Maintaining Taxes and Tax Codes

The system supports the treatment of taxes through the following actions:

• Checks the tax amount entered and automatically calculates the tax
• Posts the tax amount to tax accounts
• Performs tax adjustments for cash discounts and other forms of deductions

The expense or revenue amount is the base amount, which can either include or exclude a cash discount. In the former case, the tax base is taken as a gross value while in the latter case, it is taken as a net value.

SAP S/4HANA uses the tax code to determine the calculations required to perform taxation functions.

National regulations define the base tax amount as one of the following amounts:

• Net amount:

  The taxable expense or revenue items less a cash discount

• Gross amount:

  The taxable expense or revenue items including a cash discount

You can define which amount is used for each company code or for the highest level of the jurisdictional code.

In SAP S/4HANA, a preconfigured procedure for tax calculation exists for every country. 

The tax calculation procedure contains the following elements:

• Sequence of the steps

  These are the steps required in the tax calculation procedure. The from step indicates the point at which the system calls the base value for the step.

• Tax types (condition types)

  These are the condition types relevant to a country.

• Account key (transaction key)

  This key covers additional specifications and is used for the automatic account determination of the taxes concerned. Predefined account keys are included in SAP S/4HANA. It is recommended that you use these standard account keys.

In addition to other information, the tax code also contains tax rates. Tax rates are assigned to the tax types used in the tax calculation procedure. You can set up a tax code with several tax rates entered for different tax types (if a line item is to be taxed with several tax types), but usually only one tax rate is entered.

An example of a tax code with more than one tax rate is the 10% input tax on an item for which 40% of the tax amount is nondeductible.

For the tax rate, this example means 6% input tax and 4% nondeductible input tax.

Some postings to tax-relevant G/L accounts must have a tax rate of zero. This applies to the following items:

• Items that are tax exempt but have to be reported to the tax authorities. For these items, a special tax code with a tax rate of zero is created.
• Items that are created by tax-exempt transactions, such as the issue and movement of goods issues. You must assign a special tax code to these transactions.

The tax type definition determines if the base amount is "percentage included" or "percentage separate".

If the system detects a deviation between the tax calculated and the tax amount entered, it issues either an error message (check indicator set) or a warning message (check indicator not set). The check indicator is not set for input tax codes because the user must post the tax amount from the invoice, regardless of whether it is correct or not.

Tax postings can be of the following types:

• Taxes calculated by the application are usually posted through a separate line item to a special tax account. This is the standard scenario.

• Taxes with certain transaction or account keys (for example, NVV) are distributed to the relevant expense or revenue items, such as the case of sales tax payables or other nondeductible input taxes.

To enable the automatic determination of tax accounts, assign the following data to the account or transaction keys that generate tax items during posting:

• Tax accounts
• Posting keys (40 and 50 are recommended)
• Rules, which determine fields, such as the tax code or the account key, on which account determination is based

When exchange rate differences occur because of tax adjustments in foreign currencies, these differences are usually posted to the normal account for exchange rate differences. However, for each company code, you can specify that the exchange rate for tax items can also be entered manually or be determined by the posting or the document date. The resulting differences are posted to a special account.

You can define tax accounts, or accounts to which tax items are posted, in the Tax Category field by entering one of the following signs:

• < for input tax
• > for output tax

The properties of a tax code define the tax posted as an input tax or an output tax.

If you do not want to post tax manually, then select Post automatically only.

All other G/L accounts may have one of the following entries in the Tax Category field:

If you select the Postings Without Tax Allowed field, then you can post to the G/L account without specifying a tax code, an action that is necessary for tax postings within a calculation procedure for a jurisdiction code tax for foreign customers who do not have a jurisdiction code.