Taxes (FI-AP/AR) 
Purpose
You can use the SAP System to manage various types of tax according to the legal requirements of a country or a region. The Financial Accounting components Accounts Receivable (FI-AR) , Accounts Payable (FI/AP) , and General Ledger provide the following comprehensive tax functions:
Tax calculation
The system calculates tax amounts with or without cash discount based on the tax base amount.
Tax codes are used to calculate and check the amounts.
Tax posting
The system posts the tax amounts to defined tax accounts.
Adjustments
The system corrects tax amounts, in the case of cash discount or other deductions, for example.
Tax reporting
You can use the system to create tax returns.
Implementation considerations
To make use of the various tax types, make the relevant settings in the Implementation Guide (IMG) for Financial Accounting under Financial Accounting Global Settings .
For more information, see the individual activities in the IMG.
Integration
You can process tax in all components in which tax is incurred as a result of business transactions that are later posted to Financial Accounting.
Features
The SAP System supports the following tax types for calculating, posting, and correcting tax, as well as for tax reporting.
Tax type |
Description |
Taxes on sales and purchases are levied on every sales transaction in accordance with the principles of VAT. This applies to input and output tax, for example. Input tax is calculated using the net invoice amount and is charged by the vendor. Output tax is calculated using the net price of products and is charged to the customer. Companies can offset input tax against output tax, paying the balance to the tax authorities. Tax authorities can set a nondeductible portion for input tax which cannot then be claimed from the tax authorities. |
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Additional taxes are taxes that are posted in addition to tax on sales/purchases. They are usually country-specific, such as investment tax in Norway, or sales equalization tax in Belgium. |
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An example of sales tax is the sales and use tax that exists in the USA. Sales transactions that are taxed must be kept strictly separate from sales transactions that are not taxed. In general, goods that are intended for production or for resale to a third party are procured untaxed; that is, the vendor does not calculate tax on the sale of these goods (sales tax). Procurement transactions for individual consumption, on the other hand, are taxable (use tax). The principle of sales tax does not permit the option of offsetting input tax against output tax. The vendor must pay the taxes to the tax authorities. The system calculates sales tax based on material and customer location and posts it in Sales and Distribution (SD) and Materials Management (MM). If customers or vendors are exempt from taxation, you can specify this in their master records by entering the appropriate indicator. |
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In some countries, a portion of the invoice amount must be withheld for certain vendors and paid or reported directly to the tax authorities. SAP currently provides two functions for calculating withholding tax: Classic withholding tax and extended withholding tax .
Extended withholding tax includes all the features of classic withholding tax and, in addition, also fulfills a number of further country-specific requirements. If you wish to implement the withholding tax functions in your organization, you should choose extended withholding tax. For more information about changing over from classic withholding tax to extended withholding tax, see Withholding Tax Changeover . |
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The SAP System provides the following types of taxation:
Taxation type |
Description |
At national level |
Tax calculation with standard tax rates |
At regional/jurisdiction level |
Tax calculation with tax rates levied for the region or the tax jurisdiction USA: In the USA, there are more than 67,000 tax jurisdictions. Software from third parties is used in this case, and supported by SAP using generic interface software (see also the SAP Library under Country-Specific Documentation ). |
Taxes on sales/purchases, additional taxes, and sales taxes are determined and calculated using condition methods. For the calculation, the system requires details of the calculation procedure, the tax code, the jurisdiction code if applicable, and so on. These taxes are posted when the documents are processed.
Withholding tax, by contrast, is not calculated using condition methods, nor is it posted during document processing. Withholding tax is not considered until the outgoing payment is made.