SD1011: SD Taxes v 1.

India SAP CoE, Slide 1

Tax…?

 A tax is a financial charge or other levy

imposed on an individual or a legal
entity by a state or a functional
equivalent of a state.

India SAP CoE, Slide 2

Taxes
1 PrepareMe

2 TellMe

3 ShowMe

4 LetMe

5 HelpMe
India SAP CoE, Slide 3
Taxes
1 PrepareMe

2 TellMe

3 ShowMe

4 LetMe

5 HelpMe
India SAP CoE, Slide 4
Purpose
There are many types of taxes, in Business Scenarios. The very relevant one
are Input Taxes & Output Taxes

• Input Taxes are during Purchasing Transactions

• Output Taxes are during Sales Transactions

Every Country has its own set of Taxes levied when Sales takes place. The
tax calculations are likely to be complex in nature and can have very adverse
effect on the bottom line. Hence it is important to have clear understanding
of relevant taxes

What is sold, Where is it sold, How is it sold & When is it sold can influence relevant
taxes
In US the taxes are at Jurisdiction Level
In UK the taxes are considered as VAT
In India there are Local Sales Tax and Central Sales Tax & VAT

India SAP CoE, Slide 5

Use
 Output Taxes are a type of a Sales Tax when Sales Activity takes place.
 Output Taxes are of two Types:-
• Domestic Taxes
• Export Taxes
 When sales activity takes place, output taxes are levied to the customer.
 The output Tax revenue is collected and then paid to the respective
government authority as the case may be.
 This functionality of output Taxes helps us in calculating the taxes for
various types of scenarios, accounting of tax and payments to the
government authority.
 Customers are charged output Taxes depending whether the customer is a
domestic customer or an export customer.
 In most of the countries, the output Taxes for Exports are ZERO.
 VAT is a type of an output Tax which is uniform in the entire country.

India SAP CoE, Slide 6

Challenges
• Every country has its own set of output Taxes

• The challenges faced are to calculate the Taxes in these various scenarios
• Like in the US, the taxes are at Jurisdiction Level
• In UK, the taxes are simple which is termed as VAT.
• In India, there are states with VAT and there are states with other local &
central taxes i.e. LST / CST

• The system should calculate the taxes properly and are to be paid to the
government authorities, so this is a STATUTORY ACTIVITY.

• Proper maintenance of Master Data pertaining to Taxes

• Proper accounting of Taxes , GL accounts, Tax Codes.

• Statutory Reporting on Taxes

India SAP CoE, Slide 7

Taxes
1 PrepareMe

2 TellMe

3 ShowMe

4 LetMe

5 HelpMe
India SAP CoE, Slide 8
Output Taxes in Country
 Each country has its own set of rules for calculation of Output
Taxes

 In this courseware, we shall cover the mapping of Output

Taxes in three countries:-
• USA
• UK
• India

India SAP CoE, Slide 9

Types of Output Taxes in U.S.A.

 In U.S.A., the taxes are related to the Jurisdiction

code which is a combination of pin code & region.
 The Jurisdiction code is stored in the customer
master.
 The Jurisdictions (State, County, Town or lower) are
several levels
 The Taxes are:-
• Domestic Taxes
• Export Taxes

India SAP CoE, Slide 10

Types of Output Taxes in U.K.
 In U.K., the output taxes are called as VAT(Value
Added Taxes)
 The taxes are subdivided into Domestic and Exports.
For U.K., the tax condition type is MWST in SAP.
 Domestic – Within U.K. e.g. sale is from UK to UK
17.5 % VAT
 Exports – It is further subdivided into:-
• Exports to European Countries
• i.e. from Great Britain to France which is 0%
• Exports to Non-European Countries
• i.e. from Great Britian to U.S. which is 0%

India SAP CoE, Slide 11

Types of Output Taxes in India
 In India, in SAP, there are 2 types of output Taxes:-
• Domestic Taxes
• Export Taxes (Zero Taxes)
 Under Domestic Taxes, the state may be relevant for
VAT or not relevant for VAT.
 If the state is relevant for VAT, then it will be either
• VAT e.g. Maharashtra
• CST under VAT. e.g. Maharashtra to Karnataka
 If the state is not relevant for VAT,then it will be
either
• LST(Local Sales Tax) e.g. sales from within the same state
i.e. within Tamilnadu
• CST(Central Sales Tax) e.g. sale from one state to another
i.e. Tamilnadu to Karnataka.

India SAP CoE, Slide 12

Mapping of Output Taxes in SAP
The configuration/master data settings relating to taxes are as follows:-
 Configurations
a) Check Calculation Procedure
b) Assign Country to Calculation Procedure
c) Taxable indicator for Customer & Material
d) Define Tax Determination Rules
e) Tax Codes
f) SD Pricing Procedure
g) Account keys for Taxes and G/L account codes

 Master Data
a) Customer and Material Master should have a taxable indicator
b) VAT registration number for European customers.
c) Jurisdiction code for U.S. customers.
d) Tax condition records
e) LST and CST details for Indian customers.

