Before we get onto the more interesting and engaging topic of how to trick SAP\u2019s customizing in order to make sure you are on the safe side with regard to input tax deduction when using discounts, we will first consider the theoretical principles that apply here. This is the only way we can assess the risks and assess whether or not there is a need for action. If too much theory is too much of a good thing for you, then click here to jump directly to the customizing settings.<\/p>\n\n\n\n
Input tax? Discount? SAP? Basis of assessment?<\/h2>\n\n\n\n
In order to clearly define the terms involved and explain how they are related, we have to take a look at the relevant legal texts. In the German VAT Act (Umsatzsteuergesetz \u2013 UStG<\/em>), it is easy to find what we are looking for. Section 10 (\u201cBasis for assessment of deliveries, other services and intra-Community acquisitions\u201d) is the first point of interest:<\/p>\n\n\n\n \u201c(1) Turnover for deliveries and other services (Section 1 (1) No. 1 sentence 1) and for intra-Community acquisitions (Section 1 (1) No. 5) is measured on the basis of the charge. The charge is everything that the recipient of the service spends in order to receive the service, but minus the value-added tax. [\u2026]\u201d<\/p> The basis of assessment for input tax is therefore the charge. So far so good. But what happens if the tax base changes, as in the case of cash discounts?<\/p> The law naturally also has an answer to this too. It is to be found in Section 17 \u201cChange of the tax base\u201d:<\/p> \u201c(1) If the basis of assessment for a taxable transaction within the meaning of Section 1 (1) No. 1 has changed, the entrepreneur who carried out this transaction must adjust the amount of tax owed for it. [\u2026]\u201d<\/p><\/blockquote>\n\n\n\n This one sentence sounds quite trivial at first, if you take a common-sense approach. Of course, I have to adjust the input tax, you might think, but this is exactly when the human factor comes into play. In our scenario, an employee has deducted the 2% cash discount on the net amount but posted the full input tax on the original gross amount of the invoice.<\/p>\n\n\n\n \u201cBut that\u2019s not right! Surely that can\u2019t be done?\u201d<\/p>\n\n\n\n Unfortunately, though, this is entirely possible if the corresponding Customizing settings have not been set up in SAP. Regardless of whether it is down to human error or just sheer ignorance, when the problem occurs systematically (which is unfortunately often the case in this context), large sums can quickly accumulate. If the fraud is also noticed, then there can even be high penalties to pay to the tax authorities for tax evasion.<\/p>\n\n\n\n Here\u2019s a brief and concise example of how this can happen. Assuming we order goods worth \u20ac 119, the initial booking to our beloved T-accounts, which you will also see in zap Audit, looks like this:<\/p>\n\n\n\n If the payables are settled, 2% cash discount is received, but the input tax is not adjusted accordingly. The posting would then look like this:<\/p>\n\n\n\n Let\u2019s clarify where exactly these numbers come from:<\/p>\n\n\n\n The profit \/ gain \/ amount of tax evaded (call it as you will!) can be calculated as follows:<\/p>\n\n\n\n A tax fraud of \u20ac 0.31 may not seem much at first, but if one considers the small amount of the invoice, then this should also not really come as a surprise. Considering that companies can quite easily have invoices with a volume of well over 50 or 100 million euros per year, this would already amount to a loss of 200,000 \u20ac for the tax authorities in percentage terms. So still not a problem then?<\/p>\n\n\n\n Usually, there are many roads that lead to Rome and that is true in this case too. To change Customizing for a specific account (in this case, \u201cDiscount received\u201d), navigate either via \u201cAccounting \u2013 Financial accounting \u2013 General ledger \u2013 Master data \u2013 G\/L accounts \u2013 Individual processing \u2013 In company code\u201d, or, to do this quickly and easily, you can use the transaction \u201cFSS0\u201d. This opens the SAP view: \u201cDisplay G\/L account: Company code data\u201d.<\/p>\n\n\n\n However, you may now find yourself facing another problem:<\/p>\n\n\n\n \u201cWhat was the account number of the \u201ccash discount received\u201d account again?