tax assignment in sap

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An Overview of Taxes in SAP S/4HANA Finance

Let’s examine taxes in accounts receivable processes in SAP S/4HANA Finance.

Sales (output) tax codes are used, which usually are entered manually in financial accounting invoices and automatically determined in integrated sales and distribution billing documents.

Taxes in Financial Accounting Invoices

When you enter an outgoing invoice directly in financial accounting, normally, you would enter the tax code manually, unless some substitution is in place that can determine the tax code automatically.

When posting a customer invoice in financial accounting using Transaction FB70, in the header section, under the Tax tab, you can enter the necessary tax information, as shown in this figure.

Select the sales output tax code and, if necessary, the tax jurisdiction code, which will use a tax rate based on a specific US jurisdiction. If you select the Calculate tax checkbox, taxes will be calculated automatically by the system.

No additional configuration is required to make this work other than properly setting up your tax codes, and enabling the relevant tax codes in the outgoing financial accounting invoice Enjoy screen.

Tax Determination in the Sales Process

Tax codes can be automatically determined in the sales process using the same condition technique used by other elements of the pricing procedure we discussed. In fact, the tax is a separate condition type in the pricing procedure, which is on the sales order level.

Let’s take a look at this screen.

Double-click on condition type UTXJ : Tax Jurisdict.Code. As shown below, the system determines tax codes O0 based on the condition record found.

Tax determination in sales uses a similar condition technique as purchasing (condition, access sequences, condition tables) to automatically determine the taxes. Special pricing conditions for taxes can be used to determine the proper tax code based on fields configured for use in condition tables.

To define a condition type, follow the menu path Sales and Distribution > Basic Functions > Pricing > Pricing Control > Define Condition Types . Then, select the Set Condition Types for Pricing activity. The system shows the sales condition defined, as shown in the figure below. The standard SAP condition for output tax is MWAS, which you can copy as your own condition starting with Z or Y if needed.

Double-click MWAS to see its configuration, as shown below.

The following fields are important:

Condition Class

This field determines the usage of the condition type. In our case, the condition class is set to D: Taxes , which defines this condition as a tax condition.

Calculation Type

Specifies the type of calculation and is set to A: Percentage because the output sales tax should be calculated as a percentage.

Condition Category

Classifies the conditions and for tax conditions should be D: Tax .

Item Condition

Should be selected for taxes because this checkbox ensures that the calculation occurs at the item level, which is required for taxes.

By clicking the Records for Access button, you which records for access are maintained for the condition types, which determine the tax codes. Now, let`s define our own custom access sequence ZMWS, which is a copy of the standard MWST but accesses different tables. To set up this access sequence, follow the menu path Sales and Distribution > Basic Functions > Pricing > Pricing Control > Access Sequences > Set Access Sequences . This table is a cross-client table, and after confirming the warning message, you’ll see a list of defined access sequences, as shown here.

Select MWST and then select Copy As… from the top menu. Now, rename the new access sequence to “ZMWS” and change its Description to “Taxes on Sales.” Select Accesses from the left side of the screen and modify the condition tables to access, as shown in the next figure. The sequence of their access is determined by the step number in the first Access column. The Exclusive checkbox controls whether the system will stop searching for a record after the first successful access finds a value.

Select the first step and click Fields from the left side of the screen to see the fields that are being used by the condition table access sequence.

As shown in the following figure, the Country ( ALAND ) and Destination Country ( LAND1 ) fields are used in our access sequence. Therefore, when searching using this step, the system will look for matches in both the sending and destination countries of the goods. If a match exists, the tax code maintained for the combination will be determined.

You can maintain these condition records using Transaction VK11. Condition records are considered application data, and you can also navigate to these settings through the application menu path Logistics > Sales and Distribution > Master Data > Conditions > Select Using Condition Type > VK11—Create . Now, enter condition type “MWST” to see a popup window asking for the combination of characteristics for which you want to create records, as shown below. These characteristics are dependent on the configuration of the condition record.

