Picture 1. Jurisdiction tax analysis
MOTIVATION
In today’s fast-paced business world, the ability to effectively steer and lead an organization is fundamental for achieving strategic goals and maintaining a competitive edge. A key success criterion is the capacity to fully harness and derive value from organizational data. Many companies struggle with data problems, such as fragmented information, outdated systems, and the super important task of preparing data for emerging technologies like AI. Recognizing these challenges, we are excited to introduce a blog series dedicated to showcasing the substantial business value of SAP Business Data Cloud (BDC) in the context of planning and analytics.
The motivation behind this initiative is to provide a comprehensive exploration of how SAP BDC capabilities as essential instruments, facilitating robust strategic alignment and guiding effective decision-making processes across diverse organizational requirements. We aim to illustrate how SAP BDC, equipped with powerful data management, planning, analytics and innovative AI capabilities, empowers organizations with enhanced business steering agility by providing real-time insights, streamlined data management, and automated decision support – going from insights to action, helps mainly leaders guide their businesses with precision.
Our blog series will provide valuable insights for decision-makers seeking to harness SAP Business Data Cloud (BDC) to enhance operational efficiency, optimize resource allocation, and achieve long-term objectives. By featuring detailed planning & analytics topics, the series will illustrate the transformative impact of SAP BDC in addressing the operational complexities of today’s business environment. This first introductory blog post will spotlight the strategic advantages of SAP BDC, particularly in the context of Business Steering, setting the stage for a deeper exploration of its benefits throughout the blog series.
There are several blog posts in the series that will cover advantages of SAP BDC in the context of business steering, so please stay tuned for the upcoming blogs:
The Value of SAP BDC in the context of business steering Planning & Analytics is an essential part of SAP BDC Key Planning & Analytics components of SAP BDC Is AI going to “retire” a dashboard?Simulations, a game changer in today’s volatile worldExtend existing planning scenarios of SAP BPC/BW-IP in SAP BDC Real-time steering with LIVE planningSAP PaPM – The role of business calculation engine in business steering Self – service analytics and real time business steeringBusiness steering powered by AI agentsLeverage data products in the context of planning & forecastingIntroducing AI/ML capabilities by SAP DatabricksSAP PAPM and SAP Business Data Cloud – A Data-Centric Approach to Direct Tax (THIS BLOG POST)
INTRODUCTION
Why are we discussing tax in this series, and how does it relate to SAP Business Data Cloud?
Direct tax functions are facing increasing pressure driven by regulatory complexity, shorter reporting cycles, and rising expectations around transparency and auditability. These challenges are not new, but their cumulative impact is becoming harder to manage with fragmented processes and data structures.
Process automation is often seen as a way to address these issues. However, in the context of direct tax, automation is rarely effective on its own. Many limitations stem not from the absence of tools, but from underlying data inconsistencies, limited governance, and restricted reuse of tax-relevant data across systems and processes. Without a solid data foundation, automation efforts tend to remain isolated and require ongoing manual intervention.
From this perspective, SAP Business Data Cloud provides a framework for addressing direct tax challenges by emphasizing data consistency, integration, and reuse. Rather than treating tax as a downstream reporting activity, it enables tax-relevant data to be managed alongside financial and operational data, supporting more reliable calculations, reporting, and compliance processes.
This approach delivers several tangible benefits:
Improved data accuracy and consistency across tax, finance, and operational datasets
Enhanced auditability and transparency, with clear data lineage and traceability
Greater reuse of tax-relevant data, avoiding duplication across systems and processes
Stronger alignment between tax and finance, enabling more consistent reporting outcomes
This is why, within SAP, direct tax is increasingly discussed in connection with EPM applications and a shared data foundation. Combining process logic with a consistent data layer helps align financial, tax, and sustainability information from an end-to-end process perspective. It allows organizations to build on ERP data they already rely on, while extending it in a controlled way to support the specific requirements of global tax.
WHERE DATA MEETS A PREDEFINED TAX APPLICATION
When looking at direct tax processes, it quickly becomes clear that many elements are highly standardized. Regulatory frameworks define calculation logic, data requirements, and reporting structures with little room for interpretation. This makes direct tax a strong candidate for predefined, application-based approaches rather than purely bespoke implementations.
This is the approach taken with an SAP PaPM–powered application for direct tax management. The application covers the main steps of the direct tax lifecycle—from data collection and income tax determination to BEPS Pillar Two calculations, reporting, and audit support—while remaining flexible enough to adapt to organization-specific requirements.
