SAP S/4 HANA covers the business processes like Procure-to-Pay, Order-to-Cash and record-to-report. To understand the functioning of tax on sale purchase in SAP we need to know all tax-relevant steps within the end-to-end scenarios. Additionally, we should know the business processes behind them and then need to integrate their requirements accordingly.
Processes of Tax on Sale Purchase in SAP
The end-to-end process of Tax on Sale Purchase in SAP can be divided into four phases across tax types:-
- Data recording and tax determination
- Data analysis and monitoring
- Compliance and statutory reporting
- Tax Planning
Tax Data Recording and Tax Determination
The tax requirements define the data necessary to determine the right tax amount. Tax decisions are processed based on data and tax rules.
The correct result was calculated based on a rule that combines tax-relevant data from different process steps. It is thus important to maintain correct master data to receive and read digital invoice information, to combine and collect the relevant data elements in the tax data model and to have a rule in place that is up to date according to the latest tax requirement.
| Data Elements | Available Data Documents in SAP | Rules for Tax Determination |
|---|---|---|
| Direct Purchase-Accounts Payable | Purchase Order | Direct Purchase |
| Tax departure country- USA | Supplier Master Data | |
| Tax Destination Country-India | Goods Receipt | Determine the ship-from country |
| Tax Rate-10% | Supplier Invoice/Tax Code | Determine Ship to Country from relevant Plant |
| Supplier Name Supplier Address | Payment/Finance Posting |
Tax Monitoring and Data Quality
The tax monitoring process will ensure that the tax-relevant data is complete and correct and will prepare proper tax reporting.
Role of Business Process in Tax on Sale Purchase in SAP
Procure-to-Pay
The Procure-to-Pay scenario bundles the business processes of purchasing from the request and execution of an order to the receipt of deliveries or services and the processing of invoice receipt to the payment run.
Procure-to-Pay processes are especially subject to automation as the highest potential for efficiency gains and cash optimisation occurs here.
Along the procure-to-pay process, a lot of tax-relevant data is recorded
- Business Partner (Supplier)
- Material Type
- Material Group
- Procurement Type
- Order Quantity
- Incoterms
- Terms of Payment
- Conditions ( gross prices, discounts, freight, costs, taxes )
- Account assignment type ( assets, cost renters, Production orders )
- Purchasing organisation
- Plants
This data covers requirements for all tax types, indirect taxes ( VAT/GST), Withholding Tax, transfer prices and income taxes.
Order-to-Cash
The Order-to-Cash scenario specifies the business processes of sales from the contact to account receivables with tax-relevant impacts for all tax types
During the order-to-cash process, SAP S/4 HANA records tax-relevant data for all tax types
- Business Partner ( Customer)
- Material Type
- Order Quantity
- Terms of Delivery/Incoterms
- Delivery Plant
Record-to-Report
The record-to-report scenario includes tax reporting activities and statutory accounts activities. Some of the activities that are relevant mainly for income taxes are as follows
- Identification of temporary differences based on deviating commercial law/tax recognition and valuation regulations/tax accounting
- Review of tax items for tax effects from previous years
- Determination of current taxes in the financial statements of the current financial year.
- Assessment and approach of tax risks about future tax audits
Summary
In this blog, we discussed the opportunities of S4 HANA from a tax perspective. We also discussed an overview of the necessary transformation roadmaps to the tax function and its tax value.
Learn more on P2P with SAP with:- This Video Series
