The taxes are automatically determined in SD pricing by the R/3 system.

The settings for the tax determination in Sales and Distribution must be reconciled with financial

accounting (the FI module).

1. The tax determination requires the following information to determine the correct

tax rate depending on the business process:

a) Country of departure

The tax departure country is determined from the country of the delivering plant (T001W-

LAND1). If no plant is determined, or you want to overwrite the country that was automatically

determined, you can manually enter the tax departure country in the sales document header in

the billing document view. The manual entry has priority.

b) Destination country

The tax destination country is copied from the country of the ship-to party (KUWEV-LAND1).

However, you can also change this automatically determined destination country in the sales and

distribution document header in the billing document view. The manual entry has priority.

c) VAT registration number for businesses in the EU

The VAT registration number is stored in the customer master in the general data and in this

case in the control data. In this case, the VAT registration number for the country of the

customer is entered, but under the 'Others' radio button, you can also store other VAT

registration numbers for other EU countries, if the customer could also register in other EU

countries for tax purposes.

If no Customizing to determine the VAT registration number was stored, the determination of the

VAT registration number occurs follows the rules bleow:

1. If the payer has a VAT registration number in the customer master and the payer is not the

same as the sold-to party, the VAT registration number and the tax classification are taken from

the payer (the ship-to party is then no longer relevant).

If 1 does not apply, the following is checked:

2. If the ship-to party has a VAT registration number or the sold-to party DOES NOT have a VAT

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registration number, the VAT registration number and the tax classification is taken from the

ship-to party.

If 2 does not apply, the following is valid:

3. Otherwise, the VAT registration number and the tax classification are always determined from

the sold-to party.

As of Release 40A, you can always determine the VAT registration number and the tax

classification from the sold-to party or from the payer. Customizing occurs in the V_TVKO_TAX

view and occurs depending on the sales organization.

Important: The VAT registration number is ALWAYS determined using the tax destination country.

You can get an alternative system response for the sold-to party and payer with Note 91109.

Alternatively, you can also use Note 371764.

If the customer is a one-time customer, you enter the VAT registration number manually in the

partner address data when you create the sales document. In the address data, you can only

enter the VAT registration number for one-time customers and in the case of the partner function

of the ship-to party (also see Note 976077).

Therefore, the determination of the VAT registration number is based on the customer master

data.

d) Tax classification of the customer

For example, the tax classification of the customer determines whether the customer is fully, half

or not liable for tax. Due to this classification, you can determine different tax rates. The tax

classification is determined from the customer master for the partner role for which the VAT

registration number is also determined. You can store a tax classification for each country and

tax category or condition in the customer master. The system displays the countries provided in

the customer master in the sales area data, billing area, from the plant assignment (plant

country) for the distribution channel and division (transaction OVX6). You can change the

automatically determined tax classification of the customer in the sales and distribution

document header in the billing document area as an 'Alternative tax classification'.

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 e) Tax classification of the material

For example, the tax classification of the material determines whether the material is fully, half

or not liable for tax. Due to this classification, you can determine different tax rates. The tax

classification is determined from the material master and you can change it manually in the sales

and distribution document at item level. The system displays the countries provided in the

material master in the Sales and Distribution area: Sales organization, from the plant

assignment (plant country) for the distribution channel and division (transaction OVX6). In this

case, you can store a tax classification for each tax category or condition and country.

f) Date of services rendered

Tax rates are determined for the date of services rendered and NOT for the pricing date. This

date is determined in the sales and distribution documents depending on the process.

In this case, there is a check on whether there is a requested delivery date in sales documents.

If there is one, there is a check on whether the requested delivery date is after the date of

creation of the document. If this is the case, the requested delivery date is used as the date of

services rendered for the SD tax determination. If this is not the case, the document creation

date forms the basis as the date of services rendered. However, you can also manually change

this automatically determined date of services rendered at header and item level in the sales

document. It is important to note that, the actual date of services rendered of the later billing

document is not yet known in the sales document. Therefore, the date of services rendered in

the sales document and the tax determined for that may differ from the later billing document.

In the billing document, the date of services rendered in the case of a delivery-related billing and

for the existing goods issue date is copied from this goods issue date. If there is no goods issue

date, the billing date forms the basis of the date of services rendered.

