Tax Jurisdiction code Tax jurisdictions in SAP represents government authorities to which taxes are paid.Tax jurisdiction can be done at 4 levels in SAP, country, state, city and others. Tax jurisdictions need to defined for every tax procedures.We need to define tax jurisdiction code structure before tax jurisdiction code.Define tax jurisdiction code structure (OBCO)

Here select tax procedure for which we want to define tax jurisdiction structure.

Here select tax procedure for which we want to define tax jurisdiction structure. 

Tax jurisdiction code (OBCP):

Enter the work area as per shown in pop up screen. 

Enter the tax jurisdiction code and its description.

Here the first two letters represents state, next three letters show county and next four shows the city. Therefor all jurisdiction code will be of nine digits.

1st check did you assign tax jurisdiction code to your plant in OX10.If not assign tax jurisdiction code to your plant in OX10 t.code & save.

 

Now try your transaction MIRO.

Tax Configuration For SAP Implementations

Introduction To Tax Configurations In SAP

Tax configurations are done in SAP at the country level. This is because all businesses in the same country need to follow the same taxation

policies and generally accepted accounting principles while preparing their financial statements. Therefore, tax configurations in SAP are

done for each country. Any company code which is then created in that country can then automatically use the tax configuration that is done

for that country. So tax configurations need not be done for each and every company code again and again. This saves the effort required to

carry out the tax configurations for every company code separately.

SAP allows the tax rates to be defined internally or the tax rates may be fetched from an external taxation system like Vertex. The tax

configurations are stored in SAP in the form of tax calculation procedures and tax codes. These procedures can then be assigned to different

countries. These procedures then become available to any company code which is created in that country.

The tax rates are provided by the tax codes are the different tax types while the method of calculation is defined in the tax calculation

procedure. SAP allows the following taxes to be processed while posting documents:

Tax on sales and purchases.

Additional taxes like VAT which our country specific.

Sales and Use tax as in USA.

Withholding tax like income tax in India.

Concept Of Tax Jurisdictions

Tax jurisdictions represent the government authorities to which the taxes are paid. SAP allows up to 4 levels of tax jurisdictions representing

state, county, city and others. The tax jurisdiction structure needs to be defined before the tax jurisdictions can be created in SAP. As

mentioned before, the tax jurisdiction structure can have four levels. The tax jurisdiction structure defines the length of characters which

will be used to represent each level in the tax jurisdiction code. The tax jurisdiction code structure needs to be defined for every tax

calculation procedure.

Once the tax jurisdiction code structure has been defined, the next step is to create the actual tax jurisdiction codes. The tax jurisdiction

codes need to be created for every government authority to which the tax needs to be paid.

Assign Tax Procedure To Country

Step 1: The tax configuration details are stored in the tax procedure. The first step is to assign the tax procedure to the country in which the

company code exists. Navigate to the Implementation Guide menu path as shown below or execute the transaction code OBBG.

Step 2: Position to the country to which the tax calculation procedure is to be assigned and enter the tax calculation procedure details as

shown in the screenshot below.

Step 3: Click on the save button to save the changes. A success message showing that the changes have been saved is displayed.

Define The Tax Jurisdiction Code Structure

Step 1:Navigate to the implementation guide menu path as shown in the screenshot below or execute the transaction code OBCO from the

SAP easy access menu.

Step 2: Select the tax procedure for which the tax jurisdiction code structure needs to be defined and enter the length for the various

jurisdiction levels as shown in the screenshot below. The length chosen should be sufficiently large to accommodate enough tax jurisdiction

codes as per the requirement. For e.g. the first level represents the state. If the number of states is large then it is better to have a four

letter key to represent it rather than having a two letter key. This is because the number of combinations possible with a four letter key will

be much more than those possible with the two letter key.

Step 3: Click on the save button to save the changes. A success message indicating that the changes have been saved is displayed.

Define The Tax Jurisdiction Codes

Step 1:Navigate to the implementation guide menu path as shown below or execute the transaction code OBCP from the SAP easy access

menu.

Step 2: Enter the work area details in the pop-up as shown in the screenshot below and click on the continue button.

Step 3: Enter the tax jurisdiction code and its description as shown in the screenshot below. On the basis of the configuration for the tax

jurisdiction code structure, the first two letters of the tax jurisdiction code will represent the state, the next three letters will represent the

county, and the next four letters will represent the city. Therefore, every tax jurisdiction code will be nine characters long. It will be possible

to determine the correct taxing authority on the basis of the tax the jurisdiction code described above.

Step 4: Click on the save button to save the new tax jurisdiction code. A success message indicating that the new tax jurisdiction code has

been saved is displayed.

