intrastat & vat (europe)

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Intrastat and Value-Added Tax (VAT) –What You Need to Know to Manage Their Impact on Your Global SAP Rollout Kees van WesteropKwest Consulting

11

What We’ll Cover …

• Introduction• What is VAT?• Principles of VAT• What is Intrastat?• Relation between VAT and Intrastat• Processes relevant for VAT and Intrastat• Configuration• Nonstandard situations• Wrap-up

22

Introduction

• When rolling out your SAP system to the EU, both Intrastat and VAT have a big impact on the way processes have to be set

• This presentation is to make you aware of the impact and how to deal with it

See Also: Kees van Westerop, “Doing Business in the EU? Tips to Ensure Your Organization Correctly Configures and Reports VAT” (Global SAP Environments conference, 2007).

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33

In This Session ...

• The principles of Value-Added Tax (VAT) and Intrastat are explained

• An overview of the most important processes relevant for VAT and Intrastat is given

• The impact of the configuration is discussed• Tip and tricks are given for how to handle nonstandard

situations

44



5

What Is VAT?

• VAT is an indirect tax, calculated on every sale of goods and services

• The seller has to pay the VAT amounts to the tax authorities; the purchaser can reclaim the charged VAT from the tax authorities

• The final customer (consumer) cannot reclaim the VAT paid

• Different rates apply, according to country

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6

What Is VAT? (cont.)

• VAT is applicable for all 27 countries of the European Union (EU)

BUT

• There are regional exceptionsFor example, Ceuta (Spanish enclave in northern Africa)

Warning

Many people aren’t aware of these exceptions!

7


• VAT is applicable for most companies and organizations

BUT

• There are (local) exceptions, for example:AirlinesNonprofit organizations

Warning

8


• VAT is applicable for most products and services

BUT

• There are (local) exceptions, for example:Bank chargesMedical services

Warning

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9

Goods

InvoiceGoods

Invoice

Goods transfer

to plant abroad

DifferentVAT

scenarios

Principles of VAT

1010



11

Important Issues That Influence the Handling of VAT

• Goods cross borders (yes/no)• Customer has VAT registration number (yes/no)• Origin and final destination of the goods• The destination of the sales invoice

Don't Forget

Each combination may have a different way of handling!

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12

Local Scenario

Scenario: Sales and purchase invoice of € 1200, VAT tax rate of 20%

Vendor1200

Costs1100 100

Deductible VAT

50% deductible

Vendor1200

Costs1000 100

Deductible VAT

50% deductible

100

Nondeductible VAT

Vendor1200

Costs1000 200

Deductible VAT

100% deductible

Customer1200

Revenue1000 200

VAT payable

100% payable

13

Cross Border Within European Community (EC) Scenario

Scenario: Sales and purchase invoice of € 1200,VAT tax rate of 20% in purchasing country

Customer1000

Revenue1000

100% payableVendor

1000Costs

1000 200Deductible VAT

100% deductible

200VAT payable

• VAT is registered in receiving country• VAT rate equals rate in receiving country• In many companies, people aren’t aware that postings should be

made like this!

1414



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15

What Is Intrastat?

• Intrastat is a statistical report on goods movement between European Union (EU) countries

• Intrastat is required for companies fulfilling the threshold of €300,000 ($400,000)

• It is not a fiscal report• Some companies also have to report Extrastat for goods

movement from inside the EU to the rest of the world

16

What Is Intrastat? (cont.)

• Intrastat is applicable for all EU countries

BUT

• There are regional exceptions, for example:San Marino (not a member state of EU, but relevant for Italy)Ceuta (Spanish enclave in northern Africa)

Warning

17

Important Issues That Influence Intrastat Handling

• Does the customer have a Value-Added Tax (VAT) registration number?

Don't Forget If the customer doesn’t have a VAT number,

then no Intrastat reporting is required!

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18

Important Issues That Influence Intrastat Handling (cont.)

• Do you have VAT registration numbers in other countries?

Note

You must report in more than one country:Use Plants Abroad functionality to report in those countries!Plants Abroad functionality enables VAT and Intrastat reporting in other countries than the company code countries.