India SAP CoE, Slide 13

Configurations for Output Taxes in SAP
The configuration settings relating to taxes are as follows:-
 Check Calculation Procedure
• Create a Tax Procedure
 Assign Country to Calculation Procedure
• Assign Tax Procedure to the Country
 Taxable indicator for Customer & Material
• Create Taxable indicators for Customers & Materials like Full Tax,
Zero Tax, Concessional Tax
 Define Tax Determination Rules
• Create Rules for determining the Taxes
 Tax Codes
• Create Tax codes for various types of Tax % or Amounts
 SD Pricing Procedure
• Create Sales Pricing procedure which contains the Tax Condition
Types
 Account keys for Taxes and G/L account codes
• Assign Account Keys to the Tax Condition Types
• Assign GL Accounts to Account Keys

India SAP CoE, Slide 14

Master Data for Output Taxes in SAP
The Master Data pertaining to taxes are as follows:-
 Customer and Material Master should have a taxable indicator
• Customer indicator is “Taxable” or “Exempt”.
• Material indicator is “Taxable” or “Exempt”.
 VAT registration number for European customers
• VAT Regn No for Europe Customers in Customer Master.
 Jurisdiction code for U.S. customers
• Jurisdiction code based on Country-Region-Pin Code.
 Tax condition records
• Tax condition records for domestic & export taxes.
• This would be a combination of country-customer-material.
 LST and CST details for Indian customers
• Local Sales Tax /Central Sales Tax / VAT Registration Numbers for
Indian Customers in Customer Master.

India SAP CoE, Slide 15

Taxes
1 PrepareMe

2 TellMe

3 ShowMe

4 LetMe

5 HelpMe
India SAP CoE, Slide 16
Configurations
The configuration settings relating to taxes are as follows:-
 Configurations
a) Check Calculation Procedure
b) Assign Country to Calculation Procedure
c) Taxable indicator for Customer & Material
d) Define Tax Determination Rules
e) Tax Codes
f) SD Pricing Procedure
g) Account keys for Taxes and G/L account codes

 Master Data
a) Customer and Material Master should have a taxable indicator
b) VAT registration number for European customers.
c) Jurisdiction code for U.S. customers.
d) Tax condition records
e) LST and CST details for Indian customers.

India SAP CoE, Slide 17

Configurations
a) Check Calculation Procedure
E.g. TAXGB is the tax procedure in U.K.

Tax Procedure is
defined in this
configuration

Menu Path: IMG Financial Accounting Financial Accounting Global

Settings Tax on Sales/Purchases Basic Settings Check
Calculation Procedure
India SAP CoE, Slide 18
Configurations

Choose Define
Procedures option
here

India SAP CoE, Slide 19

Configurations

Choose the
required Tax
Procedure here

India SAP CoE, Slide 20

Configurations

The different
condition types in
Tax
ProcedureTAXGB

India SAP CoE, Slide 21

Configurations
b) Assign Country to Calculation Procedure
E.g. TAXGB is the tax procedure in U.K.

Assign Country to Tax

Procedure here

Menu Path: IMG  Financial Accounting Financial Accounting Global Settings

Tax on Sales/Purchases Basic Settings Check Calculation Procedure

India SAP CoE, Slide 22

Configurations
As seen in the snapshot below,Tax Procedure TAXGB is assigned to country GB

India SAP CoE, Slide 23

Configurations
• c) Taxable indicator for Customer & Material

The Taxable indicator for customer &

material configuration is done here

Menu Path: IMG  Sales and Distribution Basic Functions Taxes

Define Tax Relevancy Of Master Records

India SAP CoE, Slide 24

Configurations

India SAP CoE, Slide 25

Configurations
Tax relevancy indicator for Customers

0 value can be configured for Tax Exempt and 1 value for Liable for Tax

India SAP CoE, Slide 26

Configurations
• Tax relevancy indicator for Materials

0 value can be configured for Tax Exempt and 1 value for Liable for Tax

India SAP CoE, Slide 27

Configurations
• d) Define Tax Determination Rules

Tax Determination
Rules

Menu Path: IMG Sales and Distribution Basic Functions Taxes Define Tax
Determination Rules Tcode:OVK1

India SAP CoE, Slide 28

Configurations
Tax Category

Tax Country

India SAP CoE, Slide 29

Configurations

Menu Path: IMG Sales and Distribution Basic Functions Taxes

Assign Delivering Plants For Tax Determination Tcode:OX10

In the above SPRO customization, we do not have to configure anything,but only

check if the delivering plants for Tax Determination exist under this node.

India SAP CoE, Slide 30

Configurations
• e) Tax Codes

Define Tax Codes for

Sales and Purchases

Menu Path: IMG Financial Accounting Financial Accounting Global Settings Tax on
Sales/Purchases Calculation Define Tax Codes for Sales and Purchases Tcode:FTXP

India SAP CoE, Slide 31

Configurations

India SAP CoE, Slide 32

Configurations

Output Tax for

VAT

India SAP CoE, Slide 33

Configurations
You can maintain the tax percentage for a tax code in the below snapshot

Tax Percentage
Rate

India SAP CoE, Slide 34

Configurations
• f) SD Pricing Procedure

Menu Path: IMG Sales and Distribution Basic Functions Pricing Pricing Control
Define And Assign Pricing Procedures Tcode:V/08

India SAP CoE, Slide 35

Configurations
• The MWS account key for the MWST condition type indicates that the tax will hit a
particular G/L account code.