Select the Departure Country/Destination Country to see the next screen, in which you’ll enter your condition records. As shown in the next figure, in the header, enter the source country from which goods or services are sent, and then in the lines below, you can enter multiple records per destination country.

The following fields are considered:

• Destination Country : This field is the country to which the goods/services are supplied.
• Tax Classification 1 : The tax classification indicator, which is maintained in the customer master records, normally specifies whether this business partner is liable for or exempt from taxes.
• Tax Classification Material : The tax classification indicator, which is maintained in the material master records, normally specifies whether this material is taxable at the full rate, taxable at a reduced rate, or not taxable.
• Valid From and Valid To : In this field, you’ll specify the validity period of the tax code. Tax rates change from time to time, and with these fields, you have the flexibility to add more condition records when tax rates change.
• Tax Code : This field is the tax code, which should be assigned automatically when the criteria outlined in the condition record are met.

Save your entries, and sales documents that match these condition criteria will automatically receive the assigned tax codes.

Editor’s note : This post has been adapted from a section of the book Configuring SAP S/4HANA Finance by Stoil Jotev.

Recommendation

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ERProof » SAP FI » SAP FI Training » SAP Tax Configuration

SAP Tax Configuration

SAP tax configuration for sales and purchases is summarized in three customizing menus which we will present as separate sections in this tutorial:

• Basic settings

Calculation

Before starting this tutorial, it is recommended to get familiar with the overview about SAP FI taxes .

Basic Settings

To access the configuration activities under basic settings, use the customizing path below in transaction code SPRO :

Financial Accounting – Financial Accounting Global Settings – Tax on Sales/Purchases – Basic Settings

The menu explodes into various optional, mandatory and nonrequired activities as shown below:

Check Calculation Procedure

Execute the check calculation procedure activity under SAP tax configuration basic settings. You will be presented with various sub-activities. Select the Define Procedures activity as shown below:

Assign Country to Calculation Procedure

Now enter the calculation procedure you created to assign it to the country as shown below:

Now, access the calculation SAP tax configuration activities using the customizing path below in transaction code SPRO :

Financial Accounting – Financial Accounting Global Settings – Tax on Sales/Purchases – Calculation

Define Tax Codes for Sales and Purchases

Define tax codes for sales and purchases by executing the first activity in the calculation menu. Enter your country code and press enter.

Enter two-digit alphanumeric characters as your new tax code. Press enter to proceed.

Enter a long description for your tax code and specify tax type of V for input tax or A for output tax, as demonstrated below:

Press enter to go to the next page.

Enter the tax percentage rate on the appropriate line, depending on whether it is input tax or output tax. For example, the below tax code is an input tax at a rate of 15%:

Now, access the SAP tax configuration activities for posting using the customizing path below in transaction code SPRO :

Financial Accounting – Financial Accounting Global Settings – Tax on Sales/Purchases – Posting

The menu explodes into various optional, mandatory and non-required activities as shown below:

Define Tax Accounts

Execute the define tax accounts activity, and select the tax type. In our example, we select Input tax , as shown below. Press enter, specify the chart of accounts and press enter again.

Enter the general ledger account that all tax codes of this tax type shall post to. In our example, when a user picks any input tax code when posting a document, the system will automatically post to G/L account 151000 :

All necessary SAP tax configuration settings have now been completed. The newly created tax code will appear when entering a document and the tax will calculate and post automatically to the specified G/L account .

Finally, check that your tax code was created correctly by posting a test document. In our example, we created an input tax code relevant to vendor invoices. Therefore, go to transaction code FB60 . Here you can see the new tax code in the dropdown for available tax codes:

Did you like this tutorial? Have any questions or comments? We would love to hear your feedback in the comments section below. It’d be a big help for us, and hopefully it’s something we can address for you in improvement of our free SAP FI tutorials.

