Glossary

Issue

Many SAP standard reports commonly used for Tax Reporting purposes in SAP ECC have run out of SAP support and have been replaced with reports in the Document and Reporting Compliance (DRC) framework for Statutory Reporting available in S/4 HANA. The usage of SAP DRC in S/4 HANA has implications on licensing requirements as well as other project considerations such as training needs and business process change and shall therefore be assessed further as part of this KDD.

Recommendation

To ensure continuity of regulatory compliance in S/4 HANA for statutory reporting and submissions and to provide the users with a powerful, intuitive and state-of-the-art tax reporting framework, a move towards SAP DRC seems inevitable. Sticking to an obsolete and outdated tax reporting framework which has already reached or is nearing the end of their lives from a SAP support and product development perspective in a new S/4 HANA implementation is heavily contradicting the idea of building a future-proof solution in S/4 HANA.

Background & Context

SAP DRC in S/4 HANA is a powerful tool designed by SAP to cater for the ever growing need for electronic data exchanges between organizations of the private as well as the public sector. In an attempt to increase efficiency, transparency and regulatory compliance, more and more governments across the world mandate e-invoicing for businesses as well as electronic submissions of Financial data for statutory reporting purposes. SAP DRC in S/4 HANA is addressing and facilitating this transition from paper-based to data-based management of trade- and compliance-relevant documents in an organization. In the context of this KDD, SAP DRC in S/4 HANA is being looked at as SAP's roadmap tool for statutory reporting purposes in S/4 HANA which facilitates the monitoring, preparation and submission of numerous statutory reports to government and fiscal authorities.

Syensqo is currently using various tax applications for compliance, reporting and filing purposes. While some of these applications allow for seamless integration with SAP as the source system for regulatory filings and reporting, the business is still relying on supporting reports from the underlying SAP transactional accounting system especially in countries where no automated or only semi-automated solutions are in place for tax reporting and submissions. In a growing number of countries around the world it is nowadays a legal requirement to integrate the accounting system with government portals for direct submissions of statutory filings to the authorities (e.g. 'Make Tax Digital' initiative in the UK for indirect tax submissions). As such, a robust tax reporting framework needs to be established in S/4 HANA which ensures not only regulatory compliance as the leading principle but also provides the business users with a flexible and easy-to-use reporting and submission solution leveraging on state-of-the-art technologies available in S/4 HANA to address legal and audit requirements in the area of statutory reporting.

In the past, Tax reporting capabilities in SAP ECC were primarily focusing on indirect taxes (e.g. VAT, WHT) and numerous reports were developed by SAP over the years to comply with regulatory needs in supported countries. Those reports were regularly updated by SAP as and when tax jurisdictions changed in the respective countries. With the move to S/4 HANA, SAP has changed its reporting strategy towards a more consolidated and centralised tax reporting framework in SAP DRC (previously named SAP Advanced Compliance Reporting) and has therefore announced that support and compliance assurance for many of the widely-used tax reports in ECC will come to an end. 

The following list shows a non-exhaustive selection of commonly used SAP standard reports for tax reporting in ECC systems for which SAP support and further product developments to keep the reports up-to-date with latest changes in regulatory requirements has either ceased or is about to reach this stage in the near future - for a full list of no longer supported standard SAP reports for regulatory and statutory reporting and submissions, please refer to SAP note 2480067:

Most of the deprecated reports have been replaced with a corresponding equivalent report in the SAP DRC framework for Statutory Reporting in S/4 HANA. While the plain execution of the reports may be free of charge in some cases, more advanced features of the tool such as monitoring of submission deadlines, scheduled executions and automatic submissions in electronic formats to the respective government authorities require additional licensing. 

