Understanding Supply and Install in SAP

VAT in SAP often feels like a maze of exceptions, workarounds, and endless manual fixes. Our video series exposes the most common pitfalls.

What is Supply and Install?

Where a non-established supplier sells goods to a customer in another EU Member State, and those goods require installation in order for the customer to use them, this is referred to as a supply and install.
This is a mixed supply, consisting of both:
  • A goods element
  • A service element (installation)
The place of taxation for supply and install goods is the Member State in which those goods are installed. Ownership of the goods transfers to the customer only once the installation has been completed by the supplier.

Example Plafond Flow

As an example, we have an Italian supplier selling to an Italian customer, but that customer holds a special license. And up to the value of the license, the holder is allowed to purchase without any VAT being charged.

The onward sales of those purchased goods are in fact without VAT. This could be that the goods are dispatched to another EU member state or that there is an export of goods to a third country or it could even be b two c sales within the framework of distant sales where those goods are taxable in another member state.

Watch the Video: Special Licenses Explained

We explain in detail what Special Licenses are, and how you can use them
What are Special Licenses?

A special license allows the holder of the license to purchase up to usually a specific threshold from his supplier without that supplier having to charge VAT.

When would you use them?

Companies would often look to use, special licenses which remove input credit or input VAT being charged, by their suppliers.

How do you use Special Licenses?

In many cases, the license can be quite complicated to manage. So, there are certain conditions that surround this.
  • The license is generally valid just for one year after it’s given by the local VAT authority
  • The Special License has a specific reference number.
  • It is important that the supplier selling to the holder of the license puts this reference number on his invoices
  • The license itself will have a specific value.
  • When the license holder wants to use some of this threshold, and he can use it for different suppliers, different transaction types, and one off transactions.
  • Once the license is used up the threshold, the supplier will go back to just charging the applicable VAT rate on his domestic supplies of goods.
Find out More

How Meridian Tax Technology for SAP Manages Special Licences

It is really a key challenge from an SAP perspective is not just to get the right VAT treatment on a particular invoice. It's to show that, a supplier has a mechanism in place to monitor the license threshold, and to also demonstrate in the event of an audit how they're they are managing this.
Monitor and update the license threshold

Meridian dynamically updates the CTC and then thereby triggers a different tax code.

Updating the total amount billed

Meridian updates the total amount billed against the license in line with the latest invoice.

Audit trail

Within Meridian functionality, there is also a register. In the event of an audit, companies need to be able to demonstrate to the tax authorities the processes they have in place for managing the license.

Download the Guide to Special Licenses

Our Guide explains what are Special Licenses and why a business would use them.
  • why do businesses use Special Licenses
  • how do Special Licenses and thresholds work
  • what challenges do Special Licenses present for SAP
  • how does Meridian automate the process for Special Licenses
Download the Guide

Known VAT Issues in SAP

There are many known VAT issues in SAP including Supply and Install Flows, Domestic Reverse Charges, Cross Border Consignment Flows, Special VAT Regions. Toll Manufacturing, and many more. Our tax technology and VAT compliance experts are on hand to discuss these challenges with you, and advise how to automate many of the processes with Tax Technology.

Talk to our tax technology experts