When the tax rate is changed, in the FI side, should a new tax code being

[Former Member]

created or just change the old tax code to the new rate? What is the common approach? My FI guy is telling tax code should never be created because of tax rate change. They just go in to the existing code and change the rate. Is that true?

[Former Member]

Your FI guy is right,you just need to update the existing tax code with the new rate.There is no need to create a new tax code for the rate change,

The existing tax code needs to be update with the new rate and "valid from" date.

Transaction code FTXP.

[Former Member]

Thanks for the quick reply. my concern is:

1.Tax code doesn't have a validity period. Once it is changed, it becomes effective immideately.

2.Also, I found on SAP notes: <u>"<b>You must define new tax codes if tax rates are changed . The old codes with the old tax rates must remain in the system until no more open items which use this tax code exist."</b></u>

What is the right approach then?

[Former Member]

If you take a look at FTXP, tax code does have valid from date (though it does not have valid to date).

SAP note is right regarding the open items,but we handle them using a custom program,hence updating the existing code works fine for us.

If you dont have a custom program to handle open items then you might have to create a new tax code .

>What is the right approach then?

Depending on how you plan to handle open items,

You can either change the existing tax code or go for a new tax code for new rate and old tax code until the open items are cleared.