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

Condition Type Example

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

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

Configuration - Assign Tax Procedure to Country 

• Tax Procedures are assigned to countries in transaction OBBG 

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

Configuration - Maintain Jurisdiction Codes

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

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 - Properties

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

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 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

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)  

Source: scn.sap.com