Define Tax Codes

The tax codes are defined for each and every country. The tax codes contain the actual rates to be used while calculating the tax on the basis

of the tax calculation procedure. Each country can have multiple tax codes for different types of taxes like input tax sales and purchases,

output tax on sales and purchases, etc.

Step 1:Navigate to the Implementation Guide menu path as shown in the screenshot below or execute the transaction code FTXP from the

SAP Easy Access menu.

Step 2: Enter the country in the pop -up as shown in the screenshot below and click on the continue button.

Step 3: Enter the tax jurisdiction code and the other details on the screen as shown in the screenshot below and press the Enter key. The

tax code represents the type of the tax for which the rates are going to be maintained.

Step 4: Enter the tax rates as shown in the screenshot below. These tax rates can be used to calculate the tax while posting a document in

SAP. The method of calculation will be determined on the basis of the tax calculation procedure.

Step 5: Click the save button to save the changes. A success message indicating that the changes have been saved is displayed.

You activate the tax handling with tax jurisdiction codes in FI Customizing (transaction OBCO). In the standard system during the creation of a purchase order, the system consideres the

following sources for the tax jurisdiction code: Reference item, request for quotation, contract, plant, the account assignment object. During this process, the system overwrites the respective

preceding value in this list. If, for example, you have maintained a tax jurisdiction code with the account assignment object for a purchase order item, this entry "wins" as opposed to the entry in

the plant table. Besides this, the tax jurisdiction code can be entered manually.

If you use the function from Note 493515, also the tax jurisdiction code from the delivery address can be taken into account (see below.).

All About Tax Determination Procedure in SAP SDRead more at http://www.saptraininghub.com/all-about-tax-determination-procedure-in-sap-sd/#zCMOST77xTDiBv12.99 

SAP uses Condition Method  technique to calculate  taxes (except Withholding Tax) in the system.  Tax Calculation Procedures (defined in the system) together with the Tax

Codes are used  in calculating the amount of tax.

The Tax Code is the first step in the tax calculation procedure. The Tax code describes following -

Tax type (Tax Type can be defined by T-code –OVK1).

Amount of tax calculated / entered.

GL account for tax posting.

Calculation of additional tax.

Each country has a specific Tax Procedure defined in the standard system. A Tax calculation  procedure contains the following fields:

Steps— It determine the sequence of lines within the procedure.

Condition Types— Indicates how the tax calculation model will work (whether the records are for fixed amount or percentages and whether the records can be processed

automatically.)

Reference Steps— System obtains the amount/value it uses in its calculation (e.g.  the base amount).

Account/Process Keys— Provide the link between the tax procedure and the GL accounts to which tax data is to be posted. This helps in automatic tax account

assignments. To enable this automatic assignment, there is  a need to define the following:

Posting keys (unless there is  a specific requirement, it will be sufficient to use the GL posting keys: Debit: 40, Credit: 50).

Rules to determine on which fields the account determination is to be based (such as the tax code or country key).

Step-1  Tax CategoryTax Category is  used to  group and manage similar product tax rates or service tax rates. Tax Rates are defined for each of the tax codes. The tax rates are linked to Tax

Types and are included in the tax procedures (in  this relationship, it is technically possible that a single tax code can have multiple tax rates for various tax types.)

The tax code  is assigned to a Tax Procedure, which attaches  to a GL master record. A specific tax procedure is accessed whenever that GL account  is used in document

processing.

Step-1.1

1. Enter T-code OVK3 in the command field .

2. Click on New Entries  Button.

Step-1.2

1. Enter Tax Categories ,Tax class and description.

2. Click on save button.

A Message “Data was saved ” is displayed.

Step-2 Define Tax TypesStep-2.1

1. Enter T-code – OVK1 in the command field.

2. Click on new entries button.

 

Step-2.2

Enter Tax country / Sequence / tax category and save the data .

 

Step-3  Assign the plant for Tax Determination.Step-3.1

1. Enter T-code OX10 in the command field.

2. Click on New entries Button.

Step-3.2

1. Enter Plant / Name1.

2. Enter country code / city code.

Save the data.

 

Step-4 Define the Material Taxes.1. Enter T-code OVK4 in the  command field.

2. Click on New Entries Button.

Step-4.2

Enter Tax category / Tax classification and description.

Save the data.

 

Step-5 Define the Tax DeterminationStep-5.1

1. Enter T-code VK12 in the command field.

2. Enter condition type .

 Step-5.2

Select Domestic taxes.

Step-5.3

1.  Enter Country / customer tax class / material tax class.

2. Run the report.

 Step-5.4

Enter Customer Tax class/Material Tax class / amount / validity period and tax code.

Save the record.

Read more at http://www.saptraininghub.com/all-about-tax-determination-procedure-in-sap-sd/#zCMOST77xTDiBv12.99