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  • SAP provides for different forms of taxation systems that are found in various countries: Value-added tax: Tax based on the additional value added to the product. Tax on Sales /Usage: Tax on the full sales value of good Additional tax: Country specific (e.g., investment tax in Norway, clearing tax in Belgium) Withholding tax: Tax deducted at source. Note: See Appendices for examples of the different types of taxes. There are two types of taxation that can be processed in the R/3 System: Single Tax level (e.g., Federal tax) Multi Tax level Taxes below the federal level with rates defined by jurisdictions (e.g., state, country, town, city, sub-city) on several levels. Due to the complicated nature of this type of taxation, third party software is often used to determine the tax allocation. SAP provides a generic interface to support the third party software. Sales and use taxes are typical examples of taxes below federal level. The Single Tax level is most often associated with the Value-added Tax common throughout Europe. Sales & Use Taxes in the United States are examples of Multi-level jurisdictional taxes. Canada & Brazil are typical examples of taxation policies where both federal and provincial taxes are applied.
  • The Calculation table contains all of the logic for calculating taxes. It consists of: Access Sequence - Identifies the sequence of condition tables used and which field contents are the criteria for reading the tables. Condition Type - The model on which condition records are based. It indicates how the condition record will work. Examples Will the records be created with percentages or fixed amounts Are the records for tax procedures or something else The records can only be processed automatically A combination of the fields that define/are used in creating a condition record Condition tables - A grouping of condition types. There may b many condition tables associated with the access sequence. Tax procedure - A country-specific template containing all of the processing logic and algorithms that support the tax amount computations. It contains the following fields: Steps - Determine the sequence of lines within the procedure (note it is recommended that at least a 10 digit space between the numbers exist) Condition Types Reference Steps - Where the system obtains the amount/value it uses in its calculation. Account Keys - Provide the link between the tax procedure and the GL accounts to which tax data is posted.
  • The tax code is the main link to the tax calculation. It is assigned to a tax procedure and is entered in the G/L master record and accessed when the G/L account is used in a document (e.g., Sales Order, Invoice). Like the tax procedure, tax codes are country specific. Each country has a Tax Code template (procedure) already set up in the system that is used to define various specific codes. In addition, a number of Tax Codes are predefined in the system. Within the system, Tax Codes are used for the following reasons: verify the amount of tax. calculate the amount of tax. calculate additional tax portion verify the tax type determine the G/L account show tax correctly on tax forms The tax code contains the tax rates. Tax rates are assigned to the tax types (e.g., A/R Sales Tax ), which are included in the tax procedure. A tax code may have several tax rates entered for different tax types but usually only one tax rate is entered. The tax code screen, pulls in the tax procedure, which acts as a template. It is then possible to apply a rate at any step where the condition type allows for a rate to be applied.
  • For the system to perform automatic tax account assignment, the account / process keys, which generate a separate line item for the tax posting need to have the necessary data assigned to them. The necessary data are: the posting keys (40 and 50 are recommended) rules that determine on which fields the account determination is based (account determination may be used on tax code or on the account key) the tax accounts. The tax amount is generally posted to the same side as the General Ledger posting that contains the tax code. When exchange rate differences occur because of tax adjustments in foreign currencies these exchange rate differences are usually posted to the normal account for exchange rate differences. However, it is possible to specify per Company Code that the exchange rates for tax items can also be entered manually or determined by the posting or the document date. The resulting differences are posted to a special account. R/3 has a number of predefined account keys, and it is recommended that the standard keys be used.
  • A jurisdiction code is a combination of the codes of tax authorities, who claim taxes on a sale. Up to four tax levels below federal level are possible: State level Country level City Code Sub-city code Steps necessary to use the jurisdiction codes: The creation access sequence to include the country field, tax code field and jurisdiction field. Ensure that the condition types created reference the access sequence, which included the jurisdiction code. Create the jurisdiction codes. Note: While each jurisdiction’s tax rates are independent of the others, every level must must have a jurisdiction code defined even if no tax is ever charged to that level. For example: 25 000 0000 0 for state level 25 022 0000 0 for country level 25 022 1105 0 for city level 25 022 1105 1 for sub-city level When posting taxes with a jurisdiction code the taxes may be entered per jurisdiction code or per tax level. Tax rates are defined in the tax code on a jurisdiction by jurisdiction basis.
