The UK Government is set to replace EU structural funds with a new UK 'shared prosperity fund' post-Brexit.
The European Commission says provisions in the Internal Market Bill related to Northern Ireland must be removed.
The SNP hit out at the Internal Market Bill as a 'power grab' after MPs backed it at Westminster.
MPs voted 340 to 256 in favour of the Brexit legislation, which enables the UK to break international law.
The Scottish Government will ask Holyrood next month to formally withhold consent to the Internal Market Bill.
Scottish secretary Alister Jack insisted passing the controversial legislation is 'the right thing to do'.
The advocate general for Scotland, Lord Keen, has reportedly offered his resignation letter to Boris Johnson.
The controversial legislation which breaches international law cleared its first Commons hurdle by 340 to 263.
The European Commission said Britain had 'seriously damaged trust' with Brussels with its Internal Market Bill.
The post-Brexit Internal Market Bill is an 'abomination' and a 'naked power grab', Nicola Sturgeon said.