Italy pre-configured Tax Codes in SAP S/4HANA Public Cloud - issue with Tax Code X0

[Shrinivas]

Hello Experts,

I have a query regarding Italy pre-configured Tax Codes in SAP S/4HANA Public Cloud - issue with Tax Code X0

X0 is defined as 'EU Input tax 10% no ded. (serv)' with EU Code  9 = Acquisition Tax or General Tax with Zero Balance

Vendor invoice created with Tax Code X0 is posting  non deductible tax 10% to expense line item as debit, and deductible tax 10% to Output VAT GL as credit which is as below.

But I think, being a non-deductible tax code, it should post  the tax amount as credit to Vendor line item instead of posting to output VAT GL 2210000.

Could you please check if tax code defined is correct, or there should be any modification required?

Thank you.

Regards,

Shrinivas

[pawan__kumar]

@Shrinivas Changing it to post directly to the vendor account would be a serious configuration error leading to non-compliant VAT reporting

[Lakshmipathi]

For a non-deductible input tax scenario, the entire tax amount should be posted as a debit to the expense account. There should be no credit to Output VAT GL. The vendor line item should reflect the gross amount (net + tax), with no separate VAT credit.

If that is not happening, review your Tax Code configuration and see that the “Non-deductible” flag is properly set for Tax Code X0. Ensure deductible percentage = 0% and non-deductible = 100%. EU Code 9 is typically used for reverse charge or zero balance acquisition tax. If this is not a reverse charge scenario, consider changing the EU Code to one that reflects non-deductible domestic input tax

[Shrinivas]

Hello Lakshmipathi,

Thank you for your information.

This is pre-delivered tax code by SAP with EU code 9.

and there are other pre-delivered tax codes by  SAP with same settings - tax code XB = 22% non deductible and  XC =4% non-deductible with Credit tax posting to Output VAT GL

So, do I need to raise an Incident with SAP for modifying these pre-delivered tax codes?

Thank you.

Regards,

Shrinivas