Chemicals

Where a company is involved in an intra EU dispatch or an export, and the customer is picking up the goods, the vendor needs to decide whether to continue to exempt the supply or charge local VAT. Such policies are typically dependent on whether the selling entity can trust its customers to provide relevant logistics documentation proving that the goods have left the country.

As such, Meridian functionality, via the VAT Add-on and Arco solutions, allows businesses to set a default trusted or non-trusted policy for such customer pickups. There is then the possibility to handle customer exceptions via a whitelist or a blacklist (depending on the default policy chosen). This ensures that business have full flexibility to manage customer pick up scenarios based on their default policy and customer profile.

In certain cases some materials supplied to a customer may be subject to a VAT exemption based on the use of that material by the customer. In order to handle such complexities, Meridian tax technology functionality provides the possibility for businesses to set specific material and customer combinations that qualify for exemption via a flexible table-based approach.

The chemical industry is characterised by complex supply chains involving three or more parties. As such, Meridian tax technology has functionality to automatically determine the tax destination and tax departure countries for each leg of the transactions. Such functionality is based on default approaches used by Meridian functionality as well as the flexible use of over-ride tables to handle specific flows that may require a different treatment.

The Meridian solution has some very detailed functionality to automatically recognise triangulation flows both from an inbound and outbound perspective. This functionality ensures that key VAT determination characteristics (such as the Customer Tax Classification on the sales side) are dynamically updated within SAP thereby ensuring that the correct triangulation tax codes can be triggered automatically (without relying on end-users).

The Meridian triangulation functionality considers many complexities including the following:

• Party C needing to be VAT registered in the destination country
• Whether Party C is picking up the goods in Country A in which case triangulation cannot be applied
• Whether Party B is VAT registered in the destination country (and if so, whether Country C still allows the application of triangulation in such circumstances)
• Whether goods are delivered to a fourth party (Party D) in Country C (and if so, whether Country C still allows the application of triangulation in such circumstances)

Where a business has a foreign VAT registration it may need to consider local extended reverse charge rules. This can mean that VAT is not charged by the supplier on a local supply but instead accounted for the customer via a reverse charge mechanism. Meridian has detailed functionality to dynamically update key VAT determination characteristics (such as the Customer Tax Classification on the sales side) to ensure that an extended reverse charge tax code is automatically triggered.

The Meridian extended reverse charge functionality considers many complexities including the following:

• The status of the selling company (whether locally established and / or VAT registered)
• The status of the customer (whether locally established and / or VAT registered)
• Whether or not the selling company / or customer have a local fiscal representative

Where a business is involved in cross border pipeline flows, it is important to carefully consider the correct tax departure country and tax destination country. In order to handle such complexities, the Meridian solution has in place a flexible table-based approach to set the tax departure country and destination country in an automated manner.

Where businesses are involved in special licenses this can involve transactions that need to be exempted for VAT purposes as well as requirements to monitor thresholds and keeping an up-to-date register of transactions made against special licenses. As such, Meridian tax technology has detailed functionality to ensure that:

• Both sales and purchase transactions automatically trigger a relevant special license tax code where applicable (e.g. through the use of a dynamically updated Customer tax classification on the sales side)
• The amount billed against a special license is automatically updated within the Meridian solution and compared to the overall license amount (such that VAT is charged as normal if an invoice amount exceeds the remaining amount on a license)
• Billing documents (where the special license is applicable) are included within a specific register so that such information can be provided to tax authorities on request during a tax audit