From Rules to Intelligence: The Future of VAT Determination

A New Era for VAT Determination

VAT determination has traditionally been built around clearly defined rules. In SAP, factors such as the tax departure and destination countries, material and customer tax classifications, and tax codes are used to determine the appropriate VAT treatment.

This rule-based approach remains essential. VAT decisions need to be consistent, transparent, explainable, and, most importantly, compliant.

However, VAT determination is becoming increasingly complex. Companies are operating across more countries, supply chains are becoming more sophisticated, and VAT legislation continues to change. At the same time, tax and IT teams are under increasing pressure to reduce manual maintenance and manage these changes efficiently.

This creates a clear opportunity for technology to play a bigger role.

The question is no longer whether artificial intelligence (AI) will influence tax technology, but how AI can support VAT determination while keeping the control and transparency that tax processes require.

From Automation to Intelligent Tax Technology

VAT determination has already moved significantly away from manual decision-making. Automation allows organizations to apply consistent tax rules across countries, processes, and transactions.

The next step is making these processes more intelligent.

AI can help tax teams analyse large amounts of configuration and transaction data, identify patterns, detect inconsistencies, and highlight areas that may require attention.

However, AI should not replace the underlying tax rules. Instead, it should support the people who design, maintain, and monitor them.

The value comes from combining established tax logic with intelligent technology.

Where AI Can Add Value

Supporting Configuration and Maintenance

Maintaining VAT configuration across a global SAP landscape can be time-consuming, particularly when tax rates or regulations change.

AI could help tax and IT teams by identifying areas such as:

• Missing or potentially required condition records
• Inconsistent tax classifications between countries
• Obsolete or unused configuration
• Potential configuration changes following VAT rate updates
• Patterns in configuration that may require further review

This could help organizations move from reacting to configuration issues toward a more proactive approach to tax maintenance.

Improving Testing and Monitoring

AI can also play an important role beyond configuration.

For example, it could support testing and monitoring by:

• Comparing expected and actual tax determination results
• Identifying transactions that behave differently from historical patterns
• Highlighting unexpected tax code usage
• Detecting potential anomalies
• Helping prioritize transactions or scenarios that require further review

The important point is that AI should support tax professionals rather than make uncontrolled tax decisions.

The final determination should continue to be based on defined tax rules, business requirements, and expert review.

Meridian’s Perspective: Technology and Tax Expertise

At Meridian Global Services, we see AI as an opportunity to build on the foundations of good VAT determination rather than replace them.

In our experience, technology works best when it is supported by a strong tax design, a well-structured SAP configuration, and clearly defined business processes.

AI cannot compensate for unclear or incorrect tax logic. The quality of the outcome will always depend on the quality of the underlying rules and data.

What AI can do is make these foundations easier to manage. It can help tax professionals analyse information faster, identify potential issues earlier, improve testing, and gain better visibility into their VAT processes.

This combination of tax expertise, SAP knowledge, and modern technology is where we see the real opportunity.

This is also the direction behind Meridian’s VAT determination solutions: combining proven SAP-based tax logic with modern technologies that can help organizations simplify maintenance, improve visibility, and prepare for the next generation of tax automation.

Looking Ahead

The future of VAT determination is unlikely to be about replacing established tax rules with AI.

Instead, it will be about making those rules smarter, easier to maintain, and more efficient to manage.

AI can help tax professionals identify issues earlier, analyse complex data, improve testing, and focus their attention where it is most needed. At the same time, established VAT rules and expert oversight will remain essential for ensuring that tax decisions are controlled, explainable, and compliant.

For organizations, the real opportunity is therefore not rules versus AI, but rules supported by intelligence.

By combining strong tax expertise with SAP technology, automation, and AI, companies can be better prepared to manage increasing VAT complexity while reducing manual effort and maintaining confidence in their tax determination processes.