An introduction to SAP’s ‘Plants Abroad’ functionality
A topic that is and still remains, with the VAT and SAP community, the source of queries relating to whether the “famous” Plants Abroad functionality should be switched on or not.
Within SAP, a company code is often seen as a legal entity with presence in just one country. However, when a company has an Indirect Tax presence in more than one country there could be work to do.
An Indirect Tax presence abroad can originate from the following:
- Having warehouses in multiple countries – and VAT numbers associated with them – leading to reporting obligations on goods transfer between them.
- Storing goods at customer’s locations.
- Distance selling over certain thresholds.
- Performing more complex VAT transactions (e.g. chain transactions).
The moment you have an Indirect Tax presence in a country, other than where you are established, situations like these can lead to multiple reporting issues. For example: assigning transactions to a specific country, using the correct currency and exchange rate, issues with transferring data for goods movement to accounting (without change in ownership of the goods – Intracompany stock movement and consignment movement), and so on.
The internal drawback, of not addressing the above situations correctly, is the increased cost of tax operations and decreased accuracy of reporting. From an external perspective, mistakes or non-compliance in this area can lead to a number of difficulties with tax authorities – from extended audits, which can delay input VAT recovery in some countries, to severe penalties. For example: incorrect reporting of cross border movements is often treated as tax evasion.
Luckily SAP has created a solution that helps in such situations: the ‘Plants Abroad’ functionality. This functionality in itself is not the “holy grail” to all – SAP related – European tax compliance problems; however, turning on Plant’s Abroad does provide you with essential functionalities.
- Billing for Cross border stock movements between two EU countries within one company code
- VAT report can be run by reporting country
- Tax base amounts and tax amounts are recorded in national currency
- Tax codes can be listed by reporting country in various areas of SAP
These features make Plants Abroad well worth looking into, for many organizations. Therefore, we will share with you how you can get started technically, and what this could mean for your company.
Setting up Plants Abroad
Activating Plants Abroad sounds simple enough, like flicking a switch. Unfortunately, it is usually quite a project when activating it in an existing SAP system. It requires a project to be setup with all the various disciplines involved to ensure that it can be implemented correctly and smoothly.
Below you can find more information on some of the high level steps that you need to take in order to set-up Plants Abroad, and its related functionalities in a standard SAP environment.
Plants Abroad in SAP
The following figure shows where Plants Abroad can be activated in SAP.
Plants Abroad is activated using first node (IMG activities) “Activate Plants Abroad” for all company codes by default, but there are SAP notes that let you disable it for specific company codes. The second node (Enter VAT Registration Number for Plants Abroad) allows you to enter your VAT registration number in various countries. The ability to disable it for specific company codes is important, because it is not possible to practically use jurisdiction code-based tax procedures in company codes for which Plants Abroad is activated.
The activation will unlock the following functionalities within SAP:
1. Tax Reporting Country:
The Tax Reporting Country field will become visible on tax codes (FTXP). The VAT report (S_ALR_87012357) will show this field and will allow you to create country specific layouts based on tax reporting country. Instead of manually selecting all tax codes that belong to that country and in the MIRO transaction code (or other transactions for posting invoices), facilitating AP by providing them with a smaller list to choose their Tax codes from.
The figure below shows where the tax reporting country can be maintained on the tax code:
2. Tax Country currency:
This removes a big portion of the manual effort required that compliance teams have to deal with. The additional Tax Country currency and exchange rate type can now be used in country global parameters. The VAT report (S_ALR_87012357) and accounts can now handle document currency (e.g. USD), local accounting currency (e.g. EUR), and Tax currency (e.g. PLN). This enables you to run VAT reports in country specific reporting currency; moreover it is safer when it comes to reconciling accounts with amounts paid to or received from the various tax authorities.
The figure below shows where the box can be ticked to take the currency into account.
3. Managing multiple VAT registration numbers
VAT numbers for Plants Abroad can now be entered and stored under the Plants Abroad configuration, as designed by SAP. We are now able to use these VAT numbers in supplier VAT number determination on invoice layouts in SD and FI.
4. Stock movements taken care of properly
Standard stock replenishment
Instead of only having a logistical movement in SAP when stock is transferred from country A to B, the WIA billing document type for Intracompany stock transfers (i.e. the transfer of goods within the same legal entity/company code) can now be utilized. The billing/accounting document displays tax codes for the Intracommunity sale in country A and the intracommunity acquisition in country B, ensuring that the appropriate FI postings are made. This enables standard VAT and Intrastat reporting for these types of transactions.
Ensuring that the VAT treatment of consignment stock is correct can often be painful. With Plants Abroad switched on, the consignment stock functionality will be able to be used with the improved accuracy of VAT reporting. Combined with additional configuration for consignment it is possible to cover the following:
- VAT transfer events such as initial consignment stock movement from country A to country B
- Commercial events like consignment goods pick-up by a customer in country B
How Deloitte Tax Management Consulting can help
Do you want to know more about Plants Abroad? Do you need help setting up and/or integrating Plants Abroad with your other SAP functionalities? Then make sure to contact us, our experienced consultants will gladly assist you in this and any other Tax Automation challenges you may be facing.