Why is Brazil ERP Localization so complex?

Financials & Logistics

Globalization Services
2011

INTE
RNA
L

Internal

Impact of Brazilian Legislation

Legal Requirement

Impact on System

Tax Calculation

Multiple Taxes with extremely complex calculation rules.

Invoicing

Electronic Invoicing with very complex Business to

Government (B2G) communication choreography.

Payments

Specific Payment Methods and File Formats.

Accounting

Financial (IFRS) and Fiscal (BR-GAAP) accounting system

with gross revenue posting.

Reporting

Extremely extensive reports, not only financial and fiscal, but

covering all aspects of companies including logistics down
to line item level.

Legal Reporting Entities

Additional Organizational Structure (Business Place) and

Master Data.

Tax on Goods Movements

Nota Fiscal impacting whole logistics choreography

Actual Costing

Material Ledger

Brazilian Legislation affects many more areas than just financials and hence has deep
impact on the ERP system requirements.
2011 SAP AG. All rights reserved.

Internal

One Example of Brazil Complexity

Tax Calculation
Normal
Normal Tax
Tax Calculation
Calculation
(e.g.
(e.g. in
in France)
France) ...
...

VATAmount VATRate NetAmount

A few lines of France Code

...
... And
And just
just one
one example
example of
of aa
Brazilian
Brazilian Tax
Tax Scenario.
Scenario.

ICMSAmount ICMSRate
2011 SAP AG. All rights reserved.

Almost 10,000 lines of Brazil Code

NetAmount (1 IPIRate)
1 (( PISRate COFINSRate) (1 IPIRate) ICMSRate)
Internal

Impact on Business Processes

Scenario Sell from Stock

NL
NL

Customer
Order

BR
BR

Example: normal Country Version Netherlands vs. complex Brazil:

Customer
Order

Delivery

Delivery

Print
Delivery
Note

Physical
Shipment

Billing

Print
Invoice

Accounting
& Settlement

Billing

Create &
Authorize
NF-e

Print
DANFE

Physical
Shipment

Accounting
& Settlement

In most Country Versions, local

requirements affect only billing/financials
in a well decoupled way.
In Brazil, local requirements affect the
whole process chain, and unique
additional process steps occur that even
change choreography.
2011 SAP AG. All rights reserved.

Standard
Process

Process with
local/legal
Adaptations

Process
exists only
locally

Internal

Impact on Development Effort

Example:
Example: Localization
Localization of
of Business
Business By
By Design
Design for
for Market
Market Entry
Entry of
of New
New Country
Country
Version
Version (Financials
(Financials and
and Operations
Operations only)
only)

Basic
Basic Brazil
Brazil Country
Country Version
Version
(Configuration,
Forms
(Configuration, Forms etc.)
etc.) already
already more
more
complex
complex than
than Netherlands
Netherlands ...
...
...
... but
but in
in addition
addition even
even huge
huge
changes
changes to
to architecture
architecture and
and new
new
processes
are
needed!
processes are needed!

2011 SAP AG. All rights reserved.

Internal

Impact on Customer Implementation Projects

Country Version Brazil is

most difficult to implement

Click icon to add picture

Requires not only FI / CO

consultants, but mainly SD
and MM experts.
Brazil specific knowledge
usually not existing outside
Brazil.
Due to complexity / variety of
customer scenarios,
possibilities to pre-configure
(RDS, EGI) are limited.

2011 SAP AG. All rights reserved.

Internal

Impact on Maintenance

Very frequently, customers

need to apply notes or
Support Packages.
Brazil has highest number of
legal changes
More than 50% of Brazil
development team dedicated
to Maintenance of Legal
Changes and Corrections of
Legal Functions.

2011 SAP AG. All rights reserved.

Internal

Impact on Customer Operation

Average hours per year a company spends to prepare and pay taxes

448
504

187
271

< 100 h
< 200 h
< 400 h
< 1000 h
< 2000 h
> 2000 h

2600

Brazil is not just a bit more complex.

Legal compliance is more than 10 times as
cumbersome to achieve than e.g. in the US or Europe.

Source: World Bank Data 2010

2011 SAP AG. All rights reserved.

Internal