Tax registration in a foreign country - concepts

Departments

For tax registration, the legal entity to which a department belongs is important. How a legal entity is reflected in LN depends on how you model the enterprise. You can define a legal entity as a financial company or as a financial company group.

A branch office is a department situated in one country that belongs to a legal entity based in another country.

For example, an enterprise with a legal entity in Denmark can have a branch office in Finland which in its turn belongs to the legal entity in Denmark. In this case, the company must have a tax number for the branch office in Finland. For transactions that are taxable in Finland, the sales office can use the tax number of the branch office in Finland because the two departments belong to the same legal entity.

To support tax registration and reporting in foreign countries, two types of department are linked to the transactions:

• The administrative department

  The department that creates and maintains the order and which determines details such as the order number series, the price book, the rates, and various default values for the orders. The administrative department is a sales office, a purchase office, or a service department.

• The financial department

  The department that determines the financial company to which the transaction must be posted and which is responsible for the tax declaration in the tax country of the order. The financial company's home country must be the tax country of the order. The financial department is an accounting office of the financial company.

The financial data of the order

LN retrieves the financial details of an order or invoice such as the currency rates, various tolerances, and tax details, from the financial company of the financial department on the order header. By default, the tax country is the home country of the financial company of the financial department.

You can only change the financial department of an order header or line manually. If the financial department changes, LN changes the financial details according to the setup of this data in the financial company of the new financial department. Manually entered currency rates on the order header are overwritten and, if required, you must enter the rates again. The currency rate and rate factor of the order header apply to all the order lines.

For details about how LN handles sales quotations, sales orders and service orders that are taxable in other countries, refer to:

• Tax registration in a foreign country - sales orders.
• Tax registration in a foreign country - service orders.

Goods transfer relationships

For issues and receipts in Lagerwirtschaft, LN checks the goods transfer relationship between the warehouse and the financial department of the order to determine the invoicing type of the goods transfer. If the order involves a legal entity in a foreign country, the financial department of the order is an accounting office.

To support tax registration in foreign countries in a multicompany environment, you can define relationships between the following types of entities:

• Warehouse and accounting office
• Accounting office and sales office
• Purchase office and accounting office
• Accounting office and accounting office

For details, refer to Intercompany trade setup - overview.