Hello Murthy,
<b>TAX Determination –</b>
The SAP system automatically determines and calculates taxes based on -
Country of the delivering plant + Country of the Ship-to-Party + Tax indicator of the Customer Master Record + Tax indicator of the Material Master Record.
It’s important to note that the condition types for taxes are country specific. Therefore one must assign the relevant tax condition types to the country key. The system will only regard those condition types as relevant for taxes that have taxes as the “condition class” in its control data.
When determining taxes, one should always maintain the data relevant to taxes in consultation with FI module.
Menu path: IMG – Sales & Distribution - Basic functions – taxes – define tax determination rules (OVK1). Here you assign the tax ‘condition type’ or ‘tax category’ to the relevant country key. In addition to this one needs to specify if more than one tax is required and in which order the system is to access the condition records.
For example, in case of countries like Canada, three types of taxes are imposed (GST, PST, PST-Que & Mar (Base+) on standard sales transaction; and therefore three condition types have to be maintained in the system. And when allocating the country key to the relevant condition type, an access sequence has to be mentioned for the country Canada to realize in which order the system is to access the condition records for that specific country.
For determining taxes one must ensure –
relevant tax categories are assigned to the country keys
condition types are maintained in the relevant pricing procedures
Associated tax records are created and maintained.
As some countries may have county or regionalized taxes such as Great Britain and even tax based at city level like in the case of US, it is possible to state specific regions, counties or cities within a country code. This is maintained at - Menu path: IMG – Sales & Distribution - Basic functions – taxes – define regional codes.
The next step is to assign the delivering plant to the relevant country, region and/or city code for tax purposes. This can be done at IMG – Sales & Distribution - Basic functions – taxes – assign delivering plants for tax determination.
The last and final step in this tax determination process is creation of tax indicators in the customer and material master records. Menu path: IMG – Sales & Distribution - Basic functions – taxes – define tax relevancy of master records (OVK3).
Here you specify if a customer or a material is liable for taxes or not. One can then assign a relevant indicators such as 1- liable for tax, 2- concession tax, 3- tax exempt in case of customers and 1- no tax, 2- half tax, 3- full tax in case of materials. New indicators can be created if necessary.
These indicators are maintained in billing document view of CMR and sales org. 1 view of MMR.
Criteria for Tax Determination –
a. Departure country (country of the delivery plant)
b. Destination country (country of the ship to party)
c. Customer tax classification (for business within the EU on the basis of tax number STCEG)
d. Material tax classification (access with departure country)
The system determines a tax rate in the document (order/billing document) on the basis of these three criteria –
a. Business transaction – domestic or export/import
b. Tax liability of the ship to party
c. Tax liability of the material.
Taxes can be calculated using normal condition techniques. The condition type (MWST) for tax is entered in the pricing procedure. The access sequence is used to find the appropriate condition record for the current situation.
You can assign a rule (Blank, A, B) at the sales organisation level to determine the sales tax identification number in the order and billing document (tax classification determination is linked to this).
For status Blank, the standard priority rules are as follows –
a. If the payer has a sales tax ID and a different sold to party – the tax number and classification are taken from payer (SH not relevant) the tax number is determined according to the destination country.
b. If ship to party has a sale tax ID and SP doesn’t have it, then the tax number and classification is taken from SH
c. If the above two cases doesn’t apply, then the tax number and tax classification are taken from SP
For status A, the tax number and tax classification are generally transferred from the sold to party. The tax number is transferred according to the “tax destination country”.
For status B, data is transferred from the payer in the same way.
<b>Reward points if helps</b>
Regards
Sai
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