Moreover, SAP PaPM enables a creation of a pro-active transfer pricing management framework. While BEPS Pillar Two focuses on minimum taxation and jurisdiction-level Top-Up Tax calculations, Operational Transfer Pricing (OTP) addresses how profits are allocated through intercompany pricing and year-end adjustments. Both areas rely on the underlying financial and transactional data and directly influence each other’s outcomes—as well as the overall bottom line.
This interdependency makes a shared data foundation, provided by SAP Business Data Cloud, particularly important. SAP PaPM runs directly in SAP Datasphere or SAP Hana Cloud and complements this foundation by offering a common calculation and process framework that allows OTP and Pillar Two to be aligned within a single, consistent logic, improving transparency, consistency, and governance across tax processes.
Picture 2. Architecture
To illustrate this, the following sections walk through a BEPS Pillar Two calculation process as it can look like in an SAP-based environment.
Structuring the Pillar Two Process
The process starts from a role-based launchpad, in this example designed for a role of global tax manager. Rather than exposing all technical details, the launchpad focuses on the key steps required in day-to-day user work: data collection, manual adjustments, Safe Harbour tests, elections, and the Top-Up Tax calculation itself.
As a first step master data and annual configuration data play a central role here. These parameters drive the BEPS Pillar Two calculations and can be reviewed and adjusted centrally, ensuring transparency and consistency across jurisdictions and reporting periods.
Picture 3. BEPS Pillar 2 launchpad
Managing Financial Data and Adjustments
Once the configuration is in place, the process moves into financial data processing. BEPS Pillar Two requires significant volumes of data from multiple sources, and many tax-relevant figures must be reviewed or adjusted to align with GloBE definitions.
Manual adjustments are therefore an unavoidable part of the process. The key challenge is not eliminating them, but managing them in a structured and auditable way. In this setup, adjustments are made within a governed environment, with predefined validations, mandatory comments, and a full change history.
For example, tax items can be reviewed by company and scenario. If an adjustment is required—such as modifying related-party revenue for a specific entity—the user can drill down to the relevant tax item, enter the adjustment, and document the rationale. Built-in validations immediately flag inconsistencies, such as incorrect currencies or unusual values, allowing experts to correct or consciously approve deviations.
All changes are traceable: who made them, when, and why. This significantly reduces reliance on external spreadsheets and email-based explanations.
Picture 4. Manual adjustments
Process Transparency and Collaboration
Beyond individual data entries, BEPS Pillar Two is a collaborative, multi-step process. Different roles are involved in data preparation, review, approval, and final calculation.
A process management view provides transparency across these steps. It shows what tasks are pending, who is responsible, and whether approvals are required. This helps avoid the typical coordination challenges that arise when BEPS Pillar Two is managed across disconnected tools and documents.
Picture 5. Process management
From Safe Harbour Checks to Final Results
Once data inputs, adjustments, and elections are completed, the solution supports Safe Harbour assessments. Results can be analyzed at both company and jurisdiction level, showing which jurisdictions pass the Safe Harbour tests and which do not.
For jurisdictions that fail, the system provides an estimated Top-Up Tax result. While this is not the final calculation, it offers early insight into potential exposure and helps tax teams prioritize their efforts.
The full OECD-aligned Top-Up Tax calculation is then performed, considering all configurations, data inputs, and elections. Results are available at jurisdiction and company level, including the allocation of Top-Up Tax under QDMTT and IIR rules and the mechanism through which the tax is payable.
Additional analytical dimensions—such as region or business unit—can be applied to support internal reporting needs.
Picture 6. Top-up Tax allocation results
An important aspect of BEPS Pillar Two compliance is the ability to maintain multiple calculation versions. The solution supports parallel runs, comparisons, and a complete audit trail. This is essential not only for audits, but also for recalculations, restatements, and future regulatory changes.
The focus is not limited to the current reporting cycle, but on creating a sustainable setup that can evolve over time.
In this example, we can see mostly BEPS Pillar Two related data, but as explained in the introduction, SAP PAPM allows you to create a tax management framework, connecting Operational Transfer Pricing and BEPS Pillar Two and supporting forward-looking analysis. As an example, tax teams can simulate how changes in transfer pricing policies or margins affect effective tax rates and potential Top-Up Tax exposure. This moves BEPS Pillar Two from a purely compliance-driven exercise toward a more controlled and proactive tax management process and generates even more value for business users.
