SAP FICO Advanced – Taxes

Step by Step Guide to Tax Configuration

Below example shows how the tax codes will be setup in SAP. These are the set of tax codes setup for the state of Arizona:

Step 1: Assign Tax procedure TAXUSJ to Country US

save

Step 2:  Define Tax Jurisdiction Structure

Below is the structure used for setting up the Tax Jurisdiction codes:

This means the first 2 characters in a Jurisdiction code refer to State followed by others

As explained below:

Step 3:  Create below tax codes

T-code: FTXP

The tax codes configured in Softrax will be mapped to a Jurisdiction code in SAP. The Jurisdiction code is linked to a Tax code (as shown above). One Tax Code can be linked to multiple Jurisdiction codes. That means the same tax code OL, for example, can be tied to different Jurisdiction codes & have a different tax rate as shown below:

ENTER

Step 4:  Link the tax codes to GL Accounts

Note: The above tax codes can be mapped to different GL accounts or to the same GL account.

On the below screen:

Keep cursor on the account key for which you wish to link the GL Account & click on Tax accounts

Enter your chart of accounts:

Step 5:  Maintain Jurisdiction code  on the customer master on the general data section as shown below:

Transaction XD03

While entering the invoice manually user needs to check the jurisdiction code from the customer master of the relevant customer & just enter one of the 4 tax codes (OL,OM,OS or O0), the system derives the tax rate in the back ground.

NOTE: Please note that no jurisdiction codes needs to be entered when the invoice is created in SD. This will default from the customer master to the contract & then from the Contract into the billing document & the accounting document.

Configurations in SD module:

 Sales and Distribution -> Basic Functions -> Taxes -> Define Tax Relevancy Of Master Records

1) Customer Taxes (T-Code: OVK3)

2) Material Taxes (T-Code: OVK4)

3) Condition Records (T-Code: VK15)

Following combinations need to be setup:

Verify Conditions JR1, JR2,JR3,JR4

IMG Path: Sales and Distribution -> Basic Functions ->  Pricing -> Pricing Control -> Define Condition Types

Each user has to make this configuration change in accounting options:

Follow the below steps:

Transaction: FB70

Check the flag next to . & save

How Jurisdiction codes are captured in contracts:

Step 1: customer master:

Tax code: Maintain Tax code for level 1:

Tax code: Maintain Tax code for level – 2

Tax code: Maintain Tax code for level –

The 7.7 % is the total of the tax at the below 3 levels

Prerequites:

a) Following Tax jurisdiction codes have been setup:

           AZ0000000

           AZ0100000

           AZ0101000

b) Tax code OM has been configured for all the above 3 jurisdiction codes

Contract:

Create a contract (900000046) for material 7000000002

Double click on the line item for material 7000000002 & click on conditions tab:

Example for FI Invoice.

Transaction FB70

Enter the Tax Code & the Jurisdiction Code manually as shown above. Make sure that the Calculate tax check box is flagged. Hit enter to find the amount of the header in this case it is 1,077.00 .

Now enter the amount of 1,077.00 in the header

amount () & Save to post the document.

Below is the accounting entry:

T-code: VK12