Intercompany billing - tax jurisdiction code determination (Canada)

[former_member586399]

Dear all,

We have two companies in Canada. When one of the company (company A) does the consulting services to the customer, it may use the resources from the other company (company B).

Company A does the billing to the customer mean time an intercompany billing doc need to be created for the services provided by the company B. The company A is in Quebec and it uses the jurisdiction code CAQB (QST is applicable) to bill to the customer. The company B is in Alberta which cannot use the jurisdiction code CAQB to bill the company A as it is not QST registered and has to use a jurisdiction code (for intercompany billing) without QST.

Does anyone encountered the similar type of situation? Your help in this matter will be greatly appreciated.

Thanks,

Abraham.

[Lakshmipathi]

As I already asked, can you please share what the local law says. Should the tax be levied on buyer or not ? You can very well play around with tax classification based on this which I am sure, you should be knowing.

[former_member286416]

Hi Lakshmipathi,

The company A charges (Quebec region) total tax rate of 14.975% (PST 9.975% and GST 5%) to the customer where as the company B can charge only GST 5% for intercompany billing as it is in Alberta region.

To be more precise, the company A charges a tax rate of 14.975% when billing to the customer, the system uses the same rate when company B bills intercompany charges to company A. In fact the company B should charge only GST 5% to A.

[Lakshmipathi]

More than SAP, first you need to check with what local statutory law says for such type of Business transaction. Accordingly, we can try to implement in SAP.
In my country, if a Buyer purchase a product from un-registered vendor, the vendor cannot show tax in their invoice but the Buyer has to pay tax under reverse charge calculation logic.

Also have a look at OSS note 498563

[former_member286416]

Thanks Lakshmipathi for your reply.

I have had a look at the note 498563, I think this note is not relevant in our case as there is no service tax involved in the billing.