In this post, I am summarizing the process on how taxes are managed in SAP and its involved reports. SAP is able to manage different taxation systems to comply with local regulations. Generally speaking, taxation systems can be related to input taxes (taxes on purchases) and output taxes (taxes on sales). Consumption taxes included by those systems can be classified as value added tax, taxes on sales or usage, country specific additional taxes, and withholding taxes. In the case of other complex types of taxations, SAP provides an interface to support third party software to determine local tax allocations.
SAP follows a logic to calculate taxes consisting of an access sequence and a condition type. The access sequence arranges condition tables to be used according to the field contents (eg. first calculate the VAT, then the withholding VAT). The condition table is the model to calculate the tax amount (eg. percentage on the total sale value or fixed amounts). Both tables create a tax procedure for each country. An account key links the tax procedure to the posting in the GL accounts. SAP has a number of predefined account keys.
The tax code (FTXP, tables T007a / s) is the main link to calculate, verify and post taxes for each country. Each tax code is assigned to country specific tax procedure to enter a G/L from a document (eg. Invoice or sales order). SAP includes predefined tax code templates for each country (including the relationship between the tax types (Sales Tax) with tax rates. SAP needs the posting keys, rules to determine the account (tax code or account key) and operative tax accounts to automatically assign taxes.
In addition, SAP can process single level taxes (eg. VAT in Europe, South Africa and Australia) and multi level taxes by jurisdictions (eg. state or city specific, US, Brazil, India). In order to adjust the access sequences to the multi level taxes, jurisdiction codes are created to determine the local tax rate. In conjunction with a tax code, a jurisdiction code determines the amount of tax (and is breakdown among jurisdictions). Jurisdiction codes are made up of multiple levels: state (first 2 digits), county (next 3 digits) and city (last 3 digits).
Tax categorization in SAP involves several modules. In SAP SD, it specifies if a customer is liable of sales taxes for each country in the pricing process. In SAP MM, it specifies the applied tax at a material, plant and account category level in the sales process. In SAP Fi, the G/L master record specifies whether or not a posting without tax is allowed. The tax category determines which type of tax should be applied (e.g. input tax only). Customers and vendors are defined as either taxable or tax-exempt.
Standard tax reports in SAP are country specific and pre-defined to meet the standards set up by those countries. There are several useful reports to control how revenue taxes are set:
J1I2 Display Sales Tax Register by entering company code, posting date (fiscal year), ledger and condition type
Report RFUMSV00 Advance Return for Tax on Sales/Purchases
FTXA Display a Tax Code, SAPMF82T Report to Generate FTXP
FMBGUL S Sales Tax List, RFFMBGA Report to Generate FMBGUL
FMBG3 Display Input Tax Adjustments
FO8D Display Input Tax Distributions
GJVA Advance Tax Report