Plants Abroad Eases Country-Specific Tax Reporting

  • by Kees van Westerop, Senior SAP Consultant, Kwest Consulting
  • March 15, 2007
When setting up an SAP system in new countries, one of the most difficult parts is setting up the correct tax system. Part of the tax system in SAP can be the Plants Abroad functionality. See under which circumstances you might want to start using Plants Abroad and the legal requirements that can affect your system. View required customizing activities and an example of the results when using Plants Abroad for a cross-border stock transfer.
Key Concept

You can use Plants Abroad to handle tax issues for companies that have tax registration in more than one country. Plants Abroad ensures that the correct value-added tax (VAT) registration number prints on sales and purchasing documents, calculates the right tax, handles stock transfers, and conducts tax and Intrastat reporting correctly.

Although the EU is called a single market, in effect it is still a union of 27 independent countries, each of which has its own legislation and its own tax rules. As a consequence, every company doing business in an EU country must acquire a value-added tax (VAT) registration number for that country. Not only must the company acquire a VAT registration number, it also must fulfill country- specific legal reporting.

Figure 1 shows a situation that requires Plants Abroad. The example company is located in Germany and it has a warehouse in the Netherlands. In the company’s SAP system, the company code address would be the company’s central location — in this example, Germany. Therefore, the company must have a VAT registration number in Germany and in the Netherlands.

You must report any goods movement from or to the Dutch warehouse to the Dutch legal authorities. Any sale or purchase from or for the Dutch warehouse is relevant to the Dutch VAT legislation. This also applies to the head office in Germany. In Germany, the company needs to report all goods movement from and to Germany and any sale or purchase is relevant for German VAT. To handle companies with more than one VAT registration number in SAP, you can either set up a company code per VAT registration number or activate Plants Abroad.

Plants Abroad is available since R/3 Release 4.0. I’ll describe the steps required to set up Plants Abroad and show the result for the stock transfer from Germany to the Netherlands. Some of the customizing steps are only relevant for Plants Abroad; some are also applicable for intercompany billing in general. My process involves 12 customizing steps: five within FI, six within Sales and Distribution (SD), and one last step in Materials Management (MM).

I’ll then look at intercompany stock transfers and invoices, and two kinds of reporting: VAT and Intrastat. The system reports the stock transfer for VAT and Intrastat in the two countries based on the same stock transfer purchase order. The reporting in two different countries is only possible when you have activated the Plants Abroad functionality.

Kees van Westerop

Kees van Westerop has been working as an SAP consultant for more than 25 years. He has an MBA degree in mathematics and a degree in finance. Kees has been concentrating on the financial modules, especially in general ledger accounting, cost center accounting, and consolidation. He also has a great deal of experience with rollouts of kernel systems and integrating finance and logistics.

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