1919



20

Relation Between VAT and Intrastat

• There is no relationship between VAT and Intrastat!

BUT

• Many companies enforce a relationship between VAT and Intrastat

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21

Why Is There No Relationship Between VAT and Intrastat?

• Value differenceVAT reports invoice value; Intrastat reports statistical value

• Timing differenceVAT is reported based on invoices; Intrastat is reported based on goods flow

• Some processes are relevant for VAT reporting but not for Intrastat reporting and vice versa

For example, triangulation (involvement of three different countries) and subprocessingConsignment stock

22

How Can You Enforce a Relationship Between VAT and Intrastat?• Value difference

Make statistical values equal to reporting values• Timing difference

Make sure that goods flow is always registered in the same period as the invoice

• Some processes are relevant for VAT reporting but not for Intrastat reporting and vice versa

Use specific VAT codes and business transaction types (used for Intrastat reports) to distinguish these kinds of processes

23

Conclusion

• There is no relationship between VAT and Intrastat• For specific processes you can create a kind of

relationship between VAT and IntrastatYou can use this internally to check the accuracy of your reporting!

• Statistical offices in the EU countries are aware that there is no relationship between VAT and Intrastat!

BUTMany processes relevant for VAT are also relevant for Intrastat and vice versaTHIS IS THE ONLY RELATIONSHIP!Note

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2424



25

Processes Relevant for VAT and Intrastat

• Master data maintenanceAll logistical master data and master data used in invoices

• Sales processFor Intrastat only, cross-border flows within the EU are relevant

• Purchasing processesFor Intrastat only in relation to cross-border goods flows within the EU

• Cross-border goods flows• Some special (local) processes like lease cars and

returnsNot VAT relevant is not the same as zero rated VAT!GOTCHA!

26

Master Data Maintenance — Customer Master

• Maintenance of geographical data like country and region

• Maintenance of VAT registration numbers, both local and foreign

• Maintenance of VAT indicators per sales areaVAT indicators can be used for correct VAT derivation

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27

Master Data Maintenance — Vendor Master

• Maintenance of geographical data like country and region

• Maintenance of VAT registration numbers, both local and foreign

• Maintenance of VAT indicators per purchasing organization

VAT indicators can be used for correct VAT derivationIndicators are seldom used because automatic derivation is not always possible

28

Master Data Maintenance — Vendor Master (cont.)

Default modeof transport.Make it a required field; otherwise you have to correct every purchase invoice manually!

29

Master Data Maintenance — Material Master

• Maintenance of weight in kilogramsThis may require a conversion!

• Maintenance of VAT indicators per sales area and per purchasing organization

VAT indicators can be used for correct VAT derivationIndicators for the purchasing organization are seldom used because automatic derivation is not always possible

For Intrastat, it is required to make a distinction between physical goods and services!

GOTCHA!

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30

Master Data Maintenance — Material Master (cont.)

Commodity codeExport group

Geographical info

Foreign trade exportview

Some additional fields may be used depending on the local reporting requirements!

Note

31

Master Data Maintenance — G/L Master

• Indicator for sales or purchase tax on company code data view

Indicator whether tax is mandatory or optionalIf G/L account is tax relevant, always set tax to optional!Never use a combination of sales and purchase tax

32

Sales Process Overview

SalesOrder

DeliveryNote

GoodsIssue

SalesInvoice

Intrastat data

FinancialInvoice

VAT data

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33

Sales Order

• Copy rules in SD determine whether tax is relevant or not

It is also possible that it is only partially relevant• Derivation of the tax codes• Derivation of the tax percentage• Calculation of the statistical value• Intrastat fields are filled in based on master data and

customization settings

34

Sales Order (cont.)

• Pricing procedures must have been set up for VAT and statistical value calculation

• It is important that condition records have been set upConditions will work only if you know where the goods are being delivered from!

Redetermine VAT and Intrastat inthe invoice; this is controlled viacopy control rules.

Solution

35

Sales Order (cont.)

