Tax determination in Sales and Distribution

    The taxes are automatically determined in SD pricing by the R/3 system.
    The settings for the tax determination in Sales and Distribution must be reconciled with financial accounting (the FI module).

1. The tax determination requires the following information to determine the correct tax rate depending on the business process:

a) Country of departure

                       The tax departure country is determined from the country of the delivering plant (T001W-LAND1). If no plant is determined, or you want to overwrite the country that was automatically determined, you can manually enter the tax departure country in the sales document header in the billing document view. The manual entry has priority.

b) Destination country

                       The tax destination country is copied from the country of the ship-to party (KUWEV-LAND1). However, you can also change this automatically determined destination country in the sales and distribution document header in the billing document view. The manual entry has priority.

c) VAT registration number for businesses in the EU

                       The VAT registration number is stored in the customer master in the general data and in this case in the control data. In this case, the VAT registration number for the country of the customer is entered, but under the 'Others' radio button, you can also store other VAT registration numbers for other EU countries, if the customer could also register in other EU countries for tax purposes.

                       If no Customizing to determine the VAT registration number was stored, the determination of the VAT registration number occurs follows the rules bleow:

                    1. If the payer has a VAT registration number in the customer master and the payer is not the same as the sold-to party, the VAT registration number and the tax classification are taken from the payer (the ship-to party is then no longer relevant).

                    If 1 does not apply, the following is checked:
2. If the ship-to party has a VAT registration number or the sold-to party DOES NOT have a VAT registration number, the VAT registration number and the tax classification is taken from the ship-to party.

                    If 2 does not apply, the following is valid:
3. Otherwise, the VAT registration number and the tax classification are always determined from the sold-to party.

                    As of Release 40A, you can always determine the VAT registration number and the tax classification from the sold-to party or from the payer. Customizing occurs in the V_TVKO_TAX view and occurs depending on the sales organization.

                    Important: The VAT registration number is ALWAYS determined using the tax destination country. You can get an alternative system response for the sold-to party and payer with Note 91109. Alternatively, you can also use Note 371764.

                    If the customer is a one-time customer, you enter the VAT registration number manually in the partner address data when you create the sales document. In the address data, you can only enter the VAT registration number for one-time customers and in the case of the partner function of the ship-to party (also see Note 976077).

                    Therefore, the determination of the VAT registration number is based on the customer master data.

d) Tax classification of the customer

                       For example, the tax classification of the customer determines whether the customer is fully, half or not liable for tax. Due to this classification, you can determine different tax rates. The tax classification is determined from the customer master for the partner role for which the VAT registration number is also determined. You can store a tax classification for each country and tax category or condition in the customer master. The system displays the countries provided in the customer master in the sales area data, billing area, from the plant assignment (plant country) for the distribution channel and division (transaction OVX6). You can change the automatically determined tax classification of the customer in the sales and distribution document header in the billing document area as an 'Alternative tax classification'.

e) Tax classification of the material

                       For example, the tax classification of the material determines whether the material is fully, half or not liable for tax. Due to this classification, you can determine different tax rates. The tax classification is determined from the material master and you can change it manually in the sales and distribution document at item level. The system displays the countries provided in the material master in the Sales and Distribution area: Sales organization, from the plant assignment (plant country) for the distribution channel and division (transaction OVX6). In this case, you can store a tax classification for each tax category or condition and country.

f) Date of services rendered

                       Tax rates are determined for the date of services rendered and NOT for the pricing date. This date is determined in the sales and distribution documents depending on the process.

                       In this case, there is a check on whether there is a requested delivery date in sales documents. If there is one, there is a check on whether the requested delivery date is after the date of creation of the document. If this is the case, the requested delivery date is used as the date of services rendered for the SD tax determination. If this is not the case, the document creation date forms the basis as the date of services rendered. However, you can also manually change this automatically determined date of services rendered at header and item level in the sales document. It is important to note that, the actual date of services rendered of the later billing document is not yet known in the sales document. Therefore, the date of services rendered in the sales document and the tax determined for that may differ from the later billing document.

