SAP Knowledge Base Article - Public

2317572 - Unexpected Tax Rate in Customer Invoice on Services delivered outside the EU

Symptom

A sales order contains the material and the delivery service sold by a company in France (European Union) to a private customer (natural person) in the US.
The material is exonerated from VAT. However, the standard 20% VAT is applied to a service.

Reproducing the Issue

  1. Go to Customer Invoicing Work center.
  2. Go to Common Task - New Invoice Request view.
  3. In Items tab, enter two items as follows :
    • Item XX - Material - Tax Code : 523 - Export - Goods to non EU and non DOM.
    • Item YY - Service - Tax Code : 510 - Domestic Sale - Service, Standard Rate. (XX and YY represent the line item numbers.)

You can see that material item is subject to 0% VAT and service item is subject to 20% VAT.

You expect the VAT for the service to be the same as for the material : 0%.

Cause

This is linked to EU Tax regulations, specifically Directive 2008/8/EC.
From the Help Center Document: "Master Data for Tax Determination" :
Certain services are always taxed at the head office of the company that provides the services, even if these services are provided for an account located outside the borders where the head office is located. In the master data records of such services, ensure that nothing has been entered in the Tax Exemption Reason field on the Taxes tab, and that the Taxable at Destination indicator has not been set.
According to the Directive and its implementation under the Annual Tax Act 2009 from January 1, 2010 onwards, this is the basic rule for services that are provided for a private end consumer located outside the borders where the head office is located.

Resolution

This is normal system behaviour related to EU legislation.
VAT applies when the service is shipped to a natural person - private account. However it does not apply when the service is shipped to a corporate account.
 

Keywords

KBA , AP-CI , Customer Invoice Processing , Product Enhancement

Product

SAP BUSINESS BYDESIGN 1611 ; SAP BUSINESS BYDESIGN 1705 ; SAP BUSINESS BYDESIGN 1708 ; SAP Business ByDesign 1508 ; SAP Business ByDesign 1511 ; SAP Business ByDesign 1602 ; SAP Business ByDesign 1605 ; SAP Business ByDesign 1702 ; SAP Business ByDesign 1711