Insights and AI-Supported Analysis
While detailed results can be reviewed step by step, summarized dashboards provide a consolidated view of key metrics, such as Safe Harbour status or CbCR-related indicators.
At this point, AI-supported interaction becomes relevant. With Joule embedded into the process, users can ask natural-language questions—such as requesting a summary of BEPS Pillar Two results or identifying jurisdictions with the highest Top-Up Tax. Because these insights are derived from governed, tax-specific data, they support data-driven decision-making without replacing expert judgment.
Picture 7. Joule and AI powered analysis
This highlights the role of SAP Business Data Cloud as an enabler for analytics and AI: insights are only as reliable as the underlying data foundation.
There are also many developments to look forward to on the AI roadmap. Planned features include capabilities such as LLM functions with grounding, enabling the derivation of applicable tax rules based on accounting document descriptions and providing relevant recommendations. Additional innovations include automated process and model generation, as well as a knowledge graph function that will, for example, help validate derived tax rules against the organization’s compliance framework. These advancements are expected to significantly expand the possibilities for AI-driven analysis and automation.
CONCLUSION: PROCESS AND DATA AS EQUAL ENABLERS
The example shown demonstrates an end-to-end BEPS Pillar Two solution that supports tax data management, Safe Harbour assessments, elections, and jurisdiction-level Top-Up Tax calculations within a single, structured framework.
Challenges such as fragmented data, manual reconciliations, and limited transparency are addressed through a combination of predefined process logic and a shared data foundation. Rather than focusing on automation alone, the approach emphasizes consistency, traceability, and reuse of trusted ERP data. It is also important to highlight that SAP PaPM is an agnostic solution. Data can be collected and integrated from multiple sources, including both SAP and non-SAP systems.
This is where SAP PaPM, application-based tax content, and SAP Business Data Cloud complement each other: process logic and data foundation work together to support compliance, analysis, and future adaptability in an increasingly complex tax and EPM landscape.
USEFUL LINKS
In case you are interested in knowing more please refer to our help content for SAP PAPM.
Moreover I would recommend checking other SAP powered tax and analytical solutions to get a full perspective about SAP capabilities in these areas.
Picture 1. Jurisdiction tax analysisMOTIVATIONIn today’s fast-paced business world, the ability to effectively steer and lead an organization is fundamental for achieving strategic goals and maintaining a competitive edge. A key success criterion is the capacity to fully harness and derive value from organizational data. Many companies struggle with data problems, such as fragmented information, outdated systems, and the super important task of preparing data for emerging technologies like AI. Recognizing these challenges, we are excited to introduce a blog series dedicated to showcasing the substantial business value of SAP Business Data Cloud (BDC) in the context of planning and analytics.The motivation behind this initiative is to provide a comprehensive exploration of how SAP BDC capabilities as essential instruments, facilitating robust strategic alignment and guiding effective decision-making processes across diverse organizational requirements. We aim to illustrate how SAP BDC, equipped with powerful data management, planning, analytics and innovative AI capabilities, empowers organizations with enhanced business steering agility by providing real-time insights, streamlined data management, and automated decision support – going from insights to action, helps mainly leaders guide their businesses with precision.Our blog series will provide valuable insights for decision-makers seeking to harness SAP Business Data Cloud (BDC) to enhance operational efficiency, optimize resource allocation, and achieve long-term objectives. By featuring detailed planning & analytics topics, the series will illustrate the transformative impact of SAP BDC in addressing the operational complexities of today’s business environment. This first introductory blog post will spotlight the strategic advantages of SAP BDC, particularly in the context of Business Steering, setting the stage for a deeper exploration of its benefits throughout the blog series.There are several blog posts in the series that will cover advantages of SAP BDC in the context of business steering, so please stay tuned for the upcoming blogs:The Value of SAP BDC in the context of business steering Planning & Analytics is an essential part of SAP BDC Key Planning & Analytics components of SAP BDC Is AI going to “retire” a dashboard?Simulations, a game changer in today’s volatile worldExtend existing planning scenarios of SAP BPC/BW-IP in SAP BDC Real-time steering with LIVE planningSAP PaPM – The role of business calculation engine in business steering Self – service analytics and real time business steeringBusiness steering powered by AI agentsLeverage data products in the context of planning & forecastingIntroducing AI/ML capabilities by SAP DatabricksSAP PAPM and SAP Business Data Cloud – A Data-Centric Approach to Direct Tax (THIS BLOG POST)INTRODUCTIONWhy are we discussing tax in this series, and how does it relate to SAP Business Data Cloud?Direct tax functions are facing increasing pressure driven by regulatory complexity, shorter reporting cycles, and rising expectations around transparency and auditability. These challenges are not new, but their cumulative impact is becoming harder to manage with fragmented processes and data structures.Process automation is often seen as a way to address these issues. However, in the context of direct tax, automation is rarely effective on its own. Many limitations stem not from the absence of tools, but from underlying data inconsistencies, limited governance, and restricted reuse of tax-relevant data across systems and processes. Without a solid data foundation, automation efforts tend to remain isolated and require ongoing manual intervention.From this perspective, SAP Business Data Cloud provides a framework for addressing direct tax challenges by emphasizing data consistency, integration, and reuse. Rather than treating tax as a downstream reporting activity, it enables tax-relevant data to be managed alongside financial and operational data, supporting more reliable calculations, reporting, and compliance processes.This approach delivers several tangible benefits:Improved data accuracy and consistency across tax, finance, and operational datasetsEnhanced auditability and transparency, with clear data lineage and traceabilityGreater reuse of tax-relevant data, avoiding duplication across systems and processesStronger alignment between tax and finance, enabling more consistent reporting outcomesThis is why, within SAP, direct tax is increasingly discussed in connection with EPM applications and a shared data foundation. Combining process logic with a consistent data layer helps align financial, tax, and sustainability information from an end-to-end process perspective. It allows organizations to build on ERP data they already rely on, while extending it in a controlled way to support the specific requirements of global tax.WHERE DATA MEETS A PREDEFINED TAX APPLICATIONWhen looking at direct tax processes, it quickly becomes clear that many elements are highly standardized. Regulatory frameworks define calculation logic, data requirements, and reporting structures with little room for interpretation. This makes direct tax a strong candidate for predefined, application-based approaches rather than purely bespoke implementations.This is the approach taken with an SAP PaPM–powered application for direct tax management. The application covers the main steps of the direct tax lifecycle—from data collection and income tax determination to BEPS Pillar Two calculations, reporting, and audit support—while remaining flexible enough to adapt to organization-specific requirements.Moreover, SAP PaPM enables a creation of a pro-active transfer pricing management framework. While BEPS Pillar Two focuses on minimum taxation and jurisdiction-level Top-Up Tax calculations, Operational Transfer Pricing (OTP) addresses how profits are allocated through intercompany pricing and year-end adjustments. Both areas rely on the underlying financial and transactional data and directly influence each other’s outcomes—as well as the overall bottom line.This interdependency makes a shared data foundation, provided by SAP Business Data Cloud, particularly important. SAP PaPM runs directly in SAP Datasphere or SAP Hana Cloud and complements this foundation by offering a common calculation and process framework that allows OTP and Pillar Two to be aligned within a single, consistent logic, improving transparency, consistency, and governance across tax processes.Picture 2. ArchitectureTo illustrate this, the following sections walk through a BEPS Pillar Two calculation process as it can look like in an SAP-based environment.Structuring the Pillar Two ProcessThe process starts from a role-based launchpad, in this example designed for a role of global tax manager. Rather than exposing all technical details, the launchpad focuses on the key steps required in day-to-day user work: data collection, manual adjustments, Safe Harbour tests, elections, and the Top-Up Tax calculation itself.As a first step master data and annual configuration data play a central role here. These parameters drive the BEPS Pillar Two calculations and can be reviewed and adjusted centrally, ensuring transparency and consistency across jurisdictions and reporting periods.Picture 3. BEPS Pillar 2 launchpadManaging Financial Data and AdjustmentsOnce the configuration is in place, the process moves into financial data processing. BEPS Pillar Two requires significant volumes of data from multiple sources, and many tax-relevant figures must be reviewed or adjusted to align with GloBE definitions.Manual adjustments are therefore an unavoidable part of the process. The key challenge is not eliminating them, but managing them in a structured and auditable way. In this setup, adjustments are made within a governed environment, with predefined validations, mandatory comments, and a full change history.For example, tax items can be reviewed by company and scenario. If an adjustment is required—such as modifying related-party revenue for a specific entity—the user can drill down to the relevant tax item, enter the adjustment, and document the rationale. Built-in validations immediately flag inconsistencies, such as incorrect currencies or unusual