Risks and Opportunities of SAP S/4HANA in Latin America
Until 2025 companies using SAP ECC have to migrate to S4/HANA which entails a comprehensive process with particular hurdles for the region of Latin America. At the same time, the change enables businesses to develop an encompassing strategy for their worldwide taxation that can withstand the continuously changing regulatory changes.
In order to account for the complexity of the currently existing systems, the change to S4/HANA can be implemented in phases. Whereas modules with a reduced customization effort such as Financial Accounting (FI) and Controlling (CO) should be migrated first, modules that require a higher customization effort such as SD and MM Can be addressed later on.
When migrating to S4/HANA there are three main aspects that have to be considered with view to tax issues in Latin America:
Staying up to date: Rules and Regulations
In order to improve its fight against corruption, many Latin American countries are currently implementing major tax reforms as well as constant minor adaptations. In order to remain compliant, businesses must anticipate, follow and correctly implement the respective changes. Businesses that that do not regularly check their regulatory compliance risk audits or considerable penalties.
Compliance of Internal Processes
Being compliant in Latin America can require adapting a business` most simple internal processes that function seamlessly in the rest of the world. However, in most Latin American countries there are mandatory processes such as the e-Invoicing and regular Reporting to the tax authorities. This needs to be addressed through localization. However, SAP S/4HANA is currently unable to provide businesses with solutions that are fully compliant with LATAM regulations. Consequently, further software might be required for a business to become fully functional and compliant in Latin America.
Standardization and automated tax reports are the primary instruments of the Latin American fight against tax fraud and corruption. Faulty entries or incorrect information quickly lead to audits or penalties. Therefore, businesses are advised to automate their systems as quick as possible.
Add-ons und Third Party Software
Furthermore, businesses have to answer the question of how to engage with their existing add-ons and third party software solutions because those would have to fully migrate to the S4/HANA platform as well. Currently, many businesses in Latin America use such additional software that need to be examined with view to tax issues, e-Invoicing, compliance questions and reporting requirements. While SAP claims that S4/HANA can replace such localizations for reporting purposes in favor of global solutions this is currently not the case. Instead, a SAP add-on – TDF – can create the information needed for the SPED Fiscal, SPED Contabil, EFD-Contribucoes and REINF reports. However, these information are not sufficient to fulfill the reporting requirements of the tax authorities. Consequently, businesses are advised to continue using third party software providers to stay compliant while migrating to S4/HANA.