Release 21.11.03. VAT Europe

Release Notes

Starting version 21.11.03, the AvaTax add-on includes support for VAT calculation for European countries, and using European SAP B1 Company Localizations.

The AvaTax add-on is now compliant with the AvaTax API enhancements, detailed here.

AvaTax Changes

Avalara is enhancing the AvaTax for VAT determination solution to respond to legislative reforms in the European Union and in the UK as it withdraws from the EU. Effective in 2021, these changes will have a significant impact on sellers and marketplaces selling into and within the region.
The following enhancements are being made in AvaTax for VAT as a result of the EU and UK reforms/changes.

  • Enhancements in the engine to support current EU legislation for B2B and B2C use cases for sales and purchases. Supported use cases are:
    Domestic supplies when the supplier is liable
    • Domestic supplies when the customer is liable (domestic reverse charge)
    • Intra-Community supplies
    • Intra-Community acquisitions
    • Imports
    • Exports
    • Distance sales
    • Triangulation
    • General rule services
    • Digital services
  • New Customs Invoice/Customs Order document types to support the entry of the Import VAT from the customs documentation into the system to assist with ledger balance and easily upload their Import VAT charges. This form is currently limited to Import VAT, with support for Cross-border duty planned for future releases.
  • New address types to support the location where goods are imported and the location where goods are located when there is no transportation or where a service or event is rendered.
  • New Transaction parameters, including:

    • MiddlemanVatId

    • IsTriangulation

    • Transport

    • IsGoodsSecondHand

    • IsCustomerRegisteredThroughFiscalRep

      These are described in greater detail in the New data fields topic.

  • New configuration settings that you need to enable on your account.
  • There are two new VAT detail AvaTax reports available.
  • New, basic currency conversion capability that supports use cases where a customer needs to provide their local taxing authority with the invoice tax details in a local currency. This is described in greater detail in the Invoice currency conversion topic.
  • Enhanced VAT codes. VAT codes are generated and returned as part of the AvaTax document data at the line level. The codes may be returned to your source system and may be used to report and file VAT returns.
  • VAT invoice message and citations. For the supported EU articles, the invoice messaging and citations are returned as part of the response to enable a customer to generate a compliant invoice from their ERP.

New calculation fields and parameters in SAP B1

After passing the new data elements, the Avalara tax engine then determines three key questions in calculating VAT:

  1. What is the place of supply? In other words, in what country is the VAT obligation?
  2. What party has the liability to pay?
  3. Are there any applicable exemptions?

The sections below describes the additional data fields added in AvaTax to support new VAT enhancements. These fields provide the engine with the data it needs to properly match the article for each piece of the VAT calculation — Place of Supply, Liability to Pay, and any Exemptions.

This fields are created only if your SAP B1 database is using an European localization, and you enable the corresponding setting from the AvaTax add-on settings.

AvaTax Transaction field

UDF

Level

IsSellerImporterOfRecord

U_ARGNS_ATXSELIMP

Document

AvaTax Parameter name

SAP UDF

Level

Transport

U_ARGNS_ATXTRNS

Document

IsTriangulation

U_ARGNS_ATXISTRI

Document

MiddlemanVatId

U_ ARGNS_ATXMIDVATID

Document

IsCustomerRegisteredThroughFiscalRep

U_ARGNS_ATXFISREP

Document

IsGoodsSecondHand

U_ ARGNS_ATXSECHND

Document

IsImportVatDeferment

U_ARGNS_ATXIMPDEF

Document

IsRegisteredThroughFiscalRep

U_ARGNS_ATXFISREP

Document

 

IsSellerImporterOfRecord

Specifies if the transaction should have value-added and cross-border taxes calculated with the seller as the importer of record.

Some taxes only apply if the seller is the importer of record for a product. In cases where companies are working together to ship products, there may be mutual agreement as to which company is the entity designated as importer of record. The importer of record will then be the company designated to pay taxes marked as being obligated to the importer of record.

Set this value to true to consider your company as the importer of record and collect these taxes.

This value may also be set at the Nexus level

  • True (default)

  • false

In order to calculate VAT for more complex scenarios, it is necessary for the engine to receive additional data input. These additional data elements are passed as part of the and CreateTransaction and CreateNexus requests.

