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Tax codes are used to:

  • Check the tax on sales/purchases amount in the document

  • Calculate the amount of tax on sales/purchases automatically on request

  • Calculate the non-deductible input tax portion

  • Check if a tax account with tax type (input or output tax) can be posted to

  • Determine the tax account

You define a tax code by entering a two-digit code to represent a tax percentage rate. See also Tax Rates . In addition, the following technical specifications (characteristics) are required:

  • Target tax code

  • Check indicator: You use this indicator to specify whether the system is to output a warning message or an error message if the tax amount entered manually does not match the amount calculated automatically. See also Check Indicators .

  • EU indicator

" " = Not EU-relevant

1 = goods delivery within EU, display in EC sales list

2 = services within the EU

3 = subcontracting within the EU

9 = acquisition tax

( )

The system defaults tax types when you define a tax code. These tax types are the taxes that are relevant to your country or group of countries.

The tax types are defined in the system as country-specific and they determine how the tax is calculated and posted. The system determines the tax types by means of the country key that you specify when you define a tax code. For more information on the tax type, see Specifications for the Tax Type .

For information on how to proceed if you need a tax code for tax-exempt sales, see Tax Codes for Tax-Exempt Sales .

For information on how to define tax codes, see the Implementation Guide for Financial Accounting under the documentation for the activity Define Tax Codes for Sales and Purchases. See also Configuring the System Using the Implementation Guide .