Simplified 'Product Tax Code' Creation using ByD PDI

[swethapadma_oleti]

During my interaction with customers and partners, I have realized that effective utilization of ‘Business By Design Cloud Studio’ and following few inter-dependent configuration steps simplifies creation of ‘Tax Content’ in Business by Design.

So through this blog, I would like to clarify the configuration messaging with a simple Do’s and Don’ts step-guide.

At the onset, let us look at the composition of ‘Tax Content’ in Business by Design. The Tax content in Business by Design can be broadly classified into ‘Product Tax’ and ‘Withholding Tax’. The Product tax can be further classified into four elements – Tax type, Tax rate, Tax event and Tax Code with a defined
interrelation among them.

In this blog we focus on understanding effective way of defining ‘Product Tax’

A Simplistic graphical representation of ‘Product tax code’ can be as depicted below:

By following a set of guided principles as below, your product tax configuration process becomes much easier and less error prone.

Do's:

• Use all the configuration elements from single configuration source i.,e  either PDI or all SAP pre-delivered.
• Always create all other 3 elements, if you plan to create any one Tax element in the Studio. Omitting any one tax elements’ makes tax postings impossible.
• Always maintain the mapping of tax event for a created tax type. Missing mappings would make tax postings impossible.
• Always maintain tax procedures to the tax events. PDI currently supports assignment of tax events to tax procedures with ‘Input VAT’ and ‘Output VAT’ only.
• Create new decision tree for automatic determination of Tax codes which are from studio.
• Use valid combination of Tax event-Tax type and Tax type-Tax rate combination for creation of Tax code.
• Tax Deductibity codes can be created in the fine-tuning activity, “Tax Setting and Purchasing”, in the SAP Business By-Design system. You must manually redo the entire process in the customer system.

Don'ts:

• Don’t mix up tax elements from different sources of creation. Always chose to use either ‘PDI’ or ‘SAP pre-delivered tax codes’ for all elements of ‘Tax code’ creation.
• Don’t assign multiple tax types to same tax event
• Don’t assign multiple tax types to same tax code

While creating Tax code, Usage of valid Tax event-Tax type and Tax type-Tax rate combination is mandatory. A simple example use-case is provided below for quick reference.

For example:

New Tax types and Rate types: Taxtype1 -- Ratetype1

                                                         Taxtype1 – Ratetype2

                                                         Taxtype2 -- Ratetype1

                                                         Taxtype3 -- Ratetype2

New Tax events:   Taxevent1 -- Taxtype1

                                 Taxevent2 -- Taxtype2

                                 Taxevent3 – Taxtype3

                                 Taxevent4 – Taxtype2

New Tax Code:

Valid Tax codes:

• Taxcode1-- Taxevent1 -- Taxtype1 – Ratetype1
• Taxcode2-- Taxevent1 -- Taxtype1 – Ratetype2
• Taxcode3 -- Taxevent2 -- Taxtype2—Ratetype1
• Taxcode4 – Taxevent3 – Taxtype3—Ratetype2
• Taxcode5 – Taxevent4 – Taxtype2—Ratetype1

Invalid Tax codes:

• Taxcode1--Taxevent1--Taxtype2—Ratetype1 because Taxevent1--taxtype2 combination does not exists in the Tax event
• Taxcode1--Taxevent1--Taxtype2—Ratetype3 because Taxtype2—Ratetype3 combination does not exists in the Tax type BC Set.