This blog post is part of a series of related blog posts highlighting the enhancements to address the handling of landed costs. Link to main blog post.
The objective of this blog post is to explain the following specific topics in the context of the landed cost functionality:
1 Impact on key figures of cost and performance accounting
For materials with a moving average perpetual cost method, the new landed cost functionality will increase the accuracy of the value of the Work in Progress and the Cost of Goods Sold of traded goods, because the landed costs are considered very early in the procurement process. This significantly impacts and improves the Profitability.
2 Handling of different currencies
It is possible that procurement documents are recorded in a currency that differs from the company currency. With this functionality, the following variants are supported:
3 Non-deductible taxes for landed cost invoices
Depending on the type of landed costs and the country specific regulations, there can be a different set of taxes that can be levied on them. Additionally, these taxes can be of fully deductible, partially deductible or non-deductible types. Non-deductible taxes are to be included in the inventory valuation, whereas deductible taxes do not have an effect on the inventory valuation.
An automatic tax calculation is not supported for the planned landed cost components in the purchase order. If you are using non-deductible taxes, you must plan the landed cost amount including the non-deductible taxes in the purchase order. This ensures that the non-deductible tax portion will be considered at the posting of the inbound delivery, so it will be taken into account when updating the unit costs for moving average valuated materials. Later, in the Allocation document, the non-deductible taxes are displayed separately based on the tax code in the landed cost invoice:
4 Customs duty and import VAT for landed costs
Usually, customs duty and import VAT will be captured with the special invoice item types Customs Duty Debit Item and Import VAT Debit Item. However, these are currently not enabled for assigning a landed cost component. Therefore, we recommend the following handling:
a) Customs duty:
To capitalize a customs duty invoice item as described in the main scenario, you can create an invoice without purchase order and assign the landed cost component that refers to the landed cost category Customs.
Note: Please consider that you need to check and possibly change the tax code!
b) Import VAT:
In this case, import VAT taxes are treated as real taxes for which the input credit needs to be claimed. Thus, they are irrelevant for landed costs. In this use case, you need to continue using the specific invoice item type Import VAT Debit Item, because only then it will be posted correctly to the tax register and reported in the VAT return.
These are not real taxes and will be entered with the regular applied item type Invoice Item. As such, these can be handled either as to be capitalized or to be expensed landed costs, by assigning the corresponding landed cost component.
> The net amount of the invoice item is equal to the tax amount of the actual invoice received from the tax authority.
> You need to use a tax code which is zero rated and not reported in the VAT return.
In this case, you must enter the deductible part with the specific invoice item type Import VAT Debit Item. For the non-deductible portion you need to handle it in the same way as described in the point above.
5 Impact on Customer Return for use case: Moving Average and Capitalization
If a goods receipt from a customer return is posted, the current average cost is considered for the valuation. Hence, it does not change the material unit costs.
6 Partner Enablement
There are 2 new web services provided for the allocation document for creation, modification, deletion, check, query and cancellation: ManageAllocationDocumentIn and QueryAllocationDocumentInbound.
Furthermore, with regard to landed cost components, the standard web services for the purchase order are enhanced, such as ManagePurchaseOrderIn, and for the landed costs invoices the corresponding webservice ManageSupplierInvoiceIn is enhanced.
7 Limitation
Landed costs on non-valuated purchase order items are not supported.
Back to main blog post.
Overview
The objective of this blog post is to explain the following specific topics in the context of the landed cost functionality:
- Impact to key figures of cost and revenue accounting
- Handling of different currencies
- Non-deductible tax for landed cost invoices
- Customs duty and import VAT for landed costs
- Impact on customer return
- Partner enablement
- Known limitations
1 Impact on key figures of cost and performance accounting
For materials with a moving average perpetual cost method, the new landed cost functionality will increase the accuracy of the value of the Work in Progress and the Cost of Goods Sold of traded goods, because the landed costs are considered very early in the procurement process. This significantly impacts and improves the Profitability.
2 Handling of different currencies
It is possible that procurement documents are recorded in a currency that differs from the company currency. With this functionality, the following variants are supported:
- The purchase order currency is different from company currency.
- Because only one currency is allowed for the whole purchase order, the planned landed costs must also be entered in this currency. Landed cost invoice currency is different from company currency.
- Distribution by material net value in the allocation: As of release 2023/02 an allocation is enabled across multiple currencies. These currencies can deviate from the company currency. Example: The landed cost invoice item might be in USD. The goods receipts might be procured in EUR and others in GBP. At the time of allocation the goods receipt amounts are normalized to the landed cost invoice currency (in this example USD) and distributed accordingly to the normalized net values. Prerequisite: The exchange rates between the involved currencies in this example EUR -> USD, GBP -> USD have to be maintained.
- The clearing is done in company currency.
3 Non-deductible taxes for landed cost invoices
Depending on the type of landed costs and the country specific regulations, there can be a different set of taxes that can be levied on them. Additionally, these taxes can be of fully deductible, partially deductible or non-deductible types. Non-deductible taxes are to be included in the inventory valuation, whereas deductible taxes do not have an effect on the inventory valuation.
An automatic tax calculation is not supported for the planned landed cost components in the purchase order. If you are using non-deductible taxes, you must plan the landed cost amount including the non-deductible taxes in the purchase order. This ensures that the non-deductible tax portion will be considered at the posting of the inbound delivery, so it will be taken into account when updating the unit costs for moving average valuated materials. Later, in the Allocation document, the non-deductible taxes are displayed separately based on the tax code in the landed cost invoice:
4 Customs duty and import VAT for landed costs
Usually, customs duty and import VAT will be captured with the special invoice item types Customs Duty Debit Item and Import VAT Debit Item. However, these are currently not enabled for assigning a landed cost component. Therefore, we recommend the following handling:
a) Customs duty:
To capitalize a customs duty invoice item as described in the main scenario, you can create an invoice without purchase order and assign the landed cost component that refers to the landed cost category Customs.
Note: Please consider that you need to check and possibly change the tax code!
b) Import VAT:
- Import VAT that is fully deductible:
In this case, import VAT taxes are treated as real taxes for which the input credit needs to be claimed. Thus, they are irrelevant for landed costs. In this use case, you need to continue using the specific invoice item type Import VAT Debit Item, because only then it will be posted correctly to the tax register and reported in the VAT return.
- Import VAT that is not deductible:
These are not real taxes and will be entered with the regular applied item type Invoice Item. As such, these can be handled either as to be capitalized or to be expensed landed costs, by assigning the corresponding landed cost component.
Note: You would need to make sure that:
> The supplier is the tax authority to which the payment must be made.
> The net amount of the invoice item is equal to the tax amount of the actual invoice received from the tax authority.
> You need to use a tax code which is zero rated and not reported in the VAT return.
- Import VAT which is partially deductible:
In this case, you must enter the deductible part with the specific invoice item type Import VAT Debit Item. For the non-deductible portion you need to handle it in the same way as described in the point above.
5 Impact on Customer Return for use case: Moving Average and Capitalization
If a goods receipt from a customer return is posted, the current average cost is considered for the valuation. Hence, it does not change the material unit costs.
6 Partner Enablement
There are 2 new web services provided for the allocation document for creation, modification, deletion, check, query and cancellation: ManageAllocationDocumentIn and QueryAllocationDocumentInbound.
Furthermore, with regard to landed cost components, the standard web services for the purchase order are enhanced, such as ManagePurchaseOrderIn, and for the landed costs invoices the corresponding webservice ManageSupplierInvoiceIn is enhanced.
7 Limitation
Landed costs on non-valuated purchase order items are not supported.
Back to main blog post.
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