The SAP 'Plants abroad' functionality is designed to handle tax issues for companies that have warehouses/distribution centres and VAT registration numbers in more than one EU country.
The functionality enables the use of different Tax reporting countries within one company code, the use of the correct company VAT registration number for the sales invoices, the correct VAT treatment for cross border stock transfers and consignment transactions and easier VAT and Intrastat reporting.
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 is 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 plants 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 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 needs to be reported in the Intrastat report.
The SAP impact of activating plants abroad
The 'Plants abroad' functionality is integrated in SD, MM and FI. By activating the functionality new fields are updated at transaction level. These new database fields for plants abroad are standard available in every SAP environment.
On the tax code properties a new field ‘Tax reporting country’ is added and the ‘Tax reporting country’ field is added on the VAT return reports and EC sales list. A new currency field will be added to enable conversion of the VAT relevant amounts to the tax country currency.
New processes for stock transfers (intra-company replenishment/consignment business) are supported and enable creating a self-invoice (the “WIA” process). Although 'Plants abroad' is primarily global cross function setting in SAP it is possible to implement is only for specific company codes.
From a VAT perspective the SAP risk of activating plants abroad is low.
Roadmap of activating plants abroad
- Review tax codes
- Update all relevant tax codes with ‘tax reporting country’
- Setup alternative currencies
- Update exchange rate type per country
- Setup configuration for stock transport orders including new pricing procedure
- Review tax code selection for Accounts Payable and Accounts Receivable as this might be impacted
Written by Richard Cornelisse
Richard advises multinational businesses in improving the efficiency and effectiveness of their Indirect Tax Function and Tax Control Framework.
He started his career as a manager at Arthur Andersen and then became an EY partner where he led the indirect tax performance team for Netherlands and Belgium. Currently, he is a managing director of SAP Tax Consultancy Firm.
Richard has over 20 years of experience advising clients on international VAT issues. He is specialized in the tax aspects of financial transformations, shared service center migration, and post-merger integration work.