                       In the billing document, the date of services rendered in the case of a delivery-related billing and for the existing goods issue date is copied from this goods issue date. If there is no goods issue date, the billing date forms the basis of the date of services rendered.

                       In the case of the order-related billing, the billing date is used as the date of services rendered. If the billing is executed for a billing plan date, the To date of the settlement deadline is copied as the date of services rendered in the case of the periodic billing plan. In the case of the milestone billing plan, the billing date of the relevant milestone billing date is copied to the billing document as the date of services rendered.

                       If you use transaction VF01 to manually enter the date of services rendered using the default data, this manual entry has priority.

                       If you use the external billing interface for billing, you can enter the date of services rendered using the 'DELIVERY_DATE' import parameter. This then also has priority.

2. Basic settings in Customizing

              The following settings must be made in Sales and Distribution.

a) Condition type

                       Use transaction V/06 to define a condition type for each tax category (for example, value-added tax).

                       The tax condition with condition class 'D' is always determined automatically by the R/3 system. Avoid making a manual change (T685A-KMANU = 'D') since otherwise inconsistencies can occur with the tax code already created in financial accounting.

                       In addition, set the tax condition type as a group condition to ensure a possibly necessary rounding difference comparison (also see Note 403254).

b) Access sequence

                       Store the access sequences for this tax condition type and define the condition tables.

                       The MWST access sequence is in the standard system with the condition tables A078, A002 and A011.

                       Pricing conditions 7 and 8 are assigned to the accesses. Condition 8 checks the export case. That means, there is an export business if the departure country and the destination country differ. If these countries are participating countries of the EU, there is also a check on whether there is a VAT registration number. In this case, only the export access is relevant for the existing VAT registration number. If no VAT registration number was determined in the previous partner determination, the export access is NOT relevant. Instead, access to domestic tax should be successful. Pricing condition 7 checks the existence of some domestic business. If the departure country and the destination country are EU member states and there is no VAT registration number, this condition is fulfilled. If they are not EU member states, there is only a check on whether it is the same departure country and destination country. In this case, the condition is also fulfilled and therefore the condition access to the domestic tax is relevant.

                       For more information about pricing conditions 7 and 8, see Note 158890.

                       Assign the exclusive indicator (T682I-KZEXL) to the accesses to ensure that only one condition record is determined for the tax.

c) Pricing procedure

                       Use the tax condition type in the pricing procedure in which the respective taxes are taken into account.

                       In this case, pay attention to the sequence of the conditions in the pricing procedure. Therefore, we recommend that you position the tax condition after the non-statistical conditions. Exception: Statistical conditions with a special function, for example, rebate conditions, conditions of the intercompany billing and the discount condition before tax, are positioned before the tax condition. In this case, also compare the delivered standard pricing procedure RVAA01.

                       The account key that was entered from financial accounting is assigned to the tax condition.

                       Pricing condition 10 is assigned to the tax condition in the procedure. This checks the existence of a delivering plant. This plant determination is necessary since the tax departure country is defined through this. Alternatively, you can manually enter the tax departure country in the sales and distribution document header in the billing document view.

                       Use base formula 16 to ensure that the net item value forms the basis as the tax condition basis. The tax condition should NOT, if possible, refer to another step of the pricing procedure with a FROM-TO step. Therefore, the tax condition basis might be determined incorrectly. The tax base and the tax condition value must have the same +/- sign.

                       Additional information: To determine the condition basis through from-to steps, also see Note 834174.

d) General tax Customizing

                       For your business processes, execute the necessary settings in Customizing using the following IMG path: Sales and Distribution -> Basic Functions -> Taxes.

                       For each country that you contact in business, use transaction OVK1 to create the valid tax categories or condition types. Define the regional codes (city code and county code), for example, if you use the SAP system in the USA or Canada. Define the tax relevancy as the tax classification for customers (transaction OVK3) and materials (transaction OVK4) for each tax category and tax condition type.

3. Special features of the master data maintenance

              Create condition records for the tax conditions, in which the respective tax rate and the matching tax code is stored. When you make an entry, there is a check on whether the tax code entered was also stored in financial accounting in the T007A table, and whether the tax rate entered corresponds to the tax code in financial accounting. However, this check is only possible if there is only one unique tax rate in financial accounting for the tax code entered.

