The objective of a tax audit is to confirm or deny that the business has paid the correct amount of tax at the right time in line with domestic law. The days when an audit was carried out based on spot checks are over, we have already entered the age of computer-assisted audit some years ago. The future will be based on checking complete data based on comprehensive software tests. One of the steps in this direction is the obligation of providing complete data in certain format known as SAF-T.
The Standard Audit File for Tax Schemas have been designed as an international standard of best practice by the OECD. It defines the minimum necessary to extract meaningful information from a business accounting system. SAF-T is a standard of exporting accurate tax accounting data in a format that can be easily read by tax authorities.
SAF-T is a means to improve compliance and quality of testing. It allows auditors ready-access to data to perform compliance and substantive testing.
The main principle is that the software should allow auditors ready-access to data to perform compliance and substantive testing.
Guidance and Specification for Tax Compliance of Business and Accounting Software
The Guidance on Test Procedures for Tax Audit Assurance
Contains a detailed description of audit tests for self testing.
A number of countries like Portugal (2013) Luxembourg (2013), Poland (2016), Austria (2009), France (2014), Lithuania (2014) adopted SAF-T in their local legislation.
SAF-T is suitable for testing accounting transactions down to line level. Use of SAF-T allows errors to be identified and quantified efficiently in the initial stages if done in self testing and to find resources of errors with a material impact and to eliminate them prior audit done by tax authorities or preferably before a tax return is filed. However it is not SAF-T that might solve all the issues.
You know that all the testing can only be reliable, if the data is complete and correct (known as garbage in, garbage out). Therefore pre-condition for testing using the SAF-T is based on reliable records. A reliable record is a record whose contents can be trusted as a full and accurate representation of the transaction providing authenticity, integrity, and usability of the data.
To achieve this already is quite a demanding task for many companies. It needs good process by set up of master data in area of products, suppliers and customers as well as by purchase and supply order combined with highly efficient internal controls on data processing together with the application of suitable security techniques that ensure the reliability of the subsequent data output. Plus in some circumstances the determination of tax liability may require more information than is contained in the SAF-T.
Benefits of using SAF-T
- Increase of efficiency in the compliance process
- Reduction of compliance costs
- Increase of efficiency and effectiveness of both self-audit and external audit
- Easy access to required information reducing administrative costs
Content of SAF-T
- Customer Master Files
- Supplier Master Files
- Asset Master Files
- Depreciation & Revaluation
- Product Master Files
Format of SAF-T
- XML. moving in the future to XBRL- GL