Tax Category & Tax Classification

[Former Member]

Hi All,

I need to know wat is the significance of Tax Category and Tax Classification. I heard from one of my senior consultant that Tax Category and Tax Classification will help us to define different tax combinations.

Can any one explain in detail as how can we configure different tax combinations in SAP for SD.

Pls don't paste link abt the topic. If any person can explain his current business and how the tax combinations are defined in his project will help me a lot rather than going thru the links.

Points will be rewarded for best explanation.

Regards,

Sreekanth

[former_member183879 · Accepted solution]

Tax category is nothing but the tax condition type like MWST which we use in pricing procedure.In FI terms it is called as tax category.

A tax category should be assigned to a particular country and only then the tax category be used in Customer or material master.

A tax classification is the classification of customers as tax liable or tax free etc.

A tax classification will have a tax code which is configured in FI which will have the percentage of tax

Configuration for tax category adn tax classification as follows.

SPRO-SD-Basic Functions-Taxes---

1.Define tax detmn rules----This is where tax category is linked to country

2.Define tax relevancy for master records-This is where tax category and tax classification are linked together. Unlinked combination cannot be used in mastere data

SPROFinancial Acctg-Fin acctg global settings-Tax on sales &purchases-Calculation---

1.Define tax codes for sales

Here the tax codes are assigned a %

Once tax category is assigned to country, and tax classification is linked to tax category, in teh customer and material master, for the tax category , tax classification of the customer will be maintained. This will be master data.

Then in VK11, for the tax category(conditiontype), for the combination of tax classification of customertax classification of materialdeparture country+destination country combination, a tax code will be assigned (remember a % is not explicitly given in condition record as in case of other normal conddition types). Based on the tax code---%mapping in the FI path i mentioned earlier, the condition record determines the % of tax for that combination.

The tax codes and% combination is local for a country, and hence the tax code can have various % based on the country code.

Hope this clears your doubt.

Reward point if it helped you

Message was edited by:

iimnava

[Former Member]

Tax category is nothing but the tax condition type like MWST/MWVS OUTPUT/INPUT which we use in pricing procedure.In FI terms it is called as tax category.

A tax category should be assigned to a particular country and only then the tax category be used in Customer or material master.

A tax classification is the classification of customers and materialas tax liable or tax free etc.SPRO-SD-Basic Functions-Taxes---

1.Define tax detmn rules----This is where tax category is linked to country

2.Define tax relevancy for master records-This is where tax category and tax classification are linked together. Unlinked combination cannot be used in mastere data

[Former Member]

Hi Sreekanth,

Tax Category is the type that is applicable to a specific country. We will assign that Tax category to the country. Before that we have to assiign that in our pricing procedure.

Tax classification:We are classifying the particular tax category in to types based on Specifications in that countryt.

EX: 1. NO tax

2. Full TAX

3. 4% tax.

Based on the Tax rules and its applicability we will classify the taxes