Transport

This parameter indicates who in the VAT transaction is responsible for handling the transportation of the physical goods. This field is required and must be submitted on all physical goods transactions.

Options:

  • Seller (default)

  • Buyer

  • ThirdPartyforSeller

  • ThirdPartyforBuyer

  • None

IsTriangulation

Triangulation occurs when there are three companies involved in a single supply of goods, and they are all in three different EU countries. For example, a French company with a French VAT registration sells some goods to a German customer, but the French company first has to buy the goods from a Spanish supplier prior to shipment directly to the Germany customer. This would require the French company to VAT register itself in Spain for Spanish VAT  to record the purchase and onward dispatch (sale) to the Germany customer. (The French company could also register for Germany VAT to do the same.)

To avoid creating a need for many companies to register like this, Triangulation Simplification exemption was created within the EU VAT law, which is implemented across all member states so that the French company does not have to register for VAT in Spain. 

This flag is required and must be enabled if the transaction is part of a triangulation simplification scenario.

Options:

  • true

  • false (default)

MiddlemanVatId

This is required if the transaction is part of a triangulation simplification scenario because AvaTax needs to know the VAT ID of the middleman. When providing the MiddlemanVatId, you must include the complete VAT ID, starting with the two-digit country ISO prefix.

Options:

  • A string containing the full VAT ID (including the country ISO prefix) of the middleman, for example, "ATU12345678"

IsCustomerRegisteredThroughFiscalRep

This parameter indicates whether the customer in the sales transaction is registered through a fiscal representative in a given country calculating VAT. This field defaults to false.

Options:

  • true

  • false (default)

IsGoodsSecondHand

If the goods being sold in a VAT transaction are second hand (used), this flag should be set to true. AvaTax assumes all goods are new by default unless this value is set. AvaTax will also calculate VAT on second-hand goods.

Options:

  • true

  • false (default)

IsImportVatDeferment

Some of the EU countries have individual options that allow VAT to be deferred until the return is filed. For the Avalara client, this field identifies whether the Nexus VAT country applies for an Import VAT Deferment scheme. The customer sets this value in the Country Nexus as part of their configuration. This value defaults to false and can be overridden in the transaction request.

The list of EU countries with this scheme are:

  • Austria
  • Belgium
  • Bulgaria
  • Croatia
  • Czech Republic
  • Denmark
  • Estonia
  • France
  • Hungary
  • Latvia
  • Lithuania
  • Luxembourg
  • Malta
  • Netherlands
  • Poland
  • Portugal
  • Romania
  • Spain
  • Sweden

Options:

  • true

  • false (default)

IsRegisteredThrouhFiscalRep

This flag indicates whether the seller (Avalara client) is registered through a fiscal representative in the given Nexus country for VAT. Fiscal representatives manage the seller’s VAT obligations in a particular country and act on the seller’s behalf.

This value defaults to false and can be overridden in the transaction request.

Options:

  • true

  • false (default)

New AvaTax add-on settings

New settings were included in the add-on to support possible scenarios and configurations.

At the AvaTax settings, a new tab is available: VAT Europe.

Enable Europe VAT calculation parameters

Check this option to enable sending the VAT calculation parameters for Europe. If you are using a US or Canada localization you will not have this tab visible.

The first time you enable this, you need to restart the add-on. This is because the add-on will check for the required UDFs detailed before, and will create them only if the VAT Calculation for Europe is enabled.

This behavior is to avoid creating the UDFs for US and Canada localizations, where the parameters are not required.

Goods Place or Service Rendered Address

This is not a required address for Avatax request. You can create and map your own UDFs from where to read this address in the document.

UDFs could be used at Document or Line level.

Import Address

This is not a required address for Avatax request. You can create and map your own UDFs from where to read this address in the document.

UDFs could be used at Document or Line level.

Point of Order Acceptance Address

Usually only the country is provided for this address.

For Sales Documents you can opt so always send the Ship From address as the point or order acceptance, by activating the checkbox in the settings.

New AvaTax VAT calculation result output

For Europe, two new fields are included in the VAT calculation result, at the line document level:

AvaTax FieldSAP UDFLevel

VAT CodeU_ARGNS_VATCODEDocument line

Invoice MessageU_ARGNS_AVMSGDocument line