In the tax engine, a tax type represents the type of tax a particular transaction attracts, such as VAT or Service Tax. Each country/region will have a set of tax types and each tax type will have a set of rate types assigned to it, such as standard rate, reduced rate, and so on.
You can create Tax Types in the SAP Cloud Applications Studio by following the steps below:
In the Solution Explorer, right-click the Business Configuration node and select Create Business Configuration Set. The Business Configuration Set Wizard
Under Business Configuration Object Type, select Use SAP Business Configuration Object.
Enter a name and a description.
Under Business Configuration Object -> Name, select Tax Type from the list.
Click Next to continue. The Define the Values of Your Business Configuration Set (2/3) window opens.
Open the Tax Type node and enter the values as below:
CountryCode: Specify the country/region code for which you need to configure the tax type.
Note: The country/region you want to configure must be available in the tax country table already delivered by SAP. For the list of delivered tax countries, see Tax Basic Countries. Before specifying the country/region code, please see Prerequisites.
Code/Content: Specify a numerical code for the new tax type.
TaxCategoryCode: Specify the category of tax, in this case Product Tax.
Note: Due to technical constraints, the Withholding Tax tax category is currently not supported even though it is displayed in the drop-down list.
Name/Content: Enter a description for the newly-created tax type code.
Select the Tax Rate Type node and enter the values as below:
CountryCode: Specify the country/region code as outlined above.
TaxTypeCode/Content: Enter the tax type code of the tax to which the new tax rate type belongs.
Code/Content: Specify a new tax rate type code for the country/region you want to configure. This value must not exceed four characters. The tax rate type usually specifies if the tax rate is standard, reduced, or zero. The tax rate percentage can be assigned to tax rate types in business configuration under the fine-tuning activity, Tax on Goods and Services -> Define Rate Schedules.
Standard: Select the checkbox to specify that the tax rate type is Standard. Note that only one tax rate type can be defined as Standard.
Name/Content: Enter a description for the newly-created tax rate type.
Select the Tax Exemption Reason node and enter the values as below:
Enter the Country/region Code and TaxTypeCode/Content as above.
Code/Content: Specify a new Tax Exemption Reason Code according to your requirements. An exemption reason code usually specifies if the exemption is due to the business partner, or a particular sales/purchase, and so on.
BusinessPartnerRelevant/ProductRelevant/TaxEventRelevant/ExemptionCertificateRelevant: Select the relevant checkbox to define at what entity you wish to use the exemption reason code. For example, you can assign a given exemption reason code to a business partner only if the Business Partner Relevant checkbox is marked.
Name/Content: Enter a description for the newly-created exemption reason code.
Open the Tax Exemption Reason Rate and enter the values as below:
Enter the Country/regionCode and TaxTypeCode/Content as above.
ExemptionReasonCode/Content: Enter the newly-created tax exemption reason code for which you need to configure the rate.
TaxRateTypeCode/Content: Select the Tax Rate Type for the exemption reason code. When processing a business document with an assigned exemption reason code, the tax engine automatically applies the selected tax rate type and the respective tax rate percentage for calculating the tax. The tax rate percentage for the tax rate types can be specified in the business configuration fine-tuning activity, Tax on Goods and Services -> Define Rate Schedules.
Verify the values in the Review your Business Configuration Set If you want to make any changes or corrections, click Back to proceed. If all the values are correct and you want to save the content, click Finish.
Right-click the BC set that you created in the Solution Explorer view and select Activate to activate it.
Right-click the Business Configuration node and click Deploy Business Configuration. The content is deployed to the SAP Business ByDesign system and you can access the information through the fine-tuning activity, Tax on Goods and Services.
Configure Tax Calculation Procedure (Optional)
Note: First, please check whether the tax procedures delivered by SAP meet your requirements before configuring one for your requirement.
Tax calculation procedure is an element of tax calculation which defines how the tax calculation occurs. You can use one of the tax calculation procedures delivered by SAP or define a new one and implement the same via ABSL scripts.
You can do the following using the tax calculation procedure:
Influence the tax base amount (to achieve Tax on Tax scenarios).
Influence the sequence of which tax type is calculated first.
You can create a new tax calculation procedure in the studio following the steps below:
Under Business Configuration Object-> Name, select TaxCalculationProcedure
Click Next to continue.
Select the Tax Calculation Procedure Node and enter the values as mentioned below:
Tax Calculation Procedure: Specify the new tax calculation procedure based on your requirement.
Preferably start with the prefix ‘Y’ or ‘Z’.
Standard Tax Calculation Procedure: Indicates whether this calculation procedure is a standard procedure or not. Do not mark this.
Description: Enter a description explaining your tax calculation procedure.
4. Select the Tax Procedure Country Assignment node, and enter the details as below:
Tax Calculation Procedure: Enter the defined tax calculation procedure.
Country: Enter the country/region for which this tax calculation procedure is to be assigned.
Now that the creation of the tax calculation procedure is done, the next step is to define this tax calculation procedure:
Add a new Enhancement Implementation.
Under the Filter tab enter the following details:
Filter for Country: Enter the country/region for which you created the tax calculation procedure.
Filter for Tax Calculation Procedure: Enter the tax calculation procedure created in the previous step.
7. Under the ABSL section you can now influence the tax base amount and the tax percent.
8. To deploy the BC set please follow the steps as outlined in the section ‘Configure Tax Types’.
What's next ?
We will have a detailed look and understand the steps of configuration of Tax Events and Accounting Attributes of Tax Events in part 2 of this blog series as mentioned above.