TUE-Tax Determination - V0.2

Template Validation Workshop
Tax Determination
16 May 2017
Page 1 Thai Union Confidential

Agenda
 Definition and use
 Tax condition types
 Tax Determination - indicators
 Tax Classification
 Tax codes definitions
 Tax Classification Purpose
 Domestic/Export Sales
 Questionnaire
 Q&A

Definition and Use
In a sales transaction with a customer, the final price is based on the price of the material, any discount
application, freight, and taxes. This determination depends on the business rules associated with that
transaction.
Tax Billing /
Final Price Price Discounts Freight Invoicing
Pricing procedure is associated with the sales document and provides the different components
needed to come to final agreements with customers on the price they will pay for the goods or
service.
Taxes are calculated in SAP SD using the normal condition techniques. The condition type for tax is
entered into the pricing procedure

Tax Condition Type
Country Country Name Tax Condition Type Description
TH Thailand MWST Output Tax
CN China MWST Output Tax
FR France MWST Output Tax
FR France LCFR License – France
GB United Kingdom MWST Output Tax
IE Ireland MWST Output Tax
IT Italy MWST Output Tax
IT Italy LCIT VAT license Italy
NL Netherlands MWST Output Tax
NO Norway MWST Output Tax
PL Poland MWST Output Tax
PT Portugal MWST Output Tax
US USA UTXJ Tax Jurisdict.Code
US USA UTX2 County Sales Tax
US USA UTX3 City Sales Tax
ZA South Africa MWST Output Tax

SAP Tax Determination
Indicators
The system automatically determines the amount of tax and how the tax is distributed among
jurisdictions.
Several factors influence tax determination such as the origin and destination of goods and the
material/customer taxability.
Main factors that influence the tax rate are:
• Departure Country
The country of the delivering plant from the sales document
• Destination Country
Country from the ship-to party from the sales document),
• Customer taxability
Some customers such as non-profit organizations may be tax exempt.
• Material taxability
Raw materials used for manufacturing will typically be exempt while finished goods are typically
taxable.
These indicators are used in condition records to specify the tax code in transactions. In fact, the
customer and material taxability indicators are criteria in determining tax codes in a sales transaction

Pricing Key combination (1/5)
Each condition type will have its own set of available key combinations. In the case of a tax condition
type, this makes it possible for a tax percentage/value to be maintained based on the
Departure/Destination country, tax classification for customer and etc.
From Global Template, we can manage the tax determination using 4 different key combination:

Sales Organization
Distribution Channel
Sales Document Type

Departure Country/
Destination Country

Domestic Taxes:
- Departure Country
- Tax Classification for
customer
- Tax classification for
material

Export Taxes:
- Departure Country
- Destionation Country
- Tax Classification for
customer
- Tax classification for
material

Tax Classification for customer
Indicates whether, during pricing, the system takes into account taxes that relate to the customer and to
the material.
• Tax Classification for customer  Customer typology

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, Ship-to Party. You can store a tax classification for each
country/region 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
region) for the distribution channel and division.
For example we can have
In GT we have 2 kind of classifications:
Tax Classification Customer Description

0 Tax Exempt
1 Liable for Taxes

Tax Classification for material
Indicates whether, during pricing, the system takes into account taxes that relate to the customer and to
the material.
• Tax Classification for material

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.
For example we can have different VAT rate for: raw material, semi-finished products, finished products,
packaging, services, etc.
Tax classification defined in GT:

Tax Clas.Mat. Description
0 No Tax
1 Full Tax (7%)
2 Half Tax
3 Low Tax rate
4 Mixed Taxes
6 Full Tax (10%)
7 Output defer VAT 10%
8 Vat Consignment
9 Output defer VAT 7%
A Output defer VAT 0%
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SAP Tax Code Definition
The tax codes defined for the following sales business scenarios:
Country New Tax Code Description Rate (%)
GB A0 Exempt from output VAT 0

GB A1 Delivery of goods within EU 0
GB A2 Services within the EU 0
GB A3 Subcontracting within EU 0
IE A0 Output VAT 0% 0
IE A4 Delivery of goods within EU 0
IE A5 Services within the EU 0
IE A6 Subcontracting within EU 0
NL A0 0% output tax 0
NL A1 6% output tax 6
NL A3 Delivery of goods within EC 0
NL A4 Services within EC 0
NL A5 Subcontracting within EC 0
NL A6 0% foreign sales, not EC-relevant 0
Country New Tax Code Description Rate (%)

PT
PT
PT

SAP Tax Determination Purpose
Domestic/Export taxes
Generally, for sales related taxes determined based on:
• Sales Organization/Departure Country/Region of departure plant

• Sales Document Type
• Region of Customer/Destination Country
• Tax classification of the customer
• Tax classification of the material
With above combination we can make out:
Region of Plant/ Tax Tax

Tax
Tax Departure Sales Doc Region of customer/ classification classification tax
Rate
Type Country/ Type Destination Country for the for the code
%
Sales Org. customer material

Questionnaire
Following some questions in order to confirm/track any other requirement not properly gathered:
ID Question Answer
Do you have some customers such as non-profit

01
organizations may be tax exempt?
In the drop shipment flow, from ESIP to UK’s
02 customers which kind of rules do you apply in order
to calculate the VAT rate and VAT code?
Do you have different tax rates between finished
03
goods and the other materials?
How do you determine VAT rate and VAT code in
04
NAV?
Do you manage similar object to tax classification
05
material/customer in NAV?
06

Question and Answer

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Template Validation Workshop

Page 1 Thai Union Confidential

 Definition and use

 Tax condition types

 Tax Determination - indicators

 Tax codes definitions

 Tax Classification Purpose

Page 2 Thai Union Confidential

Page 3 Thai Union Confidential

Country Country Name Tax Condition Type Description

TH Thailand MWST Output Tax

CN China MWST Output Tax

FR France MWST Output Tax

FR France LCFR License – France

GB United Kingdom MWST Output Tax

IE Ireland MWST Output Tax

IT Italy MWST Output Tax

IT Italy LCIT VAT license Italy

NL Netherlands MWST Output Tax

NO Norway MWST Output Tax

PL Poland MWST Output Tax

PT Portugal MWST Output Tax

US USA UTXJ Tax Jurisdict.Code

US USA UTX2 County Sales Tax

US USA UTX3 City Sales Tax

ZA South Africa MWST Output Tax

Page 4 Thai Union Confidential

Main factors that influence the tax rate are:

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Sales Document Type

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• Tax Classification for customer  Customer typology

For example we can have

In GT we have 2 kind of classifications:

Tax Classification Customer Description

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• Tax Classification for material

Tax classification defined in GT:

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Country New Tax Code Description Rate (%)

GB A0 Exempt from output VAT 0

Country New Tax Code Description Rate (%)

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• Sales Organization/Departure Country/Region of departure plant

With above combination we can make out:

Region of Plant/ Tax Tax

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Do you have some customers such as non-profit

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