This blog post’s objective is to describe how SAP S/4HANA’s plant overseas feature works and how it can be used in non-EU and non-GCC nations.
What can we infer about blogs from this post?
- How non-EU and non-GCC countries can use the plant abroad functionality
- leveraging the plant overseas functionality for tax reporting
- The blog post’s answer is not exclusive to any one industry or sector.
There are numerous multinational firms that conduct business both in their own country and in other nations. It keeps a central office in one nation where it manages all of its other offices, including administrative branches, manufacturing facilities, and sales offices. Transactions like material purchases, asset purchases, asset sales, and product or service sales take place at these branches that are outside of the home country. They must declare taxes at branches for each purchase and sale.
Without creating company codes for branches that are outside of the home nation, a plant’s international functionality allows tax reporting in accordance with several localizations. However, only GCC (Gulf Cooperation Council) countries and the European Union can implement the solution of a foreign plant. Companies with operations in the EU or the GCC may use the tax procedures TAXEUR and TAXGCC described under the functioning of plants abroad to compute and report tax.
The activation of a plant abroad occurs at the client level, and following activation, the FTXP tax code generating and transaction posting screens both display reporting country fields. Every tax code is configured with the reporting nation.
What about businesses with a comparable structure that are not a part of the EU or the GCC nations? Can businesses with operations on other continents still use the basic plant abroad functionality?
When a transaction has tax applicability, SAP S/4HANA checks the tax procedure based on the country key of the business code. However, we may use the plant abroad capabilities by building a custom code using implicit enhancement that can call the tax procedure based on the reporting nation.
What is a foreign plant that can be reported on taxes?
For businesses that have VAT registration numbers in more than one nation, Plant Abroad is utilised to handle tax matters. Plant Abroad makes sure that the necessary value-added tax (VAT) registration number is displayed on sales and purchase receipts, computes the appropriate tax, manages stock transfers, and completes tax and Intrastat reporting in a timely manner. You can assign plants from many nations to a single business code using the functionality for plants.
The overseas plant is turned on at the client level. When a foreign plant is turned on, a reporting country field appears on the FTXP screen, where the reporting nation will be input to establish a tax code, and a reporting country field appears on every transaction screen, where the tax code must be chosen. Where one wants to submit VAT, the reporting nation is employed to create a country-level VAT tax report.
Here is an illustration of a multinational corporation that operates in various parts of the world. Its headquarters are in Paris, France, and it has branch offices (manufacturing facilities, local sales offices, and business process outsourcing offices) spread out around the globe as a result of its operations.
This blog article will demonstrate how tax reporting for a branch in Costa Rica with a Paris-based corporate headquarters can be done. We’ll design a scenario for purchases based on POs and publish purchases and sales with tax in the SAP S/4HANA FI (financial accounting) module.
Master data and pertinent configuration steps
- Activate Foreign Plants
- Enable Business Place
- Explain business location
- Assign the plant’s business location
- Make a substitution rule to determine the location of the firm based on the profit centre.
- Calculation check procedure
- Put a country in the calculation process
- Define Sales & Purchase Tax Codes
- For input and output VAT accounts, create G/L accounts.
- What are tax accounts?
- upkeep of the condition record
Activate Foreign Plants
By turning on a foreign facility, it will be possible to generate VAT tax returns and reports for branches outside of the home country without having to give those branches unique business codes.
Enable Business Place
You can programme the system to assign Financial Accounting (FI), Sales and Distribution (SD), and Materials Management (MM) documents that contain a VAT item to a business place by activating the business place, defining business places, and assigning them to sales offices and plants in the subsequent activities. Then, each firm location can produce its own tax returns.
Explain business location
Business places are organisational subunits used to submit tax on sales and purchases that are below the company code level. You must post tax below the level of the company code in countries where sales and purchases are subject to local taxation in order to produce tax returns locally.
In order to generate financial reports like profit and loss statements, balance sheets, and trial balances, as well as for tax reporting, we often build business places for all of the branches, both inside and outside of the home nation. These commercial spaces are capable of having a one-to-many relationship. Many profit centres might be assigned to a single business location.
