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Tax Configuration

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FI-CO

SAP takes care of tax calculation, tax postings, tax adjustments, and tax reporting throughthe three FI components; namely GL, AP, and AR.

SAP allows taxation at three levels:

1. National level or federal level (Europe, South Africa, Australia, etc.)

2. Regional or jurisdiction level (USA)3. National and Regional level (India, Canada, Brazil etc.)

As the requirement of tax configuration in SAP you should define the following;

Base Amount for Tax Calculation

For each Company Code you need to define whether the Base Amount includes the cash

discount as well. If the base amount includes the discount, then the tax base is calledGross, otherwise, it is Net. You may also define a similar base amount for calculating

the Cash Discount. This also has to be maintained for each of the Company Codes.

Tax Codes

The Tax Code is a 2-digit code specifying the percentage of tax to be calculated on thebase amount. While defining the tax code, you will also specify the Tax Type to

classify a tax code relating to either Input Tax or Output Tax. The tax types arecountry specific and determine how a tax is calculated and posted.

Tax Rate

The Tax Rate is the percentage of tax to be calculated on a base amount. You will be ableto define tax rates for one or more tax types when you define a single tax code.

Check Indicators

By using the check indicators, you configure the system to issue Error/Warning Messages

when the tax amount entered manually is incorrect.

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