External Tax Determination for Goods and Services ...

arunml · ‎01-14-2019

Overview:

The External Tax Determination for Goods and Services business option allows you to create and edit parameters for the external determination of incoming and outgoing tax events.

Relevance:

The External Tax Determination for Goods and Services business option is relevant if you wish to be able to overwrite the tax events determined by the system using the standard tax decision tree, for example, for certain scenarios where you may want to use local tax codes.

Business Background:

The External Tax Determination for Goods and Services functionality enables you to overwrite the tax events determined by the system using the standard tax decision tree. This is useful in all scenarios that cannot be defined generically within a tax decision tree due to the large number of parameter variants required. Specific configuration entries may be created that correspond to individual business scenarios per tenant and company.

Prerequisites:

There are certain prerequisites which needs to be scoped for external tax determination;

Go to the Business Configuration work center

Go to the Implementation Projects view

Select Edit Project Scope

Navigate to Questions step

Select scoping element Cash Flow Management and Tax Management

Select Tax on Goods and Services

Mark the scoping question - Do you want to do external tax determination on goods and services? Yes

Save the scoping

After you scope this, you will find this activity from the below steps;

Go to the Business Configuration work center

Go to the Implementation Projects view

Select Open Activity List

Navigate to Fine Tuning phase

Select the activity External Tax Determination for Goods and Services

Guiding principles for tax determination:

Automatic tax determination in SAP Business ByDesign for a business document, for example, a Sales Order, is executed individually per line item (special rules apply for tax determination for sales kits) and is based on the following guiding principles:

Tax Event Determination

A tax event is determined for each country according to the specific roles of the business partners. For a third-party drop shipment or cross-border process this could result in multiple country tax determinations getting executed for each business document

The relevant roles of the business partners involved are:
- contract-from (CF) party
- contract-to (CT) party
- ship-from (SF) party
- ship-to (ST) party
- bill-from (BF) party
- bill-to (BT) party
- service location (SL) The tax event determination is performed by considering specific parameters of the business document with a country-specific parameter set that is available either in the form of tax decision tree (offered by SAP or created by Partner Development Infrastructure (PDI)) or may be configured using the external tax event determination. Tax events can be either taxable or non-taxable events. The non-taxable events available across all countries are usually, 1 (non-taxable purchase), 200 (import scenario) and 300 (non-taxable sale).

Note:

1. When defining the configuration entries during the evaluation, the system compares the corresponding parameters of the business document with all valid configuration entries, that is, foremost the country, validity date and direction. If a parameter is defined in a configuration entry, this will be returned as a valid result only if an exact parameter match between configuration entry and business document is determined.

2. If a parameter is not defined, the configuration entry will be valid with a lower priority since it is potentially less specific than another entry where more parameters are defined. The configuration entry that returns the finally valid tax event is the one that is determined as the most specific entry applied to the current business document.

3. Thus, not all parameters need to be defined for a configuration entry but only those ones that clearly differentiate a specific business scenario from the others.

Tax Country Determination

The tax country determination is performed in the steps detailed below. A country is determined as tax country if the following applies:

The tax event returned for this country is the only taxable tax event.

The determined tax event is the only non-taxable tax event (for example, only one country returns a non-taxable tax event).

If multiple taxable or non-taxable tax events have been determined and if a tax code is supplied for the specific line item. Then the tax event and tax country are determined for the specific line item having the tax code assigned.

If none of the above steps return a valid result, the tax event and tax country are determined based on the specific parameters for example, the product line items or other.

The fallback tax country for a third-party deal scenario is determined as the country of the SF partner role, if all previous determinations have not returned a result.

How to define parameters for the external determination of incoming and outgoing tax events?

Go to the Business Configuration work center

Go to the Implementation Projects view

Select Open Activity List

Navigate to Fine Tuning phase

Select the activity External Tax Determination for Goods and Services

Select Add Row

Enter the Configuration Item ID. This ID can be up to eight characters in length and must begin with the prefix Z.

Select the Valid-for Country for which the specific tax event is to be defined.

Select the Region, this is considered as the location or region of the business partner for which the taxation is being processed irrespective of the business partner role your company takes up in the current business document. The region is not a mandatory parameter butallows additional differentiation between similar configuration entries.

Select Enforce country as tax country indicator to set the tax country in which sales need to be reported for tax purposes.This requires that no dedicated configuration entries are maintained for the other countries of the participating business partners.

The Tax Category defaults to ProductTax. Please note that, no further categories are currently supported.

Select the Tax Event Direction, for example, you canchoose Incoming for purchases and Outgoing for sales.

Enter the Valid From and ValidTo dates from which the external tax determination isvalid.
Select the relevant Tax Event.

Select a relevant Tax Code if you want to enforce a specific tax code in a business document.

In the Location Details section, you can define the location details of the business partner using the following parameters:

◦Select the Ship-From location, the value corresponds to the business partner role Ship-From.
◦Select the Ship-To location, the value corresponds to the business partner role Ship-To.
◦Select the Contract-From location, the value corresponds to the business partner role Contract-From.
◦Select the Contract-To location, the value corresponds to the business partner role Contract-To.
◦Select the Bill-From and Bill-To location information.
◦Select the Service Location. This value is independent of the Product Type selected andallows tax event determination for Services and Spare Parts item lines within a service document.
◦Select the Tax Jurisdiction of Bus. Part.Role. This field is enabled only if you choose the Valid-for Country as the United States of America (US).

16. Define Location Tax Details. Define Ship-From, Ship-To, Contract -From, Contract-To, Bill-From, Bill-To, Service Location etc.

You can also define additional parameters like product type, Third Party deal etc.

For clarity with example, you can refer to Help Document - Example Scenario for External Tax Determination for Goods and Services