How R/3 Accounts for the European Union's Value Added Tax

  • by Roy Brookes, Senior FI/CO Consultant
  • October 15, 2003
Europeans have lived with the Value Added Tax (VAT) for many years now, but to Americans or other non-Europeans who want to do business in Europe or to implement new systems in European subsidiary companies, VAT is often imperfectly understood.

Europeans have lived with the Value Added Tax (VAT) for many years now, but to Americans or other non-Europeans who want to do business in Europe or to implement new systems in European subsidiary companies, VAT is often imperfectly understood.

In the United States and other countries, a sales tax is often applied at point of sale. VAT is sometimes thought to be the same. Well, it is and it isn’t. VAT is eventually passed on to the consumer as part of the price of goods purchased, but VAT goes much further than that. All the participants in the production/distribution chain are liable for collection and payment of the percentage tax. The tax is difficult to avoid or evade and is therefore quite efficient.

Drawing on my extensive experience designing and implementing VAT during European rollouts of SAP for a number of multinational companies, I’ll explain what VAT is, how it works, and how it can be customized in an SAP context. You’ll see why it is sometimes necessary to make manual entries after you have customized VAT, even though VAT is a fixed percentage. I’ll also give you customizing tips that you won’t find documented elsewhere and step-by-step customizing instructions in the download at the bottom of this article. 

Roy Brookes

Roy Brookes is a senior consultant in SAP FI/CO and a qualified accountant and business consultant. He has worked for many years in accounting, finance, and business consulting. He is an SAP expert and has designed and implemented FI and CO solutions at the European and country level during the European rollouts of SAP R/3 in a number of multinational companies. He has also worked in the US and Turkey.

See more by this author


Comments

No comments have been submitted on this article. 


Please log in to post a comment.

To learn more about subscription access to premium content, click here.