MWST condition type

MWS
Account key

India SAP CoE, Slide 36

Configurations
• g) Account keys for Taxes & G/L Account Codes
In FTXP transaction code on entering the country and tax code,keep the cursor on output
tax MWS and click on Tax accounts tab,enter the chart of accounts as shown in the below
snapshot:-
Tax Accounts

Chart of Accounts

India SAP CoE, Slide 37

Configurations
contd……
• On entering the chart of accounts, it will display the G/L account to which the MWS
account key hits as seen in the below snapshot:-

MWS
Account key
G/L Account

India SAP CoE, Slide 38

Master Data
a) Master Data
Customer Master should have a taxable indicator

Taxable
indicator

India SAP CoE, Slide 39

Master Data
Material Master should have a taxable indicator

Taxable
indicator

India SAP CoE, Slide 40

Master Data
b) VAT(Value Added Tax) Registration Number for European Customers

VAT Reg. No.

India SAP CoE, Slide 41

Master Data
c) Tax Jurisdiction Code for U.S. Customers

Tax Jurisdiction
Code

India SAP CoE, Slide 42

Master Data
d) Tax Condition Records
U.S.A.:-
In case of U.S., the taxes are derived from the tax code.
e.g. In a sales order ,if we consider the condition types at item level, we will observe JR1
condition type having tax rate as 4%.

JR1 Tax
Condition type

India SAP CoE, Slide 43

Master Data
• If we observe the condition record of JR1, we get the following combination:-
Country – U.S.
Tax Code – 01
Tax Jurisdiction – GA0000000 as seen in the below snapshot:-

India SAP CoE, Slide 44

Master Data
• In customer master, we can see the country as U.S. region as GA and Tax Jurisdiction as
GA0000000

Country

Region

Tax Jurisdiction

India SAP CoE, Slide 45

Master Data
• The county code & city code is blank in this case as seen in the below snapshot:-

VAT Reg no. for

European
Customers

India SAP CoE, Slide 46

Master Data
• If you enter country as US in tcode FTXP and enter tax code as 01 and tax jurisdiction as
GA0000000 as seen in the below snapshot:-

India SAP CoE, Slide 47

Master Data
• We can see 4% tax rate as against MW1 account key as seen in the below snapshot:-

This is how in U.S,the taxes are derived from the tax code.

India SAP CoE, Slide 48

Master Data
U.K. :-
In case of U.K., the condition records must be maintained for MWST condition type. The
access sequence used will be either Domestic Taxes or Export Taxes as seen in the below
snapshot:-

Access sequence for Domestic

or Export Taxes

India SAP CoE, Slide 49

Master Data
contd……
Domestic Taxes
Tax relevancy
indicator for
Tax relevancy
Customer
indicator for Material

Tax Code

Valid to
Valid from Date
Date

India SAP CoE, Slide 50

Taxes
1 PrepareMe

2 TellMe

3 ShowMe

4 LetMe

5 HelpMe
India SAP CoE, Slide 51
LetMe

Transactions
The following are some of the important transaction Codes:-

Transactions Description

Create Condition Records

VK11 (Selection by condition Type)
FTXP Maintain Tax Codes
OVK3 Maintain Customer Tax Indicator
OVK4 Maintain Material Tax Indicator

India SAP CoE, Slide 52

LetMe
Step Master Data Transactions Check Data
1. XD03 Check Customer Master Data for
country,region,taxable indicator.
2. MM03 Check Material Master data for taxable indicator .

3. VK13 Check Tax condition records .

India SAP CoE, Slide 53

LetMe
Step Transactions Expected Output
1. VA01 Create a Sales Order.
Check the pricing conditions for calculation
of Taxes.
2. VL01N Create output delivery, do picking & PGI .

3. VF01 Create a Billing Document .

4. VF03 Enter Billing document no. saved in step no.

3,click on document flow & check
accounting document for Taxes related GL
Accounts and amount of Taxes.

India SAP CoE, Slide 54

Taxes
1 PrepareMe

2 TellMe

3 ShowMe

4 LetMe

5 HelpMe
India SAP CoE, Slide 55
Tips and Tricks
If Tax is not getting determined, then we can check the following points :-

 The country and region should be maintained for the Customer

 Customer Master for taxable indicator

 Material Master for taxable indicator

 Check if tax procedure has been defined

 Check if tax procedure has been assigned to the country

 Check if the account key exists in pricing procedure for the respective tax
condition type

 Check if the G/L account exists for Tax account key

India SAP CoE, Slide 56

Additional Info
Following are some of the tables that can be referred to:-

 Customer Master – KNA1,KNVV

 Material Master – MVKE

 Pricing Conditions – KONV

 Tax Codes - T007S , T007V for percentage of tax code.

India SAP CoE, Slide 57