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7 thoughts on “SAP Tax Configuration”

Hi, Middle East is going on VAT implementation for 5% from Jan 2018. Does the procedure is same or is it different? Can you published same prodedure for Middle East SAP user companies. it will be great benefits to online learners and experts.. Regards, Neelu

The general principles of VAT configuration are the same. It is difficult for us to create a tutorial for Middle East SAP user companies without knowing detailed business and legal requirements in these countries. If you can share your experience of VAT implementation for Middle East countries in 2018, we will be happy to publish it on this blog.

Hello Cleo,

VAT implementation and legal requirement is same is EU as per BIG4 Audit firms. 5% on SALES & PURCHASES. Net of each month will be payable to Tax Authorities here in Middle East. There are few companies exempted but the principal remains same as what is in EU.

Will keep you progressed with Tax Law to be published as nothing has been declared yet. It’s 5 % we know as of now.. So probably the implementation rule remains the same and tax code to be created and assigned on sales & purchases..

Regards, Neelu Bhojwani

Don’t make excuses for failure, just find a way for success

Could you please share complete end to end tax procedure for India after entry of GST in India. It would help a lot.

Please provide details to configure non-deductible tax for purchasing, and tax procedure where vat is calculated on cost plus non-deductible tax.

THANKS A LOT for your valuable work! A few comments to this article: 1) It would be great to mention here the importance of maintenance of “Tax category” and “Posting without tax allowed” in the GL master. Without these settings the system will not calculate tax on sales/purchases, even if the customizing correctly done and the a tax code is specified in the document. 2) Would be nice, if you can make an additional tutorial for the case, when “Plants abroad” functionality is activated for a client. – This case will require additional customizing settings to post sales/purchases tax accounts automatically.

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Creating Custom Tax Classifications for Customers and Materials in Sales

After completing this lesson, you will be able to:

• Create new tax classifications

Custom Tax Classifications for Customers and Materials in Sales

Business example.

John is a business process configuration expert who takes care of the sales tax configuration for his company. Until now, changes in tax relevance for customers and materials (for example, due to fiscal legal changes) required John to request expert configuration from SAP. SAP experts then made the required changes by creating new tax classifications in the system.

With the current release, the following configuration activities have been enhanced to enable John to create custom tax classifications for customers and materials by himself:

• Maintain Tax Relevance for Customers (ID: 106589)
• Maintain Tax Relevance for Materials (ID: 106590)

If you are using SAP Central Business Configuration as your configuration environment, this change empowers your company to maintain this important aspect of tax configuration yourself whenever it is required, without relying on SAP for updated configuration.

You use tax classifications in customer and material (that is, product) master data to classify the tax relevance of the corresponding customers and materials. Tax classifications are always defined for specific tax condition types representing tax regulations in various countries. For example,

• Customer tax classification 1 for tax condition type TTX1 (representing tax regulations in Germany) indicates that a customer is liable for taxes.
• Material tax classification 2 for tax condition type TTX1 indicates that the material is subject to reduced tax.

The system typically uses these classifications to determine the tax rates that must be applied for business transactions involving the customers and materials to which the tax classifications are assigned in master data.

Note that other variables also affect tax determination. These typically include the tax classification of the sold material, the tax departure country/region, and the tax destination country/region of the business transaction.

Configuration Environment

If you are using the Manage Your Solution app as your configuration environment, you can only change the textual descriptions of existing tax classifications. This is the same functional scope as in previous releases.

For more information about your configuration environment, see Configuration Environment of SAP S/4HANA Cloud .

System Scoping

During system scoping, SAP loads your system with predefined pairs of tax condition types and customer tax classifications. This predefined configuration content should cover the most common tax requirements in the countries/regions that are scoped for your system.

You should only create new tax classifications if the standard tax configuration content for your scoped countries/regions doesn't fulfill your business requirements.

You can only create new tax classifications for tax condition types representing tax regulations in countries/regions that have been scoped for your system. The list of available tax condition types is restricted accordingly. For example, the TTX1 condition type represents tax regulations in Germany. You can only create tax classifications for the TTX1 condition type if Germany has been scoped for your system. If Germany has not been scoped for your system, the TTX1 condition type is not available.

