The Procedure of Tax Configuration in SAP

Updated Jul 09, 2021

Tax determination is mainly a country-specific setting and there are separate SAP

modules for tax. In SAP the amount of tax is determined mainly on the basis of Tax
procedures and Tax Codes.

Tax on Purchase/Sale- When we purchase something we have to pay the tax, it is

called input tax. It is denoted by V. When we are selling something we have to pay the
tax, it is called output tax and it is denoted by A.

The Procedure of Tax Calculation in SAP

Define Condition Types
Define the Account Key
Create Tax Procedure
Assign the Country to the Calculation Procedure
Define Tax Codes

Define Condition Types

It indicates different types of tax such as GST, VAT, etc, and conditions applicable.

Steps to create Condition Types

Step 1: Enter the T-Code  SPRO  in the SAP Command Field and press  Enter .
Now on the next screen click on SAP Reference IMG Button
Step 2: Navigate to SAP IMG Path:

Financial Accounting >> Financial Accounting Global Settings >> Tax on

Sale/Purchase >> Basic Settings >> Check Calculation Procedure

OR

Enter T-Code OBYZ
Here you can Define your Condition Types

Click on  Define Condition Types

Step 3: Click on the  New Entries  button on the top navigation

Step 4: Now make an entry in the following fields

Condition type: Enter condition type as RGST for company code 1982.

Access sequence: Select standard Access Sequence MWST from the list.

Condition class: Select Condition Class D for Taxes.

Calculation Type: Select Calculation Type A for Percentage.

After making all the entries press the Save button.

Now Condition Type RGST for company code 1982 is created.

Define the Account Key
Steps to create Account Key

Step 1: Enter T-Code SPRO and click on the button SAP Reference

IMG & Navigate to SAP IMG Path

Financial Accounting >> Financial Accounting Global Settings >> Tax on

Sale/Purchase >> Basic Settings >> Check and Change Setting for Tax
Processing

Here we will define our account key

OR

Enter T-Code OBCN
Step 2: On Change View Text Processing and Accounting Screen click on
the  New Entries  button
Step 3: Give information in the following field.

Process: Enter process name as RG1

Description: RGST for company code 1982

Tax type: Select Tax type 1 for Input tax and Tax type 2 for Output tax

Posting indic: Select Posting indicator 2 for Separate line item

Press the  Save  button

Now the Account Key RG1 is created you can see it from the list.

Create Tax Procedure

It is the automatic mechanism developed to calculate tax on sales and purchases by
the system. Tax Procedure should not be created for any company codes, it should be
for one specific country.

There can be multiple tax procedures for the same country but for multiple company
codes, there is a single tax procedure. There are so many country-specific Tax
Procedures available in SAP, simply you can assign the tax procedure to your country
and its applications. Tax Procedure should be assigned to the country before creating
the Tax Codes.

Steps to create Tax Procedure

Step 1: Enter T-Code SPRO and click on the button SAP Reference

IMG & Navigate to SAP IMG Path

Financial Accounting(New) >> Financial Accounting Global SettingS(New)

>> Tax on Sale/Purchase >> Basic Settings >> Check Calculation Procedure

OR

Enter T.code OBYZ
Step 2: A popup window screen appears with options. Double click the  Define
Procedures  field.

Step 3: On Change View “Procedure”: Overview screen click on New Entries

button
Step 4: On New Entries: Overview of Added Entries screen update the following
field.

Procedure: Enter the name of the tax procedure which is a 5 digit key for
example XYZIN.

Description: Descriptive text of the tax calculation procedure for example TAX
PROCEDURE FOR XYZ INDIA.

After maintaining the details click on the  Save  button.

Step 5: Now select the procedure XYZIN you created from the procedure tree
and double click the  Control Data  folder

Step 6: Select the  New Entries  button

Step 7: On the New Entries screen give information in the following fields.

Step: Enter the number like 10, 20 30….etc. which specifies the sequence of the
procedure.

Condition type: Either we can create or use sap standard condition type for
example BASB for Base Amount.

Description: The description text appears automatically based on the condition

type

Account key: We link the account key to the tax procedure

After completing all the details click on the Save button and your tax procedure is
successfully created and you can see it from the Procedure tree.
Assign the Country to the Calculation Procedure
Step to assign the country to the tax procedure

Step 1: Enter T-Code SPRO and click on the button SAP Reference IMG & Navigate
to SAP IMG Path

Financial Accounting(New) >> Financial Accounting Global Settings(New) >>

Tax on Sale/Purchase >> Basic Settings >> Assign Country to the
Calculation Procedure

Or

Run T.code OBBZ
Step2: On the Change View “Assign Country” screen select the country from the
list and change the tax procedure to XYZIN
Then press the  Save  button

Now your Tax procedure XYZIN is assigned to the country India.

Define Tax Codes

Tax Codes are the tax rates used in the calculation of tax. We can create multiple Tax
Codes.

Step to create Tax Code

Step 1: Enter T-Code SPRO and click on the button SAP Reference

IMG & Navigate to SAP IMG Path

Financial Accounting >> Financial Accounting Global Settings >> Tax on

Sale/Purchase >> Calculation >> Define Tax Codes for Sales and Purchases
Now it will ask you to select the country of which you want to define Tax Codes
Step 2: On the Maintain Tax Code: Initial Screen

select

Country as IN India
Tax Code as R1

Step 2: Double click Tax code R1

Then the Properties window well come, update the following fields

Tax Code: R1
Tax type: V for Input Tax
Then press the check button

Now Maintain Tax Code: Tax Rates screen appears

In the field, Tax Percent Rate give the Input and Output Tax percentage as 18%.

Then press the  Save  button.

Now your Tax Code R1 is created successfully.