Tax Service – Using Tax Service on Purchase Processes for Brazil
MODERATOR’S NOTE: This blog post, originally published in 2020, contains information related to an older version of this product. For information about the latest version, please see Integration with External Tax Calculation Engines – New Concept for SAP S/4HANA Cloud and SAP S/4HANA.
Tax Service is your solution for Brazilian tax calculation when you are using the SAP S/4HANA and SAP S/4HANA (on-premise).
It is well known how complex the Brazilian rules are for taxes calculation. So, we joined the expertise of partners with the powerful SAP S/4HANA (Cloud and on-premise) to reduce your effort for tax calculation and reduce the Total Cost of Ownership (TCO). Using the tax service, you will not maintain rates or make changes in your system when rates or law change. Remember, laws can change in federal level, state level or even in municipality level.
In this blog post we will share a purchase process for Brazil using the tax service.
Setup Pre-Delivered by SAP
When using the tax service, all tax rules will be maintained by an SAP tax partner.
The data got from vendor, purchase organization and material (goods or services) and of course purchase operation itself, will be used for determining which taxes shall be applied and its rates. The address of involved parts in the transaction will be used for determining if the purchase occurs across states or not or even across cities, in case of services. So, it’s very important that all data is precisely informed. In truth, maintained in your SAP S/4HANA (Cloud or on-premise) system. Also, codes like NCM, CNAE and some others will contribute for the accuracy of tax calculation. All you need is maintain this data up to date.
The most important characteristic of using SAP S/4HANA (Cloud or on-premise) with the tax service is that now, as the consumer of a service, you can focus on the process instead of the its legal rules. The returned values will be mapped automatically to S/4 HANA (Cloud or on-premise) structures and the system will take care of the process finalization for you. For that, SAP will pre-deliver the necessary content.
In this way, when you create a purchase order, naturally, you specify the usage characteristics and the system will suppose the purchase finality: resale, consumption, industrialization or fixed assets of goods or purchase of service(s), reducing the complexity for selecting the right tax code where no tax knowledge is needed.
The tax service will use a series of information from customer/vendor, plant and material (goods or services) for the correct tax determination such as customer/vendor/plant CNAE codes, goods NCM code or service city codes, and addresses information like IBGE codes. Therefore, it is very important to maintain correctly all master data for those parties. Details about each data to be maintained can be found in the official documentation in SAP Help Portal, under Integrating the Service.
SAP pre-delivers a new tax procedure ABRX01 that connects automatically to the tax service.
When using the tax service, the Materials Management (MM) tax codes now represent a business process and not the expected resulting taxes. The formula 279 is used to activate the tax service interface.
In the picture bellow you can see some differences of configurations from the standard purchase of service and the standard purchase of goods:
For Service, the tax selected are: PIS, COFINS, ISS, etc. For Goods, the taxes selected are ICMS, IPI, etc.
In other words, using the tax service, you only need to specify the tax code, according to what the finality of your transaction is.
After net price and tax code is defined the TXSC condition type is placed with condition value formula 279. This condition type is the trigger of the tax service and it will basically perform three steps:
- Extract all needed data from the current sales process
- Build a JSON payload in the tax service API format
- Open an HTTPs connection and call the tax service endpoint configured by the customer
Details about how to setup the tax service endpoint on S/4HANA Cloud and S/4HANA products can be found under Integrating the Service.
Purchase Order Execution
Now let’s create a purchase order in Brazil and check the ease in using the tax service.
When using the tax service, the Código Fiscal de Operações e Prestações (CFOP) and the tax law texts are set to “Display Only” because they are filled automatically by the tax service. Also, the tax law codes are set to “TXS” by default for the entire sales process. So, when we enter the MM tax code and hit enter, pricing calculation will be called, which will trigger the tax service call and mapping of tax results back to the sales order.
See, in the picture below, the selection of the MM tax code 00, representing a standard purchase of goods.
In the picture below we can see the tax amount and some taxes calculated by an SAP tax partner for the purchase order depicted above:
Also, the CFOP was already determined by the SAP tax partner.
Creating a Nota Fiscal
After entering an incoming invoice and creating a goods receipt purchase just informing the Nota Fiscal type, you can see the result with the CFOP, taxes and messages generated by the tax partner in the pictures below:
Benefits of use Tax Service
As we try to show, using the tax service in MM transactions brings simplicity to your purchase process. You can focus in your business instead of dealing with a large number of Brazilian tax laws and rules.