In the case of the order-related billing, the billing date is used as the date of services rendered.

If the billing is executed for a billing plan date, the To date of the settlement deadline is copied

as the date of services rendered in the case of the periodic billing plan. In the case of the

milestone billing plan, the billing date of the relevant milestone billing date is copied to the billing

document as the date of services rendered.

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If you use transaction VF01 to manually enter the date of services rendered using the default

data, this manual entry has priority.

If you use the external billing interface for billing, you can enter the date of services rendered

using the 'DELIVERY_DATE' import parameter. This then also has priority.

2. Basic settings in Customizing

The following settings must be made in Sales and Distribution.

a) Condition type

Use transaction V/06 to define a condition type for each tax category (for example, value-added

tax).

The tax condition with condition class 'D' is always determined automatically by the R/3 system.

Avoid making a manual change (T685A-KMANU = 'D') since otherwise inconsistencies can occur

with the tax code already created in financial accounting.

In addition, set the tax condition type as a group condition to ensure a possibly necessary

rounding difference comparison (also see Note 403254).

b) Access sequence

Store the access sequences for this tax condition type and define the condition tables.

The MWST access sequence is in the standard system with the condition tables A078, A002 and

A011.

Pricing conditions 7 and 8 are assigned to the accesses. Condition 8 checks the export case. That

means, there is an export business if the departure country and the destination country differ. If

these countries are participating countries of the EU, there is also a check on whether there is a

VAT registration number. In this case, only the export access is relevant for the existing VAT

registration number. If no VAT registration number was determined in the previous partner

determination, the export access is NOT relevant. Instead, access to domestic tax should be

successful. Pricing condition 7 checks the existence of some domestic business. If the departure

country and the destination country are EU member states and there is no VAT registration

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number, this condition is fulfilled. If they are not EU member states, there is only a check on

whether it is the same departure country and destination country. In this case, the condition is

also fulfilled and therefore the condition access to the domestic tax is relevant.

For more information about pricing conditions 7 and 8, see Note 158890.

Assign the exclusive indicator (T682I-KZEXL) to the accesses to ensure that only one condition

record is determined for the tax.

c) Pricing procedure

Use the tax condition type in the pricing procedure in which the respective taxes are taken into

account.

In this case, pay attention to the sequence of the conditions in the pricing procedure. Therefore,

we recommend that you position the tax condition after the non-statistical conditions. Exception:

Statistical conditions with a special function, for example, rebate conditions, conditions of the

intercompany billing and the discount condition before tax, are positioned before the tax

condition. In this case, also compare the delivered standard pricing procedure RVAA01.

The account key that was entered from financial accounting is assigned to the tax condition.

Pricing condition 10 is assigned to the tax condition in the procedure. This checks the existence

of a delivering plant. This plant determination is necessary since the tax departure country is

defined through this. Alternatively, you can manually enter the tax departure country in the sales

and distribution document header in the billing document view.

Use base formula 16 to ensure that the net item value forms the basis as the tax condition basis.

The tax condition should NOT, if possible, refer to another step of the pricing procedure with a

FROM-TO step. Therefore, the tax condition basis might be determined incorrectly. The tax base

and the tax condition value must have the same +/- sign.

Additional information: To determine the condition basis through from-to steps, also see Note

834174.

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 d) General tax Customizing

For your business processes, execute the necessary settings in Customizing using the following

IMG path: Sales and Distribution -> Basic Functions -> Taxes.

For each country that you contact in business, use transaction OVK1 to create the valid tax

categories or condition types. Define the regional codes (city code and county code), for example,

if you use the SAP system in the USA or Canada. Define the tax relevancy as the tax

classification for customers (transaction OVK3) and materials (transaction OVK4) for each tax

category and tax condition type.

3. Special features of the master data maintenance

Create condition records for the tax conditions, in which the respective tax rate and the matching

tax code is stored. When you make an entry, there is a check on whether the tax code entered

was also stored in financial accounting in the T007A table, and whether the tax rate entered

corresponds to the tax code in financial accounting. However, this check is only possible if there

is only one unique tax rate in financial accounting for the tax code entered.