values, allowing experts to correct or consciously approve deviations.All changes are traceable: who made them, when, and why. This significantly reduces reliance on external spreadsheets and email-based explanations.Picture 4. Manual adjustmentsProcess Transparency and CollaborationBeyond individual data entries, BEPS Pillar Two is a collaborative, multi-step process. Different roles are involved in data preparation, review, approval, and final calculation.A process management view provides transparency across these steps. It shows what tasks are pending, who is responsible, and whether approvals are required. This helps avoid the typical coordination challenges that arise when BEPS Pillar Two is managed across disconnected tools and documents.Picture 5. Process managementFrom Safe Harbour Checks to Final ResultsOnce data inputs, adjustments, and elections are completed, the solution supports Safe Harbour assessments. Results can be analyzed at both company and jurisdiction level, showing which jurisdictions pass the Safe Harbour tests and which do not.For jurisdictions that fail, the system provides an estimated Top-Up Tax result. While this is not the final calculation, it offers early insight into potential exposure and helps tax teams prioritize their efforts.The full OECD-aligned Top-Up Tax calculation is then performed, considering all configurations, data inputs, and elections. Results are available at jurisdiction and company level, including the allocation of Top-Up Tax under QDMTT and IIR rules and the mechanism through which the tax is payable.Additional analytical dimensions—such as region or business unit—can be applied to support internal reporting needs.Picture 6. Top-up Tax allocation resultsAn important aspect of BEPS Pillar Two compliance is the ability to maintain multiple calculation versions. The solution supports parallel runs, comparisons, and a complete audit trail. This is essential not only for audits, but also for recalculations, restatements, and future regulatory changes.The focus is not limited to the current reporting cycle, but on creating a sustainable setup that can evolve over time.In this example, we can see mostly BEPS Pillar Two related data, but as explained in the introduction, SAP PAPM allows you to create a tax management framework, connecting Operational Transfer Pricing and BEPS Pillar Two and supporting forward-looking analysis. As an example, tax teams can simulate how changes in transfer pricing policies or margins affect effective tax rates and potential Top-Up Tax exposure. This moves BEPS Pillar Two from a purely compliance-driven exercise toward a more controlled and proactive tax management process and generates even more value for business users.Insights and AI-Supported AnalysisWhile detailed results can be reviewed step by step, summarized dashboards provide a consolidated view of key metrics, such as Safe Harbour status or CbCR-related indicators.At this point, AI-supported interaction becomes relevant. With Joule embedded into the process, users can ask natural-language questions—such as requesting a summary of BEPS Pillar Two results or identifying jurisdictions with the highest Top-Up Tax. Because these insights are derived from governed, tax-specific data, they support data-driven decision-making without replacing expert judgment.Picture 7. Joule and AI powered analysisThis highlights the role of SAP Business Data Cloud as an enabler for analytics and AI: insights are only as reliable as the underlying data foundation.There are also many developments to look forward to on the AI roadmap. Planned features include capabilities such as LLM functions with grounding, enabling the derivation of applicable tax rules based on accounting document descriptions and providing relevant recommendations. Additional innovations include automated process and model generation, as well as a knowledge graph function that will, for example, help validate derived tax rules against the organization’s compliance framework. These advancements are expected to significantly expand the possibilities for AI-driven analysis and automation.CONCLUSION: PROCESS AND DATA AS EQUAL ENABLERSThe example shown demonstrates an end-to-end BEPS Pillar Two solution that supports tax data management, Safe Harbour assessments, elections, and jurisdiction-level Top-Up Tax calculations within a single, structured framework.Challenges such as fragmented data, manual reconciliations, and limited transparency are addressed through a combination of predefined process logic and a shared data foundation. Rather than focusing on automation alone, the approach emphasizes consistency, traceability, and reuse of trusted ERP data. It is also important to highlight that SAP PaPM is an agnostic solution. Data can be collected and integrated from multiple sources, including both SAP and non-SAP systems.This is where SAP PaPM, application-based tax content, and SAP Business Data Cloud complement each other: process logic and data foundation work together to support compliance, analysis, and future adaptability in an increasingly complex tax and EPM landscape.USEFUL LINKSIn case you are interested in knowing more please refer to our help content for SAP PAPM.Moreover I would recommend checking other SAP powered tax and analytical solutions to get a full perspective about SAP capabilities in these areas. Read More Technology Blog Posts by SAP articles
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