Skip to main content

Explaining SAP's tax determination logic - Workflow of SAP Tax Determination

Page 2 of 2: Workflow of SAP Tax Determination

Page 2 of 2

Workflow of SAP Tax Determination

  1. Transaction Input: When a sales order or purchase order is created, relevant master data and conditions are retrieved.
  2. Tax Jurisdiction Check: The system checks the tax jurisdiction based on the addresses involved in the transaction (e.g., ship-to and sold-to parties).
  3. Identify Tax Code: SAP identifies the applicable tax code by referencing condition records and master data attributes.
  4. Apply Tax Rate: Based on the determined tax code, the appropriate tax rate is applied to the transaction.
  5. Display Calculated Tax: The calculated tax amount is displayed in the document and is included in the transaction's total.

Considerations

  1. Localization Requirements: Many countries have unique tax requirements, and the SAP system needs to be configured accordingly for local compliance.
  2. Changes in Tax Legislation: Businesses must regularly review and update their tax codes and condition records in SAP to align with any changes in tax laws.
  3. Reporting Requirements: SAP also facilitates reporting for tax compliance, with standard ABAP reports and tools to assist in creating VAT returns and other tax documentation.

By leveraging the above components and logic, SAP ensures accurate tax calculations across different business scenarios while facilitating compliance with tax regulations.

Page