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Author's profile photo Former Member

Basic SAP Tax Overview

Purpose


I would like to provide a document that outlines the basics of SAP tax configuration and provides a couple of examples of how tax code could be determined in SD and MM.


Overview


  • SAP provides the majority of the tax configuration out of the box by country
  • There are three SAP areas that work together to determine taxes FI,MM, and SD

  FI – Base configuration for tax procedures, rates and accounts

  SD – Configuration/master data to determine output tax code

  MM – Configuration/master data to determine input tax code

  • Master data such as customer, vendor, and material, as well as transactional data like POs and Sales Orders are key to determining the correct tax
  • Rates can be maintained in SAP or SAP can call an external system for them (this document with focus on rates maintained in SAP)


FI Tax Basics


  • Tax configuration is done by country
  • All company codes in the country share those settings
  • Two Main Components:
    • Tax Calculation Procedure – Provide the method of calculation – normally use SAP standard
    • Tax Codes – Provide the rates

Tax Procedure


  • These are provided by SAP for each country – General recommendation is to use delivered logic
  • Tax Procedure, related conditions, and access sequences can be viewed in transaction SPRO at the path Financial Accounting Global Settings>Tax on sales/Purchases>Basic Settings>Check Calculation Procedure


Tax Procedure Example

  • Steps define calculation, conditions, and account assignments

Tax Procedure.jpg

Condition Type Example

  • Condition record defines access sequence, and other characteristics about the condition


Condition.jpg

Access Sequence Example    

  • Access Sequence defines field required to access a condition
  • For example to find a condition for the entry below the system will use Country, Tax Code, and Tax Jurisdiction

Access Sequence.jpg


Configuration – Assign Tax Procedure to Country

  • Tax Procedures are assigned to countries in transaction OBBG

Assign Tax.jpg

Tax Jurisdictions

  • Represent government authorities to which taxes need to be paid
  • SAP allows up to 4 levels tax jurisdictions representing state, country, city, and others


Configuration – Jurisdiction Code Structure


  • Tax Jurisdiction structure must be defined in transaction OBCO

Tax Jurisditions.jpg

Configuration – Maintain Jurisdiction Codes


  • Jurisdiction codes are maintained manually in transaction OBCP for tax procedures that do not use an external system


Jurisdiction Codes.jpg


Tax Codes


  • Tax Codes are maintained by country and jurisdiction code
  • They define the rate that is used in calculation
  • They are maintained in transaction FTXP
  • Don’t be confused on the name, this transaction can create,maintain, and display tax codes


Tax Code.jpg

Tax Code – Properties


  • The properties of the tax code identify its code, name,  type (input vs output) and other information about it


Tax Code Properties.jpg

Tax Code – Tax Rates


  • In the tax rate screen you enter the appropriate tax rates
  • You can also see the account assignment key and the conditions that are used to calculate a value in the follow on transactions such as SD invoice


Tax Rates.png

Tax Account Determination


  • Accounts are assigned in transaction OB40
  • You can also see the account assignment key and the conditions that are used to calculate a value in the follow on transactions such as SD invoice

Account Determination 1.jpg

Account Determination 2.jpg

Tax Code Determination


  • At the end of the day the tax is determined based on the tax code and the tax procedure on the AP or SD invoice
  • SAP multiple ways to determine the tax code, condition tables, master data, programs, manual entry, etc.
  • Method can be different by situation
  • This document shows an example of how a tax code could be determined for an SD invoice (output tax) and SRM Pos/invoices (input tax)

SD Calclation.jpg

MM determination.jpg

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      4 Comments
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      Author's profile photo Erwin Leitner
      Erwin Leitner

      Hello,

      Really great stuff. 🙂

      all the best erwin

      Author's profile photo Former Member
      Former Member

      Nice Document , Thanks John.

      Author's profile photo Revathy Somaskandan
      Revathy Somaskandan

      Beautiful explanation. It gives process information and needed configuration.

       

      Thank you

       

      Author's profile photo Narasimha reddy Tavanam
      Narasimha reddy Tavanam

      Informative, thank you.