  • The data to calculate, post, and report taxes on sales and purchases are defined in five places: Country definition table (contains the Tax Procedures to be used) Tax Code tables (contain Tax Codes and applicable Countries and Tax Procedures) Tables controlling automatic postings G/L Account master record Line item when posting a document Note: The first three items are Configuration items. The transaction screen allows: automatic tax calculation based on the tax code assigned Manual posting of tax amount The G/L Master Record specifies Tax category - Determines which type of tax should be applied (e.g. Input tax only) Posting without tax allowed - allows posting against account without requiring tax postings Customers and Vendors are defined as either taxable or tax-exempt.
  • The FI system assists with the management of taxes calculated by: Checking the tax amount entered or automatically calculating the tax. Posting the tax amount to the General Ledger accounts. Performing tax adjustments for cash discounts or other forms of deductions. The expense or revenue amount is the base amount, which can include a cash discount (tax base is gross) or exclude a cash discount (tax base is net).
  • Closing entries must be completed for tax reports to be run. To find out if there are payables or receivables with regard to the tax authorities, the monthly balances of the tax accounts must be transferred to a payment charge account. The system automatically makes these adjustments when the batch input session is run to print the “tax report”. If the tax accounts are prevented from being posted to manually, postings must be made to an auxiliary account. These adjustments must be excluded from the tax report by excluding the document numbers or excluding the document type specially created for these adjustments. Open item management allows the credits outstanding with a specific debit item or set of items to be noticed and cleared. Standard tax reports in SAP are country specific and pre-defined to meet the standards set up by those countries. When using third party tax software, a separate server may be used to run the third party application. Keeping SAP and the third party software on the same server has posed problems on some projects.
  • Input Taxes - Taxes on purchases. Output Taxes - Taxes on sales. Tax Code - A country-specific, two digit code that represents the specifications used for calculating and displaying tax. Calculation Table - Contains all of the logic for calculating taxes. Tax Procedure - A value that is tied to a Country Code, which contains all of the processing logic and algorithms that support tax amount computations.

Transcript

  • 1. Chapter 29 Taxes
    • Tax functionality in the system is supported in the Sales & Distribution, Materials Management and Financial Accounting modules.
    • Chapter Objectives
      • Provide a general understanding of input and output tax.
      • Identify and describe the various types of taxes that can be supported in the system.
  • 2. Tax Overview
    • Types of Taxation
      • Value-added tax
      • Tax on Sales/Usage
      • Additional tax
      • Withholding tax
    • Tax Levels
      • Single level tax (e.g. Federal tax or State/Province Tax)
      • Multi levelJurisdiction tax (e.g. State-County-City)
  • 3. Calculation Table & Tax Procedure Access Sequence Condition Tables Condition Type Account Key Calculation Tables
  • 4. Tax Codes Account Key Reference Steps Condition Type
  • 5. Automatic Tax Account Assignment Posting Keys Rules Tax accounts Account Key
  • 6. Jurisdiction Codes USA 25 022 1105 1 2 3 4 1 State County City Sub-city Example of a Jurisdiction Code
  • 7. Applying Tax Elements Master Record Level Transactional Level G/L Master Record A/R & A/P Master Record
  • 8. Tax Assistance
    • The system provides assistance with:
      • Calculating tax amounts
      • Posting to specified General Ledger accounts
      • Performing tax adjustments
      • Tax reporting
    • The system determines taxes from:
      • A base amount, which has a cash discount included or excluded.
      • A tax code to validate or calculate the tax amount.
  • 9. Tax Reporting Input Tax MB 700 TR 700 Output Tax AP 1,000 MB 1,000 Payment Charge Account TR 700 AP 1,000 Tax Clearing Account (+) AP 10,000 (A1 = 1,000) AP 10,000 (A0 = 0) MB = Monthly Balance TR = Transfer AP = Auxiliary Posting
  • 10. Taxes Chapter Summary
    • Key Terms:
      • Input Tax
      • Output Tax
      • Tax Codes
      • Calculation Table
      • Tax Procedures