United Kingdom left European Union on 31st December 2020 and UK went from being a EU member state to a third country.
UK leaving EU is termed as Brexit. UK was part of EU for more than 4 decades and leaving European union required to negotiate the trade deal again. This blog post will be looking toward what changes Brexit has brought for UK and EU for Sales and how these changes need to be adapted in SAP.
Guidelines for Sales
- Brexit Trade teal covers only material/goods and Financial services are not covered. Financial Services are still being negotiated.
- The deal formally entered into force on 1 May 2021, after the ratification processes on both sides were completed: the UK Parliament ratified on 30 December 2020; the European Parliament and the Council of the European Union ratified in late April 2021. The Brexit Trade deal was temporary implemented from 1st Jan 2021 to 30th April 2021.
- UK consists of England, Scotland, Wales, and Northern Ireland. But to prevent hard border between Ireland (EU) and NI (UK) a dual position of NI has been agreed.NI will continue to trade as if it is an EU member state and thus intercommunity supply requirements will apply.
- Since the UK is now a third country, taxable cross-border transactions between EU and GB (England, Scotland, and Wales) are classified as imports and exports and thus treated as transactions between EU and any other non-EU third country.
In order to adopt these changes following approach has been followed in SAP S/4HANA Cloud for Sales
- Region will be used to identify trade between NI and EU. It is only required to update region for Northern Ireland and not for GB (England, Scotland, and Wales) .Update of customers, vendors, BP master records and all organizational units (i.e. company code, plant, sales organization, purchasing organization etc.) from NI businesses with the region.
The list of NI regions can be found in SAP note “2885225 – BREXIT: Through the Transition Period and Beyond” in the reference section.
- Deactivate the “indicator: European Union Member” for country code GB .
- NI businesses falling under the Northern Ireland Protocol will be identified with an XI VAT registration number for the trade of goods between NI and EU 27 MS. This number would consist of the prefix “XI” followed by the numeric digits of the existing GB VAT registration number.
- In order to identify goods or services , Maintain Tax classification for Goods or Services in Business partner
- the new access sequence TTX2 is supposed to be used instead of standard access sequence TTX1 in all effected condition types (most prominent: TTX1) for customers having business with Northern Ireland. Any sales between Northern Ireland and rest of EU need the new Tax procedure and Region determines the taxes.
Some of the cases for tax determination are
Case 1 : Trading between Northern Ireland and EU without VAT number
a) Physical products → domestic tax
b) Services → export tax
Case 2 : Trading between EU and GB ( Scotland, Wales and England )
a) Physical products → export tax
b) Services → export tax
This blog post should help you to understand in detail about Brexit and the changes that have been made in taxes due to this.
Thanks for reading this blog post, hopefully the blog post was informative.
For more information on Brexit
Please refer to SAP notes