Tax code is like a natural resource where the availability of new tax code for creation would exhaust at some point if it is not managed with proper planning.
In this blog, I would like to explain how to effectively recycle the tax codes.
Tax codes are created at country level based on the legal requirements of the country. One tax code is created per tax percentage and the account keys to be used in a country.
E.G: As on today the tax rate in a country is say 20% and to be posted in account key MWS (Output Tax). New tax code is created for this.
After sometime, say tax rate has been changed from 20% to 22%. We can’t change the tax rate in the existing tax code as this has already been used by the country and any change in percentage would lead to conflicts. So, a new tax code should be created.
There would be multiple tax rates in a country to be posted to different account keys like output tax, acquisition tax, non-deductible tax etc which is equal to the same number of tax codes.
It is not necessary that, we would be using all the tax codes created in the system. There might be a scenario where tax codes are created as per the legal requirements but was never used due to nonexistence of the business in that particular area. If a new request is received for tax rate change at later point, tax code recycling should be done before we rush through FTXP to create the new tax code. Because, there is a limitation in the system on number of tax codes that can be created in SAP.
Let us see how many tax codes can be created in the system.
Tax code is a 2 digit field and allowed characters are 0-9 and A-Z.
Number of letters available = 10 (0-9) + 26(A-Z) = 36
Number of 2 digit tax codes that can be created = 36*36 = 1296
So, total number of tax codes that can be created are 1296.
Due to this reason, new tax code creation should be done only if tax code recycling can’t be done. So, let us see how to recycle the tax codes.
T-code TAANA is used for table analysis. Using TAANA, we can identify the tax codes which are created in the system but never used. Follow below steps to identify unused tax codes.
1. Go to T-code TAANA and click on Start table analysis (F8).
2. Enter BSET as table name and click the push button “Analysis variant”. In the next popup, click on “Ad Hoc Variant” button.
3. Select the fields Company code, Fiscal year, Tax code and continue.
4. Select the new variant and continue.
5. Select the run in background option and proceed. Most of the time, “Online” option wont work due to huge number of records to be extracted.
6. A background job would be scheduled. Once the job is completed, results can be checked to see how many documents are posted for each tax code.
Double click on green light to see the results.
7. Identify the tax procedure assigned to the country from t-code OBBG.
8. Extract the list of tax codes defined in this tax procedure of the country from table T007A.
9. Identify the list of company codes defined for the country from t-code OBY6 or table T001.
10. Filter the output for the company codes and tax codes extracted above.
11. Now check the number of entries against each tax code. If we find any tax code with zero entries, that means, this tax code is just defined and never used in the country. This kind of tax codes can be cross validated with business to check if there is any plan to use that tax code in future. If the answer is not going to be used, this tax code can be configured for the new requirement.
So, effectively we are recycling the existing tax code in the system which is never used.
If there is no free tax code available/business is planning to use the free tax code which is not used till now, next step is to identify the tax code in a different tax procedure which is using same account keys (eg: MWS, VST etc) and same tax G/L accounts as per the new requirement.
E.g.: Existing tax code A1 is using G/L 12345 with account key MWS in country Italy with tax rate 20%.
New requirement is to have a new tax code in country Spain with account key MWS and tax G/L 12345 with tax rate 15%.
In this case, tax code A1 of Italy can be extended to Spain with 15% tax.
Logic behind this is, tax percentage is maintained in condition record at country level. So, same tax code of Italy can be recycled to Spain with a different percentage.
Important: In this case, we should make sure that account key and tax G/L to be used are same in both countries.
Table T030K can be used to identify the tax codes that share the same account keys and tax G/L accounts as per the new requirement.
E.G: New requirement is to have a tax code in Spain with rate 15% and post to account key MWS and Tax G/L 123456.
Assume that there is no free tax code found in step 1.
Now go to T030K table, enter operating chart of accounts (Should be same for both countries), account key as MWS and G/L as 123456.
If there is any existing tax code which meets this criteria, that can be recycled to Spain with 15% tax rate. Please note that tax rate of existing tax code in a different country can be same/different than our requirement.
I have attached the list of possible permutations and combinations of the tax codes that can be created in the system for your reference. Text file is uploaded as excel file is not allowed to upload. This file can be opened with excel for easy reading.
Hope this blog may help many people in this forum. You are most welcome to share your experience in this area and feed back on this blog 🙂