Creating new tax classifications for customers and materials - how to find the configuration activities:

• In the Project Experience within SAP Central Business Configuration , go to Configuration Activities .
• Search for maintain tax relevance .
• The system will find the two activities that you can see in the screenshot above.
• From here you can open the documentation and launch the configuration activities.

How to use the configuration activities

Both configuration activities are structured identically, but one is for managing tax classifications for customers, and one for materials (that is, products).

Each row in the table maps a tax classification to a tax condition type. Tax condition types represent tax regulations in countries/regions that have been scoped for your system.

When a business transaction is initiated from a given country/region, the system uses the corresponding tax condition type to determine the correct taxes within the related sales documents and billing documents during pricing.

If the standard tax configuration content for your scoped countries/regions doesn't fulfill your business requirements, you can do the following to create new material tax classifications for the tax condition types in your system:

• You can create new entries from scratch by entering the relevant tax condition type, material tax classification, and a corresponding description in the newly created row.
• You can copy existing entries and adapt them as needed.

How to create a new tax classification

When you create a new entry, you must enter the three pieces of data indicated in the screenshot:

• Select the tax condition type for which you want the tax classification to be valid. The list of available tax condition types is restricted according to the countries/regions that have been scoped for your system.
• Enter the tax classification indicator that you want to use for your new tax classification. It must be a single alphanumeric character, for example, "1", "A", or "X".
• Enter a textual description for the new tax classification, for example, "Tax Exempt".
• Save your changes.

You can then define the tax relevance of a specific customer or material (that is, product) by assigning the required tax classification to the corresponding tax condition type within the relevant master record.

You can do this in the Maintain Business Partner and Manage Product Master Data apps, respectively.

During system scoping, SAP loads your system with predefined pairs of tax condition types and tax classifications. This predefined configuration content should cover the most common tax requirements in the countries/regions that are scoped for your system.

However, it's your company's responsibility to continually ensure legal compliance with the tax regulations in the scoped countries/regions.

This includes updating your tax configuration (including tax classifications) when it becomes necessary.

In previous releases, SAP regularly provided up-to-date tax configuration as part of its reference configuration content. As of SAP S/4HANA Cloud 2402, SAP will no longer provide such updates.

Log in to track your progress & complete quizzes

2891150 - Error FF731 although tax code definition is correct

Error FF731 is raised when you directly post to a tax account.

This error tells you that tax code XX may only contain one assignment line, despite the fact that your tax code was defined with just one active condition.

Environment

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• SAP R/3 Enterprise 
• SAP ERP Central Component
• SAP enhancement package for SAP ERP
• SAP enhancement package for SAP ERP, version for SAP HANA
• SAP S/4HANA Finance
• SAP S/4HANA

FF731, direct tax, contain, one assignment line, one condition type, tax rate, FTXP, OBYZ, procedure, A003, FF 731, correct tax definition, directly. , KBA , FI-GL-GL-F , Value Added Tax (VAT) , How To

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• ❯ Define tax calculation procedures

How to Define Tax Procedure in SAP

In this SAP tutorials, you will learn how to define tax procedure in SAP systems . In our previous training tutorial we have discussed about what is sales tax and purchase tax in SAP .

How to Define tax procedure in SAP

You can maintain tax calculation procedures in SAP by following one of the navigation method.

Transaction code: – OBYZ Menu Path: – SPRO –> IMG –> Financial Accounting (New) –> Financial Accounting Global Settings (New) –> Tax on sales/purchases –> Basic settings –> Check calculation procedure.

Step 1) Enter transaction code “OBYZ” in the SAP command field and enter.

Step 2) A pop up window condition element screen displays with options, you need to choose procedures so double click on it.

Step 3) On change view procedure screen, click on new entries button for definition of new tax procedure in SAP.

Step 4) On new entries calculation procedures screen, update the following details.

• Procedures: – Enter the four digits key that identifies the tax procedure in SAP.
• Description: – Update the descriptive text of tax calculation procedure – Sales tax India.

After maintaining the details, click on save button and save in your request number.

Step 5) Now select TKCP procedures row and double click on control data folder.