\u201d<\/p>\n\n\n\n A short click in the G\/L account field and then on the small button to the right opens a new dialog window with various tabs. Navigate to \u201cG\/L account description in chart of accounts\u201d and enter \u201cdiscount received\u201d in the G\/L account long text field. Then click on the green equals sign that appears and select \u201cInclude greater than or equal to\u201d from the selection. Confirm twice with \u201cEnter\u201d \u2026et voil\u00e0<\/em>: discount received now appears at the top of the list.<\/p>\n\n\n\n Select the discount received account and confirm again with \u201cEnter\u201d. Only then will the data in the template be updated.<\/p>\n\n\n\n The part of the template where things start to get really interesting is marked in red in the following screenshot:<\/p>\n\n\n\n In the \u201cTax category\u201d area, enter a \u201cminus\u201d and uncheck the box \u201cPosting without tax allowed\u201d. To access the settings, use the pen symbol, which is marked with one (1) in the image and says \u201cChange\u201d by it. Further information on this topic can be found here, for example.<\/p>\n\n\n\n In addition to a registered external audit of tax auditors, the tax authorities in Germany also have the option of carrying out a VAT review at any time, as set out in Section 27b of the German VAT Act (UstG):<\/p>\n\n\n\n \u201c(1) In order to ensure a uniform determination and collection of value-added tax, the officials of the tax authorities entrusted with this task may, without prior notice and outside the scope of an external audit, enter properties and premises of persons who independently carry out a commercial or professional activity, during normal business and working hours in order to determine facts which may be relevant to taxation (Value-Added Tax review). The authorities may enter residential premises against the owner`s will only to prevent an urgent threat to public security.\u201d<\/p><\/blockquote>\n\n\n\n True to the motto that Ignorance is no defense, this is a phenomenon you should obviously keep an eye on. Changing the Customizing settings is only half the story, however, because the change to the settings is not applied retroactively. We have therefore developed an indicator that automatically checks whether you are affected by the described phenomenon of \u201cInput tax not adjusted when cash discount is claimed\u201d. This is still in the beta stage, but it can be activated via a setting in zap Audit and was submitted as a proposal by one of our customers and implemented by us free of charge. If you have any questions, or want to know how exactly to do this, then simply click below to get in touch:<\/p>\n","protected":false},"excerpt":{"rendered":" When the tax auditor comes to visit, there are always a number of challenges that need to be overcome. In some exceptional cases, however, the auditor\u2019s visit is not necessarily announced beforehand, which is precisely why you should read this article carefully. To mention all the challenges here would definitely go beyond the scope of […]<\/p>\n","protected":false},"author":5,"featured_media":10699,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","inline_featured_image":false,"footnotes":""},"categories":[38,37,40],"tags":[],"class_list":["post-11220","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-en-audit","category-en-compliance","category-en-finance"],"acf":[],"yoast_head":"\nThe problem of input tax profit illustrated<\/h2>\n\n\n\n
Debit<\/strong><\/td> Credit<\/strong><\/td><\/tr> Purchased services \u20ac 100<\/td> Trade accounts payable \u20ac 119<\/td><\/tr> Input tax \u20ac 19<\/td> <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n Debit<\/strong><\/td> Credit<\/strong><\/td><\/tr> Trade accounts payable \u20ac 119<\/td> Bank account \u20ac 117<\/td><\/tr> <\/td> Discount received \u20ac 2<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n How to get the problem under control in SAP customizing<\/h2>\n\n\n\n
![\"discount-received-FSS0\"\/](\"https:\/\/zapliance.com\/hubfs\/Blog\/Indikatoren\/Tax-Compliance\/en\/discount-received-FSS0.jpg\")
<\/figure>\n\n\n\nWhere danger lies dormant<\/h2>\n\n\n\n
How can I best protect myself?<\/h2>\n\n\n\n