SAP and 'plants abroad'

SAP "Plants Abroad" Functionality

The SAP “Plants Abroad” functionality is designed to address tax issues for companies that operate warehouses or distribution centers and hold VAT registration numbers in multiple EU countries. This feature facilitates the management of various tax reporting countries within a single company code, ensuring the correct company VAT registration number is used for sales invoices, properly applying VAT treatment for cross-border stock transfers and consignment transactions, and streamlining VAT and Intrastat reporting.

The “Plants Abroad” functionality enables automated VAT and Intrastat postings for cross-border movements of owned stock and supports additional reporting requirements related to cross-border VAT registrations. It’s important to note that while this functionality enhances VAT reporting and exchange rate handling, it does not eliminate the complexities involved in tax determination, which is a common misconception.

When to Use "Plants Abroad"

The “Plants Abroad” functionality should be utilized under the following circumstances:

• When a company has plant, storage, or warehouse locations in multiple EU countries and is VAT registered in those countries.
• When there are intra-company transfers of goods between plant, storage, or warehouse locations, or in cases of consignment stocks across EU countries.
• When the countries where the company is VAT registered operate with different “tax currencies.”

Limitations of Standard SAP VAT Determination

It is essential to recognize that standard SAP VAT determination does not cover all VAT requirements, as not every process flow is accommodated within its standard framework. To fully leverage the available functions, companies must activate the "Plants Abroad" setting.

Tax Determination in SD

In the Sales and Distribution (SD) module, tax determination is calculated based on the key drivers: the "country of the supplying plant" (country of departure) and the "country of the ship-to party" (destination country). Tax classification is determined using the customer master and material master, depending on the country of departure. Tax condition records are maintained about both the country of departure and the destination country.

When should plants abroad be used

• If a company has plant/storage/warehouse locations in multiple EU countries and the company is VAT registered in these plant/storage/warehouse location countries
• If there are intra-company transfers of goods between plant/storage/warehouse locations or in case of consignment stocks in multiple EU countries
• If the countries where the company is VAT registered are using different 'tax currencies'

When plants abroad are implemented, a new field for tax reporting country and currency conversion is available for VAT reporting. With activating plants abroad functionality, you do not need to create separate company codes for European plants or implement manual processes for VAT and Intrastat reporting.

Cross border stock transfers and plants abroad

With the plants abroad functionality a plant abroad invoice (document type WIA) for cross-Border (intra-company) stock transfer can be created between a foreign plant (e.g. warehouse in France) and a domestic plant (e.g. warehouse in Germany) as such transaction is deemed to be a fictitious intra community transaction from a VAT perspective.

In the below example, an intra-community acquisition of goods via reverse-charge mechanism needs to be reported in the German VAT return and an intra-community dispatch in the French VAT return. These transactions also need to be reported in the Intrastat report.

The SAP impact of activating plants abroad

The "Plants Abroad" functionality is integrated within the Sales and Distribution (SD), Materials Management (MM), and Financial Accounting (FI) modules. By activating this functionality, new fields are added at the transaction level, and these standard database fields for "Plants Abroad" are available in every SAP environment.

Among the enhancements, a new field labeled "Tax Reporting Country" has been introduced in the tax code properties. This field also appears on VAT return reports and the EC Sales List. Additionally, a new currency field has been incorporated to facilitate the conversion of VAT-relevant amounts into the currency of the tax reporting country. The functionality supports new processes for stock transfers, including intra-company replenishments and consignment business, enabling the creation of self-invoices through the “WIA” process.

While "Plants Abroad" serves as a global cross-functional setting in SAP, it can also be implemented selectively for specific company codes. From a VAT perspective, the risk associated with activating the "Plants Abroad" functionality in SAP is minimal.

Roadmap for Activating Plants Abroad

1. Review Tax Codes: Assess all existing tax codes to determine which need updates.
2. Update Tax Codes: Incorporate the 'Tax Reporting Country' field into all relevant tax codes.
3. Set Up Alternative Currencies: Implement alternative currency fields to support multi-currency transactions.
4. Update Exchange Rate Types: Adjust the exchange rate type according to the specific requirements of each country.
5. Configure Stock Transport Orders: Establish new pricing procedures for stock transport orders to enhance operational flow.
6. Review Tax Code Selection: Evaluate tax code selection processes for Accounts Payable and Accounts Receivable, as these may be affected by the changes.

In summary, successfully integrating and managing "Plants Abroad" within SAP necessitates meticulous planning, configuration, and training. This approach allows organizations to fully leverage the software's capabilities while meeting local requirements. Ultimately, this integration will enhance operational efficiencies and provide better visibility across international operations.