Costa Rica’s Business District
Assign the plant’s business location
When posting any tax-relevant document from the logistics (MM – material management, SD – sales & distribution) module, we assign the business place to the logistics plant in this stage, which helps to identify the business location.
Make a substitution rule to determine the location of the firm based on the profit centre.
However, for transactions created with tax directly in the SAP S/4 HANA financial accounting module, the user must manually select the business place. Business place is automatically determined for invoices created from the material management (MM) and sales & distribution (SD) modules based on the plant assignment.
When there are several branches and their associated business locations, there is a chance that a user will choose a location that is not associated with that branch. We have developed a replacement through BTE (business transaction event) 1120, where we have a Z table with a mapping for company code, profit centre, & business place, in order to prevent such user errors.
Additionally, we created a validation that asks the system to confirm that the reporting nation selected by the user and the nation listed in the profit centre are identical. The system will display an error warning if the reporting nation in the tax code and the country key in the profit centre are different.
Branch is not a part of the reporting nation.
Calculation check procedure
We’ll develop a Z tax procedure utilising the standard tax procedure SAP has provided for Costa Rica.
Put a country in the calculation process
We will assign the tax method and the country key in this phase.
Define Sales & Purchase Tax Codes
In this stage, we will construct separate tax codes for purchases and sales using Costa Rica as the reporting nation (CR).
acquire VAT @ 4%
VAT on sales is 13%.
For input and output VAT accounts, create general ledger accounts.
- Tax on purchases 122001
- tax on sales 213509
What are tax accounts?
When a plant is activated abroad, it is not possible to keep the account determination for the tax code with the G/L account through OB40; instead, we must utilise SM34.
Keep a note of your health
The tax code and its percentage will now be recorded in a condition record that we shall keep.
Record of the tax condition entered
Tax condition record for output
Now, utilising plant overseas, we’ll make some transactions to demonstrate how tax is computed and reported.
Through a service PO, services are purchased (purchase order)
We will now choose the tax code that will be applied to this service transaction.
Because the service was purchased in San Jose, Costa Rica, Costa Rica should be listed as the reporting nation.
Select the CG (VAT Purchase @ 4%) tax code.
Click now on
Normally, the system selects the tax calculation method based on the country key associated with the business code. However, thanks to an implicit upgrade, the system is now able to select the tax calculation method based on the reporting country. Check for errors if any after entering the necessary information, and then save the PO (purchase order).
Posting of Service Cost
Posting of vendor invoices
Directly posting a vendor invoice in the financial accounting module of SAP S/4HANA
We are attempting to post a vendor invoice with a Costa Rican VAT in this particular scenario.
The system will validate the country key in the profit centre against the reporting country key in the tax code if the user unintentionally chooses a different reporting country. The system will permit posting of the vendor invoice if the reporting nation in the tax code and the profit center’s country key match. Otherwise, an error message will be displayed.
In the aforementioned illustration, we used Argentina (AR) as the reporting country and a purchase tax that applied to Argentina.
The error notice “branch does not belong to the reporting nation” is displayed by the system. A vendor invoice with an improper reporting country and tax code can therefore not be processed by a user. Now we try to process the invoice once more with tax code CG (Purchase VAT 4%) and post the invoice after selecting the appropriate reporting nation (CR), Costa Rica.
Directly posting a client invoice to the SAP S/4HANA FI (financial accounting) module
We are attempting to post a client invoice with a Costa Rican VAT in this example.
Table view in BSET
Reporting Taxes in SAP S/4HANA
Advance Tax Return for Sales and Purchases
This tax report is generic and can be used to create input and output tax reports for any nation. As the business place is listed in the BSET table, this report can be run based on both the reporting country (country of tax return) and the business place.
G/L Line Item Display, FAGLL03
The ability to include business locations and freely defined currency (CRC), which is used to report transactions at the branch (profit centre), to G/L reports using BTE 1650, allows for the report to be filtered based on the locations of the reported transactions.
As was shown above, the plant overseas solution has an implicit augmentation for calculating the tax procedure depending on the reporting country and may be utilised for non-EU and non-GCC countries.