Step 6) Select new entries button.

Step 7) On new entries screen, update the following details.

• Step: – Enter the number (10, 20, 30…) which specifies the sequence of the conditions within a procedure
• Condition type: – Update the condition type key that indicates the each activity or tax.
• Description: – Description text will be automatically updated based on condition type text.
• From, To: – This indicate which tax should be calculated on which base amount.
• Account key: – Assign the account that respective to condition types.

After maintaining all the required details, click on save button and save the configured details.

Successfully we have maintained tax calculation procedures in SAP.

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Hurricanes are notorious for their destruction, and a new study shows the storms demolish more than buildings and infrastructure.

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Employers Adopt Remote Work Policies, Lag in Addressing Risks

By Jamie Rathjen

Increasing numbers of employers have policies about remote work assignments while also lagging behind in addressing the risks that come with them, two consultants said May 7.

Patrick Landers and Abbas Mirza, a partner and senior manager at EY, respectively, spoke about compliance risks associated with remote work while also presenting some results from EY’s 2024 Mobility Reimagined survey , which was released April 19. The pair spoke at PayrollOrg’s 42nd Payroll Congress in Nashville.

Mirza broke down remote assignments into business travel, where an employee travels for company-approved business needs and does not change their tax residency; remote work, where an employee works outside their tax residence or normal workplace for an undefined period; and a hybrid approach where an employee alternately works outside their normal workplace and returns on a set schedule.

Landers said he had an expatriate assignment that turned into a hybrid system, moving to Bangalore, India, in 2017, returning to the US during the Covid-19 pandemic, and then commuting between the US and India for a few weeks at a time.

The Covid-19 pandemic saw a 54% decrease in global business travel spending that is expected to recover to prepandemic levels, Landers said citing the EY survey. He added that employers are having difficulty recruiting employees with the skills they require, citing declining birthrates in the Western world.

Further survey findings on remote work and global mobility were that 87% of knowledge workers think they should be able to work from home at least twice per week, while 82% of employers said they had “developed a policy/approach for hybrid mobility,” Landers said.

The survey found that 98% of employers used some method of tracking employees’ locations, either through employee disclosure, tracking, or software tools, Landers said. Travel data was the most common method, used by 43% of employers, and next most common were employee self-reporting, expense reports, or email or social media monitoring, he said.

Areas of Risk

Basic areas of focus for US remote work compliance include state tax and employment laws, Mirza said, while internationally tax residency, work permits, and tax treaties are also included. Employees working remotely somewhere where they do not have the right to work can lead to civil or criminal penalties for both the employee and employer, he said.

“Any one of these areas can create a potential issue for your organization,” Landers said, referring to immigration, employment taxes, individual income tax, social security, and any other regulations.

The survey found that employers acknowledged risks in the areas of data privacy, cybersecurity, tax compliance, and immigration or legal compliance much more often than they had formal policies in those areas, Landers said.

The percentage of responding employers that acknowledged those risks ranged from 78% to 84%, but the percentage that had policies about each category of risk ranged from 32% to 55%, Landers said.

Landers turned to tax compliance when providing examples of unintended consequences of remote work, such as sourcing of deferred compensation when an employee moves or that employees can cause their employers to become liable for state business or franchise taxes. In response to a question about whether countries tracked employee presence as well, Landers said it depends on the jurisdiction but “there’s definitely visibility to this in a way that there wasn’t a few years ago.”

International jurisdictions that the presenters cited as high-risk regarding employment taxes included Australia, Brazil, Colombia, the Netherlands, and Switzerland. Landers mentioned that Australia in particular has automated much of its entry processes, which he characterized as positive because of less human interaction but also potentially negative because automated algorithms can trigger follow-ups from officials.

In the US, the presenters cited New York and Connecticut as high-risk states for employment taxes, followed by California, Minnesota, and Ohio as “medium-high risk.”

To contact the reporter on this story: Jamie Rathjen in Washington at [email protected]

To contact the editor on this story: William Dunn at [email protected]

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