              You can only enter the tax code in the condition master data for condition class 'D', therefore the tax conditions.

              Additional information: A tax determination procedure is delivered in financial accounting. This is assigned to the corresponding country and includes all the possible tax categories of the country. For example, this tax determination procedure is required if you create a posting document directly in financial accounting. Use transaction FTXP to store the tax percentage rates for this tax determination procedure, the tax code and the account key.

              In financial accounting, you can determine the sales tax Customizing using the menu path Financial Accounting -> Financial Accounting Global Settings -> Tax on Sales/Purchases.

4. Determination of the tax condition in sales and distribution documents

              If you create a sales and distribution document, the tax rate is determined for the date of services rendered of the document. The tax condition is NOT determined with the pricing date. In this case, due to legal conditions, you need to determine the tax rate for the date of services rendered.

              For the billing, use a pricing type that redetermines the tax condition, for example pricing type 'G' (explanations about the possible pricing types are in Note 24832). With that, it is ensured that the tax condition at the time of the billing can be redetermined for the now known date of services rendered. You only want to keep the tax condition for the date of services rendered of the previous logistical process for return processes. Therefore, in this case pricing type 'D' is used, which does not redetermine the tax rate.

5. Tax-relevant checks in the SD-FI interface

              During the billing data transfer to accounting, the tax data from financial accounting is checked (among other things) before the accounting document is generated.

              If the conditions of financial accounting are not met, the system issues the following error messages for the tax data in particular:

a) FF 805: Tax statement item missing for tax code &

                       If the billing document is posted to accounting, the 'transplant' of the tax codes still occurs on Sales and Distribution. Until now, the tax code was determined from the condition master data only for the tax condition. However, for the generation of the accounting document, this tax code is also required in each condition relevant to posting to which the tax condition refers. You can read Note 112609 to find out how this tax code is transferred to other conditions of the billing document.

                       If the system issues this error message, check the pricing procedure used with the details from Note 112609.

b) FF 800: Different tax countries are not permitted in one document

                       The system issues this error message if different tax codes are used with different reporting countries (T007A-LSTML) in the billing document and this billing document also generates a customer line item.

                       Different reporting countries are required for the 'Plants abroad' function. However, the plants abroad billing document does not generate a customer line item, which is why the system does not issue this error message in this case.

                       You can only maintain a reporting country in FI in transaction FTXP, if the 'Plants abroad' function (T000F-XWIAA) was activated in Customizing.

                       Also see Consulting note 506588 for the Customizing settings of the plants abroad process.

c) FF 759: Cannot post document: tax base in local currency is zero

                       This error situation can occur if the tax condition was NOT set as a group condition. This setting must occur in Sales and Distribution in transaction V/06 and in FI through the menu path Financial Accounting -> Financial Accounting Global Settings -> Tax on Sales/Purchases -> Basic Settings -> Check Calculation Procedure -> Define Condition Types. Therefore, a rounding difference comparison is required for the tax condition to avoid rounding differences between the tax calculation at item level and the calculation at document level.

                       Another reason for this error message can be that a 'mixed' billing document was created with debit-side and credit-side items. For example, this can occur if credit memos and debit memos are billed together, or also in the case of an invoice correction. Since the tax lines in accounting are aggregated using the debit/credit indicator, under certain circumstances, a difference may occur after this aggregation so that the error above occurs. In this case, you can use transaction OBBH to create a FI substitution for stage '2' (document item). For example, for SD billing documents (the 'VBRK' reference procedure), this substitution may fill the BSEG-SGTXT text field for debit-side accounting items (BSEG-SHKZG = 'S') with a different text than the text for credit-side line items (BSEG-SHKZG = 'H'). Therefore, the aggregation of the line items is prevented with the debit/credit indicator, and therefore no differences occur in the tax lines for this special case.

d) FF 747: The tax amount must not be greater than the tax base

                       Since only percentage tax conditions are supported, the tax amount (condition value) can never be greater than the tax base.

                       However, this error message can occur, for example, if you try to set a quantity-based tax condition. This is not supported in the standard system. This situation is described in Consulting note 184985.