• The previous solution doesn’t work for self-bill customers because they create the invoice themselves

The customer is always right.Solution

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Delivery Note

• Doesn’t have Intrastat nor VAT data• Data is only used within condition records• Plant determines the ship-from country

37

Sales Invoice

• The sales invoice contains the final data for VAT and Intrastat

• Because there can be a big time difference between order creation and invoice creation, data based on condition records must be redetermined

• Other data is copied from the sales order

38

Financial Invoice

• The financial invoice contains the same data as the sales invoice

• VAT and Intrastat data are the same as in the sale invoice,

BUT

• VAT reports are based on financial invoices• Intrastat reports require that the financial invoice was

created

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39

Purchasing Process Overview

PurchaseOrder

GoodsReceipt

LogisticInvoice

Intrastat data

FinancialInvoice

VAT data

40

Sales Order

• Automatic VAT derivation for goods is not always possible because the origin of the goods is not known; for services it is possible

Therefore Evaluated Receipt Settlement (ERS) is not possible for EU countries!

• Calculation of the statistical value• Intrastat fields are filled in based on master data and

customization settings

Issue

Intrastat fields are also often incorrect because of unknown country of dispatch!

41

Goods Receipt

• Doesn’t have any effect on Intrastat and VAT data!• You can decide to report the goods receipt value instead

of invoiced value

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42

Logistics Invoice

• The logistics invoice contains the final data for VAT and Intrastat

• Data is entered manuallyIt is a legal requirement that data is entered as it appears on the invoice, even if it is incorrect!

43

Financial Invoice

• The financial invoice contains the same data as the logistics invoice

• VAT and Intrastat data are the same as in the sales invoice

BUT

• VAT reports are based on financial invoices

44

Cross-Border Goods Flows

• The company owns a warehouse in Holland and another in Italy

• Goods flow from Holland to Italy must be reported in both Holland and Italy!

Company

Warehouse WarehouseGoods flow

Issue

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45

Cross-Border Goods Flows (cont.)

• Use Plants Abroad functionality to solve the issue!

Company

Warehouse WarehouseGoods flow

Solution

46

Returns and Credit Notes

• Returns and credit notes are important subjects:Are goods returned to the original country of departure?

If not then the standard SAP cannot handle it correctly Credit notes must correct the original Intrastat report

Standard SAP cannot handle it correctly

Solution

Ignore it: Pretend you aren’t aware of the issue.

4747



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48

Three Areas to Customize VAT

Financial Accounting

Purpose: Correct Posting

IMG path:Financial Accounting Financial Accounting Global Settings Tax on Sales/Purchases

Whereto

FIND it

49

Three Areas to Customize VAT (cont.)

• Financial AccountingActivate plants abroad?Define tax codesAccount determination

50


Materials Management

Purpose: Correct VATCode Derivation

IMG path:Materials Management Purchasing

Taxes

Whereto

FIND it

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• Materials ManagementTax classification materialTax classification plantTax classification Account Assignment (purchase order item)

52


Sales and Distribution

Purpose: Correct VATCode Derivation

IMG path:Sales and Distribution Basic Functions

Taxes Define Tax Relevancy Of Master Records

Whereto

FIND it

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• Sales and DistributionTax classification customer and materialSales Tax ID number DeterminationPricing procedure (only relevant for plants abroad)Interplant stock transfers within one company code

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54

1: Sales and Distribution

Customizing

• You can set up Intrastat via the customizing menu or using wizards via the standard SAP menu:

55

2: Materials Management

Customizing (cont.)

• You can set up Intrastat via the customizing menu or using wizards via the standard SAP menu: (cont.)

56

ReceiptsWZFT01

Using Wizards

• Wizards can guide you through the settings for Intrastat

DispatchesWZFT02

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57

But they aren’t complete!

GOTCHA!

Using Wizards (cont.)

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What the Intrastat Wizards Don’t Mention

• Maintain additional company code data (OBY6)

59

Convert export into import!Relevant for the plants abroad and intercompanygoods flows!

What the Intrastat Wizards Don’t Mention (cont.)

