EU Triangular Sales Process Flow

[#1]

possible-flow.pngRegarding the EU Triangular Sales, I could understand the process from Various blogs but I am not sure of the Correct sales flow approach.

I referred SAP note- 938150 there the process has been defined with 2 different deliveries - Inactive and active delivery. I am not sure of the inactive delivery concept against the sales order. could someone advise whether the below approach would be fine based out of the experience in this sales process.

[sanilbhandari]

Hi mythi1209

You have your selling entity in Italy, customer in Spain and goods are being shipped from a supplier or your own associate company in Slovenia. From an EU Tax perspective, all the three are different entities under different VAT Numbers, even though Slovenia is your own associate or same entity with a different VAT No.

Your confusion is on how to determine active or inactive delivery, since that also applies what tax rate should be applied in the transaction. In your case, you have to first check, if the supplier in Slovenia is transporting the goods to customer in Spain or the selling entity is responsible for transport or the customer is picking the goods from plant in Slovenia, which would be a kind of ex works.

Assume that the transport responsible is Slovenia VAT No and the goods are transported from Slovenia to Spain, than this would be considered as active delivery. These would be taxable event in EU Cross Border though at a zero rate or a reverse charge tax code.

However, if the responsibility for transport is with selling entity in Italy, than there are two active deliveries. The entity in Italy should register for VAT in Slovenia and the final invoice to customer should have zero tax or reverse charge tax code (Supplier - Selling entity should have VAT Reg No of Slovenia). However, the invoice from Slovenia to selling entity in Italy with a VAT registration in Slovenia would have a normal VAT Tax Code supplied as it is related to supplies within Slovenia.

Hope this should help you understand the concept as well as understand how tax code determination should work for triangular deals within EU

Best Regards

Sanil Bhandari

[former_member762676]

Thanks Sanil for the explanation. I am just looking for the Sales process perspective in handling in SAP. The screenshot that i have attached is the assumption of the process that I could carry out. I would like to understand from SAP experts how they have handled for EU trianglular Sales. In my case there is no business involved to explain what they are doing, it is completely POC that we are doing considering all sales scenarios.

[sanilbhandari]

Hi mythi1209

The process flow in your screen shot refers to an intercompany drop shipment scenario. From pure technical perspective, it is already available as intercompany billing. The below scope item 1MX might be very useful to get started if you are looking at it from S/4HANA perspective

https://rapid.sap.com/bp/#/browse/scopeitems/1MX

However, the complication comes in from tax determination and that is what I have tried to explain, since the tax code to be determined would depend on the way transport is organized. This will in turn also impact the tax reporting especially, the EC Sales List and VAT Reports if you are looking specifically at EU Countries. Be mindful, that the tax determination based on the EU taxation rules is something which has to be set up based on your specific business rules and that is where the complication comes in. I would suggest to look at the following scenarios, you must look at

1) Intercompany sales with transport organized by Selling Company

- Variation 1: All Countries are EU Countries

- Variation 2: Selling Company and Delivering company are EU Countries, but customer is in European Country (Not an EU Member Eg, Switzerland)

- Variation 3: Customer and Delivering company are in EU, but selling company is in European Country (not an EU Country)

2) Intercompany Sales with transport by Delivering company and all the three variations as above

3) Intercompany Sales with goods delivered ex works

In all the three scenarios, what differs is the tax determination and is the most complex affair, else the process is straight forward. You might also want to look at activating Plants Abroad if you are on S/4HANA OP system

If you are on S/4HANA Cloud, be on the look out for changes on intercompany sales process in SAP Roadmap explorer and you can get those details here:

https://roadmaps.sap.com/welcome

Please search on S/4HANA Cloud and Intercompany sales as key processes.

Thanks & Regards

Sanil Bhandari

[former_member762676]

Hi Sanil,

Thanks for sharing the roadmaps. I will consider this variation for my testing.

Regards,

Mythily

[jobis]

Hi

I think its same as the intercompany billing. From the attached process diagram its a case of the standard intercompany billing in SAP.

There are lot of information available on Intercompany billing in the community

Regards

Jobi

[former_member762676]

Hi Jobi,

The flow that i have attached is the assumption of process that might be used in EU triangular sales actually i am not sure how the process flow goes for EU triangular sales whether we need to handle like Third party sales process or Intercompany route or do we have any other approach.

[jobis]

Processes may vary depending on the company and the tax treatment that they want to have. normally the business will have the exact process that they follow for which the system has to be configured. The basic concept will Intercompany billing or thirdparty sales with single level or multilevel