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Tax code
Tax Code: It represents a tax category which must be taken into consideration when making a tax
return to the tax authorities. Tax codes are unique per country. The tax rate calculation rules and
further features are stored in a table for each tax code. For tax-exempt or non-taxable
transactions, you should use tax codes with a 0 percentage rate if the corresponding transactions
are to be displayed in the tax returns. You must define new tax codes if tax rates are changed by
the state. The old codes with the old tax rates must remain in the system until no more open
items which use this tax code exist.
As per SAP Help, tax code two-digit code that represents the specifications used for calculating
and displaying tax.
Examples of the specifications defined under the tax code are:
Tax rate
Type of tax (input tax or output tax)
Calculation method (percentage included or percentage separate)
Step 3.
Enter in the field tax code. This must be a 2-digit alphanumeric code i.e. A5, 55, BB, etc.
Step 4.
Provide description of the tax code: please give a clear description
Step 5.
Define the tax type: define whether the tax code is relevant for input or output tax
Indicator which determines that an error message should be issued if the tax amount is not
correct. It it recommended to flag this.
Step 6. (optional)
Eu code: One of the most forgotten parameter. If you do not set this parameter at “1? then all
transactions with this code will be not picked up in the ESL listing of that specific country. This
code “1? represents all the Sales from one EU country to another EU country.
Step 7. (optional)
Target tax code: This fields are used in case of deferred taxes. This is applicable for example in
France. The VAT needs to be paid for example not when the invoice is issued but when the
customer pays the VAT. There are here again special programs available in SAP for deferred
taxes.
Step 8. (optional)
Reporting country: this field needs to be completed when you are using the plants abroad
functionality. This means that when you as a German company have a Belgian VAT number and
you have sales in Belgium (+ you need to submit a VAT return in Belgium) , then of course these
invoices need to be booked in SAP with a Belgian tax code.
Tax Acoount: This will have all account keys relevant for output tax. Here you can maintain
account key with relevant Tax G/L account.