vendor country or customer country because of the absence of goods. So how is tax to be applied in this case? Section 3a (2) of the German VAT Act provides an answer to this question:

(2) Other services which are carried out for another trader for its business shall be carried out at the place where the recipient operates its business, subject to Paragraphs 3 to 8 and Sections 3b, 3e and 3f. If the other service is carried out from a fixed place of business, the location of the place of business shall constitute the place of delivery […]

In this case, the so-called reverse transaction procedure (also referred to as the “reverse charge procedure”) is applied in accordance with § 13b (5) of the German VAT Act. Accordingly, the recipient of the other service must initially declare the value-added tax, which it can subsequently claim back as input tax. In this case, no VAT has to be stated on the invoice. So now let’s summarize the key facts about stating VAT on invoices:

Please keep in mind that the above table is not the entire extent of wisdom on the matter. It simply wouldn’t be tax legislation if things were that easy, would it? Here, once again, there are a number of exceptions.

So let’s get to the point, I hear you say!

What do you mean, you were expecting that anyway?

Okay, okay, so now let’s take a look at the VAT stated on your invoices in SAP.

How do you retrieve the data in SAP for an analysis of the stated VAT for deliveries and services to other countries?

If you want to analyze the VAT in your SAP for deliveries and other services to other countries, you need the necessary data structures and data from your SAP system. With the help of our software zap Audit, the data is loaded from your SAP system fully automatically and stored on your hardware. zap Audit will then automatically check more than 124 other indicators besides the “Intra-community supply or service with VAT” indicator. In addition to the data, you will also receive an evaluation for the audit question of the VAT that has been shown for deliveries and other services to other countries. You want to download zap audit? Feel free to contact us here.

Can I evaluate at least a part of deliveries and services to other EU countries manually?

The necessary fields for the analysis of the services to the other countries within the EU are spread over various tables in SAP, so that a carrying out a manual evaluation would be worthy of a blog post all of its own due the extent of the subject.

However, deliveries to another EU country can be audited relatively quickly and easily via the SAP GUI. To do this, I used the SAP transaction “SE16N” using the BSEG (accounting document segment) SAP table. Because we don’t need all the fields from the BSEG table for an audit of this type, we deselect all the fields, except for those shown below with the corresponding options listed:

The fields “Country of Destination for Delivery of Goods (Dest. Country)” and “Supplying Country for Delivery of Goods (Suppyling cntry)” are intentionally selected with the option “not equal to”, since SAP does not maintain these fields if they are deliveries within the same country. As a result, we obtain all postings for which the destination and delivery country differ.

By clicking on “Online” (F8), we obtain a list with all the documents that have VAT mentioned (MWSTS > 0) and the relevant tax amount (field WMWST). Due to varying tax regulations outside the EU, first examine the combinations of destination and delivery country within the EU. Since the list shows only documents with VAT, this is where your Professional Judgment comes in. Investigate things further and ask why VAT was stated in the given cases.

Note: Remember that natural persons (technical field name: STKZN = X) have to be excluded. To do this, you compare the generated list with your customers in table KNA1.

How to correct VAT that has been stated by mistake?

An answer to this question can also be found in the German VAT Act in Section 14c Paragraph 2:

“[…] The tax amount due pursuant to sentences 1 and 2 may be corrected to the extent that the risk to the tax revenue has been eliminated. The risk to the tax revenue is eliminated if a deduction has not been made by the recipient of the invoice or the input tax has been repaid to the financial authorities. The correction of the amount of tax owed is to be applied for separately to the tax office in writing and, after its approval, in accordance with Section 17 Para. 1 for the tax period in which the requirements of sentence 4 have been met”

When you read that paragraph, you will notice that errors of this type can only be corrected with a considerably amount of effort. More specifically, this paragraph means that:

1. You have to inform your customer of the error
2. You must issue a new invoice with correct VAT to the customer
3. Your customer must declare the correction to the tax office and carry it out
4. Your customer must pay the correct VAT
5. You must report the correction to the tax authorities

To put it simply: The amount of effort involved is huge and any money that you will get back will long since be used up.

Have you had any experiences related to the topic of “Intra-community supply or service with VAT”? Tell us about your experiences below.