The evolution of transport management systems allows companies to centrally manage all operations in the same flow, from loading through to transport and receipt of goods in different locations.

At SAP we can invoice these services automatically, generating the information from the transport module and sending it automatically to accounting.

What is VAT?

In order to discuss determining VAT in SAP Transportation Management operations, we will begin by defining what VAT is.

VAT is a value added tax, which increases the value of the in both national and foreign territory and takes place in the sales transaction of products and services. In Spain there are three types of VAT: general (21%), reduced (10%) or super-reduced (4%). There is also VAT exempt status (0%) for products or services which are exempt from payment for a legal reason.

For the transport sector, VAT is determined according to the business activity of the service provision.

VAT on transport

In SAP, transport operations are managed in the SAP TM (Transportation Management) module. For both the payment of transport costs and for invoicing the client for the service, the TM processes are integrated with purchasing (MM) and sales (SD) processes.

At this point, the amounts to be passed on to the costing and income accounts, as well as the tax (VAT) to be paid in each of the operations, are determined automatically.

Payment process of transport operations.

Types of operations

In TM operations there are a wide variety of scenarios including: exports, imports, customs, in-house transport, subcontracted transport, etc.

As we can see in the previous diagram, once the transport and / or management processes have been carried out, the settlement is launched in TM generating a sales invoice or a purchase order to be invoiced, both in ERP, which is then transferred to accounting.

An important part of the TM document flow is related to the settlement of dispatch orders or freight orders, as the VAT is determined in the transfer to SD or MM. Some of the parameters that can be used for this determination are:

  • Tax classification of the client: national, community, foreign, etc.
  • Tax classification of the service: Due to the complexity of transport operations, there may be services that are always exempt from VAT, always subject to VAT, or whose VAT percentage may vary depending on the characteristics of the operation.
  • Origin and Destination of the goods.
  • Tax regime of the goods: customs warehouse, non-customs warehouse, free…
  • Customer type: whether a shipper, freight forwarder, etc.
  • In the case of customs operations, whether or not expenses included in the SAD (Single Administrative Document) are included.

Determination of VAT in transport operations

In accordance with the points explained above, the VAT determination process will be as follows:

  1. In TM the rates are defined based on cost classes that correspond to each of the billable elements. These could include freight, fuel surcharge, waiting time, etc.
  2. In the purchasing section each cost class will be associated with a service, and in the sales section, with a price condition class. Tax determination will be carried out separately for each element, so each invoice line issued and / or received may have a different tax status to the other lines. For example, on a single invoice, the freight could be subject to VAT, whereas the origin charges (commonly known as “FOB charges”, prior to freight) may have a different VAT percentage, or not be subject to VAT at all.
  3. In each operation, the user will choose a cost class in MT and, depending on the characteristics of the operation (national, community or third-party customers, origin and destination of the merchandise, etc.), the relevance of VAT and, if relevant, the percentage to be applied. This will be transferred to SD and MM, where the amount and tax indicator will be determined in each case.

As we have seen, in the process for determining VAT in MT operations, there are many possibilities to adapt the VAT allocation according to the flows of transport operations and other parameters. In this way, most of the cases that occur in this type of company can be covered.