Tax Configuration

SAP takes care of tax calculation, tax postings, tax adjustments, and tax reporting through the three FI components; namely GL, AP, and AR.

SAP allows taxation at three levels:

  1. National level or federal level (Europe, South Africa, Australia, etc.)
  2. Regional or jurisdiction level (USA)
  3. National and Regional level (India, Canada, Brazil etc.)

As the requirement of tax configuration in SAP you should define the following;

  • Base Amount for Tax Calculation

For each Company Code you need to define whether the Base Amount includes the cash discount as well. If the base amount includes the discount, then the tax base is called ‘Gross,’ otherwise, it is ‘Net.’ You may also define a similar base amount for calculating
the ‘Cash Discount.’ This also has to be maintained for each of the Company Codes.

  • Tax Codes

The Tax Code is a 2-digit code specifying the percentage of tax to be calculated on the base amount. While defining the tax code, you will also specify the ‘Tax Type’ to classify a tax code relating to either ‘Input Tax’ or ‘Output Tax.’ The tax types are country specific and determine how a tax is calculated and posted.

  • Tax Rate

The Tax Rate is the percentage of tax to be calculated on a base amount. You will be able to define tax rates for one or more tax types when you define a single tax code.

  • Check Indicators

By using the check indicators, you configure the system to issue Error/Warning Messages when the tax amount entered manually is incorrect.

16 thoughts on “Tax Configuration”

  1. thanks eddai. additional info as follow: account determination (img:posting keys, rules and tax account)
    2.setting up tax accounts (fs00) and other G/L accounts as needed.
    3.X-ing “Post Automatically Only” (in fs00) if you want
    4. X-ing “Postings without tax allowed” per Jurisdiction code.

  2. Hi Eddai, you are very welcome. u have been making great contribution to SAPers with precious suggestions and documentations. I am focusing on FICO and BI, hope we can keep in touch. Thanks again!:)

  3. Can you please let me know if you have a user manual for VERTEX Configuration for SAP

  4. Can someone clarify me below?
    I am configuring tax codes for India. We are not using CIN so I am using TAXIN1 (standard tax procedure) but want to use Jurisdiction code to create tax code.

    My Concern is below
    If we define Jurisiction code for each state in India lets say 10 states so I have 10 Juriscition code.

    Now when I configure tax code, System populates Jurisdiction code automatically so does it mean I can create same tax code under more than 2 states. For ex. I create a O1 output tax code for IN01 Jurisdiction code & again O1 output tax code for IN02 Jurisdiction code with a different percentage.

    Also I want to configure service tax for India. Appreciate if someone can send me any configuration document relating to service tax. Note: We are not using CIN so we are not using TAXINJ or TAXINN. We want to use TAXIN1 with adding few condition types if necessary because we are already using TAXIN1 for existing business.
    Appreciate a quick response.

  5. Hey Eddai, I am trying to register in SAP Financial Forums. even after providing all the information it shows a error message saying ” Required fields. Please enter latin characters only”.

    What does it mean?

    Thanks in advance

  6. I dunno which field it gives that error but you are not using your language’s special characters while registering are u ? and you are sure to fill in all red starred fileds (required fields) ?
    And also please make sure you checked Terms of Use..
    There should not be any problem in this easy registration~

  7. Tax code V0 does not exist in company code 1000 error when i try to psot the cash Journal-FBCJ expenses posting with Tax code VO, i have done all the config even then this is the error can any one can give an idea to resolve the issues

  8. you can either create a new tax code or just config to ignore it. 1.check tax codes, maybe it has been deleted by someone;2.check GLaccount (assigned to the CJ transaction) comany code segment, set tax code as you want;3.check abovementioned GL account group – filed status group, set tax field optional. if you stongly insist to input V0, double click tax code during posting, you should be able to define a new one as I remembered. During tax code definiton, you’d better use copy instead of creation, much more time-effecient, in the end, that is only sandbox, try more to solve it.

  9. HI Eddai,

    can u help me to configure tax configuration for CANADA. My project is coming up in next month. i’m little confused about this

    any hint of materail will be realy appreciated


  10. Hello,
    I am looking for a report from SAP which shows, at the GL account level, the Sales tax posting. We use this report to file our HST/GST report to the CRA in canada. Is there a standard report or does anyone have an example that I can take to our developers? We keep getting told that a report like this does not exist and that to capture the information my accounts payable girls would have to post an invoice that has multiple GL accounts and tax on each item, multiple times.
    for example invoice A has 2 lines.
    1st line – GL Acct 542510 – $100 with 12HST total $112
    2nd line – GL Acct 658520 – $200 with 24HST total $224

    The suggestion is to post in FB60 2 entries
    one for 1St Line -> doc#11111111
    one for 2nd line -> doc#22222222

    If we post this way then their “report” will work. I find it hard to believe that there is not a report in SAP to tell you how much sales tax you paid or collected in the period. Other systems I have worked on this is standard.

    Also, in the FI module is there a detailed GL report where you are shown an opening balance, all the transactions within a period and the closing balance?

    Again, this is an item we are told doesn’t exist, but it seems to be standard in other programs.

    Please any help would be appriciated!


Leave a Comment