Tax on Sale Purchase in SAP S/4HANA

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

Pradeep