• Conversion for intercompany billing

IMG path:Sales and Distribution Foreign Trade Customs Basic Data for Foreign Trade Control/Conversion

Whereto

FIND it

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60

• Determines what to report:

Based on goods movement, orBased on invoice

IMG path:Sales and Distribution Foreign Trade Customs Periodic Declarations Control Data Data Selection Control

What the Intrastat Wizards Don’t Mention (cont.)

• What to report (and when)

Whereto

FIND it

61

Compcode

Warehouse

Plants Abroad

• You are represented in more than one country, therefore:You have more than one VAT registration number

One for each country you are represented inYou have to report VAT and Intrastat in those countries

62

IMG path:Financial Accounting Financial Accounting Global Settings Tax on Sales/Purchases Basic Settings Plants Abroad

Whereto

FIND it

Plants Abroad (cont.)

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63

Setting Up VAT, Project Approach

1. Analyze goods flows2. Estimate workload3. Detailed check of all customizing4. Design condition table5. Design user exits6. Test, test, test, test7. Analyze output8. Write user instructions and customizing documentation

6464



65

SAP Can Handle a Lot of Situations, But Not All …

• Departure country variesBecause you order the goods from an external supplier

• Order needs to be planned and the delivering plant is unknown (see example 1)

• Sometimes customer does the import, sometimes the sales organization (see example 2)

• Complex sales flows (see example 3)

Issue

How do you solve these issues?

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66

SAP

Example 1: Unknown Delivery Plant

Local salesorganization

Customer

International salesorganization

Planning system

1

2

3

4 44

5

1: Customer places sales order.2: Local sales org buys goods from international sales org.3: Purchase order from international sales org entered in external planning system.4: Planning system determines which plant is going to produce and send the goods.5: Goods are sent to the customer.

67

Example 2: Customer Import or Sales Org Import

• Based on:Material typeCountry of origin

• Customer decides whether it will do the import of the goods or whether the selling organization needs to do the import

68

Example 3: Complex Sales Flows

1. Austrian customer orders goods from Dutch company.

2. Dutch company orders the goods from a Belgian sister company.

3. Belgian sister company orders goods from French sister company.

4. French company produces goods and sends them via Ceuta (Spain) and Amsterdam (the Netherlands) to the customer in Austria.

5. Administratively the goods are first stored in a warehouse of the Dutch company and then shipped to Austria.

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69

Solution 1: Create Additional Condition Tables

StandardConditions

Additional + Standard

Conditions

70

Solution 2: Requirements in Condition Tables

• Solution 2: Requirements in condition tables

Example ofrequirement

ABAP codingallows you to make

modifications

71

Solution 3: User Exits in SD Programs

• Determine correct departure countryMV45AFZZ for sales order processingRV60AFZZ for billing

• Determine correct country of destination RV60C9XX (see SAP Note 10560)

• Determine correct VAT registration numberRV60AFZC

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72

Solution 4: User Exits in Intrastat Programs

• Selecting/deselecting documents for Intrastat reportingEXIT_SAPLV50G_001

• Correcting the Intrastat data EXIT_SAPLV50G_002

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74

Lessons Learned

• Deriving correct VAT and Intrastat has a big impact on the logistical processes

• Make an inventory of all logistic flows• Intrastat will never be 100% correct; this is often

acceptable for the statistical offices• The more “sales partners” get involved, the more

complicated the handling of VAT and Intrastat becomes

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75

Resources

• European Commission: Taxation and Customs Unionhttp://europa.eu.int/comm/taxation_customs/index_en.htm

• Country VAT links:http://ec.europa.eu/taxation_customs/taxation/vat/traders/vat_community/index_en.htm

• The International Bureau of Fiscal Documentationwww.ibfd.nl

76

7 Key Points to Take Home

• VAT and Intrastat are applicable in all EC countries• Global principles with many local exceptions• Part of the settings are to be maintained by the logistical

department• Standard SAP can handle the standard, simple

flows only• Implementing VAT and Intrastat is time consuming• Involve Finance and Administration (F&A) and logistical

departments• Test all flows extensively!

7777

Your Turn!

How to contact me:Kees van Westerop

[email protected]

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Notes: ______________________________________________________________________________

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intrastat & vat (europe)

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