This blog was last updated on February 1, 2024

Tax compliance is moving up the priority list as companies migrate from ECC to S/4HANA and S/4HANA Cloud.

Multinationals recognize the inefficiencies of SAP-native compliance as government mandates redefine sales and use tax, e-invoicing, and VAT compliance and reporting requirements. Financial systems that were originally implemented to help manage growth are now hindering it.

IT leaders are prioritizing tax for SAP S/4HANA migrations as governments get more aggressive to close their tax gaps. Here are 10 reasons why:

1. Legacy ECC and S/4HANA ERPs are falling out of compliance as continuous tax compliance requirements spread across the globe. In addition, your ECC tax solution may not be certified to work with S/4HANA
2. Country-by-country custom codes and workflows are adding cost and complexity to SAP COEs and reducing operational efficiency
3. Expansion into new geographies is creating discrepancies in how different business locations calculate and administer tax leading to errors and misuse of IT resources
4. VAT and GST filing inaccuracies, tax penalties and fines are on the rise as constantly evolving regulations lead to out-of-compliance internal systems and product codes
5. “Economic Nexus” tax collection requirements in the U.S. are evolving quickly since South Dakota v. Wayfair and companies still using disparate ERP or tax data-related technologies are ill-prepared to scale
6. Real-time transaction controls where invoices cannot be exchanged between trading partners until the tax administration has received and approved them are forcing ERPs, and even business processes, to adapt radically
7. Patchwork of e-invoicing, tax reporting and B2B transaction automation systems are resulting in significant cost and risks
8. New customer-driven business models are requiring IT modernization projects to scale across all departmental areas affected by tax
9. Unique and changing data formats that require modern, flexible and comprehensive APIs to make applications easily available across a specific set of financial systems and workflows
10. Need for better collaboration among teams like tax, finance and IT that are closest to tax compliance management and require centralization of processes