Author : Andre Bollion
Single Billing Entity.
The Single Billing Entity is the entity or company in a group of companies, usually affiliated companies, that will invoice each customer independently where the product is sourced from.
In a traditional set-up, each manufacturing unit is invoicing the customer and consequently a customer can thus be invoiced by several companies from the group. If the customer can be supplied from several companies, the result is often that the customer places an order with one company but get invoiced by another one. Setting up a Single Billing Entity (SBE) can help improve the level of customer service.
An SBE can be set-up in several legal structures such as commissionaire or agent, buy-sell and toll manufacturing.
The agent structure and more specifically the "commissionaire a la vente" is often used because it does not involve a major change in the direct taxation status of the parties involved, the principal and the agent. The commissionaire is acting in his own name but for account of the principal. Because the commissionaire is not taking a lot of risk, his fee will be small and consequently there is little or no change in the direct taxation status. For VAT purposes, commissionaire transactions are considered as buy-sell transactions.
In a buy-sell structure, the SBE is usually taking more risk such as currency and commercial risk. Between the manufacturing company and the SBE a transfer price must be established and consequently there is a chance that the tax authorities will challenge the level of the transfer price especially when these transactions are cross border.
In a toll manufacturing structure, the SBE will buy all or most of the major raw materials and/or components and is contracting the conversion into finished products to the manufacturing companies for a toll fee. The SBE is thus owner of the finished goods and in that respect, this structure is easier to set-up than the buy-sell structure.