Few days back I have started a blog series – Reflection via conversations to share my experiences/learnings from S/4HANA cloud implementation projects. The first Blog of this series was focused on the initial Q to P transports.
In this blog, I want to reflect on my conversation around the Tax rate maintenance for US. As the tax rates in US change quite frequently, this blog will focus on the possibilities of changing the tax rates and validity period of the tax codes and the important considerations that need to be followed while changing the same.
Customer – Hello Anshu, hope you are doing good. We have encountered an issue while posting customer invoices for our US company code.
Tax rates of Tax Code XX and tax procedure of TAXUSJ against different Tax Jurisdictions are wrongly defined during implementation. We need to fix this ASAP as this is blocking the posting of customer invoices for three of our US customers where the tax is applicable.
Anshu - Hello Sir, I am doing good. Thank you. Did you try out the configuration step Define Tax Codes for Sales and Purchases? SAP has provided a self-service configuration UI (SSCUI) which you can use to change tax rates for company codes in the US. Please check the following:
In Configure Your Solution, under Application Area, select Finance. Under Sub Application Area, select Statutory Reporting. From the table, select the Tax item. Select Configure for configuration step Define Tax Codes for Sales and Purchases.
Customer – Yes, we tried using the SSCUI to change the tax rates, but we are facing an error while changing the validity date along with the tax rates.
Anshu – I understand that here you are maintaining the tax rates backdated. Valid from date that you are trying to maintain comes before the valid from date of the already existing setting.
Customer – Yes as we have not yet gone live and when we are entering the old invoices the tax computations of our historical invoices is getting impacted which does not give correct amount reconciliation and our trial balance will not match with our old Finance system for auditing purposes. So, we need to update the tax rate for back date too.
Anshu – Alright! There is a way to achieve this if you change the message control of the error message to warning. Please follow the following steps:
In Configure Your Solution, under Application Area, select Finance. Under Sub Application Area, select Localization. From the table, select the General settings item. Select Configure for configuration step Change Message Control.
Enter following details
Application Area FOT_US_INT_TAX_CALC
Message Number Online Batch
048 W W
This will change the error message for Validity period to warning and you will be able to save the changed tax rates for back date too.
♦ But there is an important consideration that you should keep in mind. If you change the tax rates for the past dates, it will create a completely new interval and the tax rates maintained for future dates will be deleted. Therefore, the already posted documents e.g. sales orders, Financial documents where the tax was calculated with the previous rates cannot be audited anymore as the documents will be out of sync with the data maintained in the Tax master.
Customer – As I mentioned, we have not started posting any documents yet. There are no backdated documents existing in the system. Can we proceed with this setting?
Anshu – Yes but as a recommendation from SAP, once you have maintained the tax rates and transported to P system. Kindly change the message control of the validity period back to error again to avoid any inconsistencies in future.
Customer – OK, anything else that we should keep in mind?
Anshu - Please note that, once the rate has been backdated, it will create a completely new interval and remove previous rates. Therefore, if multiple rate changes need to be maintained they will have to be re-entered.
And You must enter changes to tax rates in chronological order to avoid a very serious configuration error.
For example, if the rate was 5.00% on 1/1/2019 and 5.5% on 1/1/2020, the 2019 rate would be entered first followed by the 2020 rate to create the correct intervals.
Please find more details in the help documentation.
Customer – Sure will ensure the same. Thank you!