The full scope of currently supported reports and compliance tasks in SAP DCR in S/4 HANA can be viewed online on the official SAP website via the link provided below - please note that the list of in-scope tasks for SAP DRC in S/4 HANA is subject to frequent updates and changes as SAP DRC is the declared roadmap design for Statutory Reporting in S/4 HANA with frequent additions to its capabilities and supported compliance tasks (SAP Roadmap for SAP DRC):

• Supported Compliance Tasks by Country/Region

Below a sample extract of supported key functionalities in countries where Syensqo is operating larger organizations without external tax applications to support statutory submissions to authorities:

SAP DRC for Statutory Reporting in S/4 HANA is not only the new home to SAP standard reports for Tax Reporting and other mandatory regulatory compliance tasks (e.g. submission of electronic Financial Statements) but also offers additional functionalities to manage and support periodic compliance tasks out of a single place in a controlled manner in S/4 HANA - the below process flow illustrates the solution components, how they interact with each other and the usual flow of activities to complete the end-to-end process of Statutory Reporting in S/4 HANA.

1.) Report Definition: Additional auxiliary reports can be built on top of the SAP standard reports available in the pre-defined SAP standard content delivery to support manual filings through targeted data extractions. 

2.) Reporting Activity: Reporting activities provide the business users with the option to manually adjust the automatically extracted figures before the actual submissions to the authorities are scheduled (e.g manual inclusion/exclusion of specific transactions). Any manual adjustments are fully auditable through built-in audit trail mechanisms and commenting functionalities. 

3.) Reporting Category: Reports can be grouped together based on various criteria (e.g. country, type of tax, organizational units, etc.) where this is required for statutory submissions.

4.) Reporting Entity: The required statutory reports can be produced at different reporting levels via the use of organizational units. The reporting levels currently supported in Statutory reporting are company code, business place, profit center, segment, jurisdiction code and section code.

5.) Reporting Task: The execution of statutory reports can either be done on an ad-hoc basis or via scheduled periodic activities. Workflows for review and approval of statutory reports can be defined before the outputs are generated. Outputs can be produced in various formats, such as, XML, PDF, TXT, JSON, ALV, or XBRL. You can also choose to view the information in a preview or tabular format, and use the information to file your tax returns manually through the authorized government portals.

Assumptions

• The licensing requirements for SAP DRC in S/4 HANA for Statutory Reporting are not clearly documented. Infrastructure team was consulted and advice given is to assume that the scope of functionalities provided by SAP DRC for Statutory Reporting compliance will be a chargeable service in the to-be solution with unclear costs at this point as it will be subject to negotiations with SAP.

Constraints

• Should Syensqo as a group at some point consider to move towards a global tax compliance software (e.g. Vertex, Thomson Reuters) for managing indirect taxes, the usage of SAP DRC for Statutory Reporting in S/4 HANA may become obsolete as regulatory reporting and filings is then usually performed out of the integrated external applications.

Impacts

• Licensing and Costs: Additional licenses will be required to leverage on SAP DRC for Statutory Reporting in S/4 HANA.
• Training and Change Management: Extensive training will be required as SAP DRC is a new functionality which brings about changes to the current ways of working. On top of that, it is a Fiori-based application with a completely different look and feel compared to the old Tax Reporting framework which mainly consisted of ABAP reports.
• Automation: Statutory Submissions can be scheduled as regular batch jobs to ensure timely submissions to the authorities. Monitoring and alert functionalities are also available to avoid overdue submissions.
• Data Cleansing and Migration: No impact.
• Basis: Business functions may need to be turned to active SAP DRC for Statutory Reporting in S/4 HANA. Other services such as Adobe Document Services must be enabled as well to support generation of pdf documents out of the application.
• Security: Various front-end and back-end role settings need to be considered during the role building exercise. Further details can be obtained the SAP online help portal.

Business Rules

None identified in conceptual design phase - this section may be revisited again during detailed design as underlying business processes leveraging tax reporting functionalities are investigated in more detail.

Options considered

Option A: Deploy and Utilize SAP DRC in S/4 HANA for Statutory Reporting

Option B: Use classic Tax Reporting framework instead of SAP DRC in S/4 HANA for Statutory Reporting

Evaluation

	Option A	Option B	Option C	Option D
Criterion 1	Pro Con	Pro Pro	Pro Con	Pro Con
Criterion 2	Pro Con	Con	Pro Pro	Con Con
Criterion 3	Pro	Con	Con	Pro

See also

Change log

Workflow history