EUR - Euro

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The key factors that determine taxes are the location of the delivery plant, the country and region of the customer, and the material and customer tax classifications.

There is a lot of variation in tax laws and schema across the world. Therefore, it is important to document the exact requirements during business blueprinting, while working with your finance team. Tax determination, like pricing, follows the condition technique. A tax condition appears in the pricing procedure as a condition type along with an account key, just like any other condition.

Once customizing is done, you assign the tax classifications to customer and material master records. You set up the tax rates in the condition tables. SAP then determines the applicable tax percentage and tax code from the master records and applies this percentage to the sales document.

During billing creation, SAP reads the pricing information from the sales document and service rendered date Post Goods Issue date from the delivery document and re determines the applicable tax, based on settings. During the accounting posting of this billing document, the tax code and the account key determine the GL account to which the tax posting can be made. Following are the steps in the configuration of tax in SAP: Define Tax Determination Rules.

The menu path is as follows: In this setting, you assign a tax category by country. Maintain the settings only for those countries that are relevant to your business scenario. This category is the pricing condition type that will be used for taxes in your pricing procedure. Only those condition types classified as tax in the condition class can be used here. Some countries can have more than one tax category assigned.

In this case, you can usethe sequence field. Check whether the country appears in the list. To do this, click New Entries, andenter the country code and tax category, along with the access sequence number.

Some countries have regional taxes. Hence, it is necessary to define all the counties or cities in a country. Specify the Country and Region entries, and then divide them into county codes as applicable. If you need to set up taxes at a city level, you can specify Country and Region and then divide them into city codes as applicable.

Assign Delivering Plants for Tax Determination. Since the delivering plant determines the source address, it is important to set up the address details.

Double-click the chosen plant. Specify the complete address, including the country, region, county code, city code, and jurisdiction code, as required. You next have to set up customers and materials so that the system determines the appropriate tax in a transaction. You can group your customers and materials into groups and control the tax by each group.

In either case, specify the tax condition type tax category , and define the tax classification codes. For example, materials in your product range could have no tax, half tax, or full tax. In this case, you would set up three material tax-classification codes and maintain them in the material master. When you maintain the customer master data, you enter the tax classification on the Billing Document tab in the Sales Area Data section.

Note that the tax category UTXJ that appears on this screen is controlled by the tax determination rule maintained for the country U. Sales Org 1 tab. In this step, you can specify a rule to determine the VAT registration number in a sales order or billing document.

Leaving the Tax Number field blank leads you to a default priority rule.