Tax registration in a foreign country

For an enterprise with locations in multiple countries, you can set up financial companies with a registered tax number in each country. The transactions of each department must be reported for tax to the authorities of that country and with the company's tax number in that country.

However, in some situations, transactions must be reported for taxation in a foreign country. To report tax in a country other than the company's home country, an enterprise must have a registered tax number in the other country, whether or not the company has employees, facilities, inventory, or other assets in the other country.

In the following situations, you must have a registered tax number in countries other than the company's home country:

  • If you perform transactions that are taxable in the destination country.
  • If you have branch offices in some countries that belong to legal entities in other countries.

Transactions taxable in the destination country

Transactions can be taxable in the destination country:

  • Under the distance-selling rules, sales transactions and service transactions with customers in EU countries if the related invoice amount exceeds the defined thresholds.
  • If the delivered goods are installed in the destination country.

Transactions taxable in the destination country often are 'supply-and-install' projects. Because projects are characterized by being unique, LN does not support a tax country other than the home country for sales schedules and purchase schedules, which typically are predictable and repetitive.

Transactions taxable in foreign countries can be:

  • Sales orders
  • Service orders
  • Purchase orders and invoices related to direct delivery sales orders
  • Sales invoices, including manual invoices, credit notes, and sales invoices for service orders

For transactions taxable in foreign countries, you must create a separate financial company for tax registration in the foreign country.

Tax registration requirements

To tax registration in foreign countries, the following requirements apply:

  • You must have a registered tax number for each country in which you do business. Departments that belong to the same legal entity can share the tax number for a country.
  • Documents for the customer or supplier, such as order acknowledgements and invoices must show your company's tax number in the tax country and the address of the order's administrative department. The department's address can be in the tax country or in a different country.
  • Invoices must be sequentially numbered by tax number.

  • In the European Union, each legal entity of your company must submit the following reports to the authorities of each country in which you perform taxable transactions:

    The reports must contain your company's tax number in the country and must be based on the taxable transactions in the country, and the country's local tax rates.

  • The tax reports submitted to the local authorities must be supported by postings in the general ledger.

For details on how tax registration in foreign countries is implemented in LN, refer to Tax registration in a foreign country - concepts.

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