You can only enter the tax code in the condition master data for condition class 'D', therefore the

tax conditions.

Additional information: A tax determination procedure is delivered in financial accounting. This is

assigned to the corresponding country and includes all the possible tax categories of the country.

For example, this tax determination procedure is required if you create a posting document

directly in financial accounting. Use transaction FTXP to store the tax percentage rates for this

tax determination procedure, the tax code and the account key.

In financial accounting, you can determine the sales tax Customizing using the menu path

Financial Accounting -> Financial Accounting Global Settings -> Tax on Sales/Purchases.

4. Determination of the tax condition in sales and distribution documents

If you create a sales and distribution document, the tax rate is determined for the date of

services rendered of the document. The tax condition is NOT determined with the pricing date. In

this case, due to legal conditions, you need to determine the tax rate for the date of services

rendered.

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For the billing, use a pricing type that redetermines the tax condition, for example pricing type

'G' (explanations about the possible pricing types are in Note 24832). With that, it is ensured

that the tax condition at the time of the billing can be redetermined for the now known date of

services rendered. You only want to keep the tax condition for the date of services rendered of

the previous logistical process for return processes. Therefore, in this case pricing type 'D' is

used, which does not redetermine the tax rate.

5. Tax-relevant checks in the SD-FI interface

During the billing data transfer to accounting, the tax data from financial accounting is checked

(among other things) before the accounting document is generated.

If the conditions of financial accounting are not met, the system issues the following error

messages for the tax data in particular:

a) FF 805: Tax statement item missing for tax code &

If the billing document is posted to accounting, the 'transplant' of the tax codes still occurs on

Sales and Distribution. Until now, the tax code was determined from the condition master data

only for the tax condition. However, for the generation of the accounting document, this tax code

is also required in each condition relevant to posting to which the tax condition refers. You can

read Note 112609 to find out how this tax code is transferred to other conditions of the billing

document.

If the system issues this error message, check the pricing procedure used with the details from

Note 112609.

b) FF 800: Different tax countries are not permitted in one document

The system issues this error message if different tax codes are used with different reporting

countries (T007A-LSTML) in the billing document and this billing document also generates a

customer line item.

Different reporting countries are required for the 'Plants abroad' function. However, the plants

abroad billing document does not generate a customer line item, which is why the system does

not issue this error message in this case.

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You can only maintain a reporting country in FI in transaction FTXP, if the 'Plants abroad'

function (T000F-XWIAA) was activated in Customizing.

Also see Consulting note 506588 for the Customizing settings of the plants abroad process.

c) FF 759: Cannot post document: tax base in local currency is zero

This error situation can occur if the tax condition was NOT set as a group condition. This setting

must occur in Sales and Distribution in transaction V/06 and in FI through the menu path

Financial Accounting -> Financial Accounting Global Settings -> Tax on Sales/Purchases -> Basic

Settings -> Check Calculation Procedure -> Define Condition Types. Therefore, a rounding

difference comparison is required for the tax condition to avoid rounding differences between the

tax calculation at item level and the calculation at document level.

Another reason for this error message can be that a 'mixed' billing document was created with

debit-side and credit-side items. For example, this can occur if credit memos and debit memos

are billed together, or also in the case of an invoice correction. Since the tax lines in accounting

are aggregated using the debit/credit indicator, under certain circumstances, a difference may

occur after this aggregation so that the error above occurs. In this case, you can use transaction

OBBH to create a FI substitution for stage '2' (document item). For example, for SD billing

documents (the 'VBRK' reference procedure), this substitution may fill the BSEG-SGTXT text field

for debit-side accounting items (BSEG-SHKZG = 'S') with a different text than the text for credit-

side line items (BSEG-SHKZG = 'H'). Therefore, the aggregation of the line items is prevented

with the debit/credit indicator, and therefore no differences occur in the tax lines for this special

case.

d) FF 747: The tax amount must not be greater than the tax base

Since only percentage tax conditions are supported, the tax amount (condition value) can never

be greater than the tax base.

However, this error message can occur, for example, if you try to set a quantity-based tax

condition. This is not supported in the standard system. This situation is described in Consulting

note 184985

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