Almost all sales and purchase activities within the European Union (EU) are relevant for value-added tax (VAT). VAT reporting is based on postings made for invoices sent and for invoices received. However, in some EU countries VAT also has to be reported even if no invoice has been received yet. This obligation exists when goods are acquired from vendors located in other EU countries and when the invoice still has to be received by the 15th of the month after the goods were received. For example, a Polish company orders goods from an Italian supplier. The goods are received in September, but the invoice only arrives at the beginning of November. In such a situation an acquisition tax accrual has to be made and it has to be included in the October VAT declaration. When the invoice is received, the accrual has to be reversed.

The functionality developed by SAP to handle this legal requirement is called acquisition tax accrual. The functionality is generally available since SAP R/3 4.6C. The tax accrual has to be made for the Czech Republic, Hungary, Poland, and Slovakia. I describe how to set up the acquisition tax accrual in the SAP system and the processes related to acquisition tax accruals.

Prerequisites

For the acquisition tax accrual functionality to work correctly, you need to fulfill some prerequisites. I have listed these prerequisites and the steps that you need to take to fulfill them.

Step 1. Define the acquisition tax code. First, you must set up the acquisition VAT code using transaction FTXP. Enter the country code for which you want to maintain the tax code. On the next screen, enter the tax code to be maintained. Press Enter to bring up the screen in Figure 1. The example shows the acquisition tax code PJ as it has been set up for Poland. The properties of the tax code must be maintained correctly. The EU code of the VAT code must have been set to 9 to indicate that it is an acquisition tax code. Figure 2 shows the properties of the VAT code.

Figure 1

Acquisition tax code

Figure 2

Properties of the acquisition tax code

Step 2. Create the technical account using transaction code FS00. The tax acquisition accrual is a posting, and therefore, it requires a general ledger (G/L) account to be used for this posting. The accrual posting makes both a debit posting and a credit posting on this account. Therefore, the balance of this G/L account always is zero. When you are setting up the acquisition G/L account, it is important to set the tax category to - (or *) and to select the check box for Posting without tax allowed (Figure 3).

Figure 3

Technical G/L account for acquisition tax accrual

Configuration

Within configuration, you need to complete two steps.

Step 1. Create a new account key TGR. The account key is used by the report for the tax accrual postings to determine the G/L account to be used. In Customizing follow menu path Materials Management (MM) > Purchasing > Conditions > Define Price Determination Process > Define Transaction/Event Keys > Transaction Keys. Figure 4 shows the menu that appears. Select the first option, Trans./Event Key.

Figure 4

Menu for transaction and event key maintenance

Go to the overview screen (not shown) with account keys. On this screen click the New Entries button. Then enter the data for a new account key. Enter TGR as the account key (ActKy) and Acq.Tax Accruals as the Name (Figure 5).

Figure 5

New account key TGR

Save the new entry and go back to the IMG structure by clicking the save icon.

Step 2. Configure the automatic posting. You now assign the correct G/L account to the account key just created. Start transaction OBYC or in Customizing follow menu path Materials Management > Valuation and Account Assignment > Account Determination > Account Determination Without Wizard > Configure Automatic Postings.

Go to the overview screen for maintenance of automatic postings for materials management (this screen is not shown). When going via the menu on the pop-up screen you see, you first have to click the cancel button. Next, click the Account Assignment button. You now are at the overview screen. When using transaction OBYC directly, you see the overview screen immediately. Double-click the line that shows the account key TGR. Click the save icon  to save the rules (Figure 6). Then define posting keys (not shown) by pressing the Posting Key button. Save the posting key entries by pressing the save button. Press the Rules button  to assign the technical account to the acquisition tax accruals transaction key (Figure 7). Save your entries again by clicking the save icon.

Figure 6

Rule for automatic posting of acquisition tax accrual

Figure 7

Assign technical G/L account to transaction key TGR

The Business Process

I now explain how the business process works using an example. First create a purchase order (PO). Make sure that on the Invoice tab of PO line items, you derive a tax code or enter one manually. If derivation is used, you use info records (standard purchasing functionality). In addition, on the Invoice tab indicate that the invoice is goods receipt (GR) based, meaning that invoices for this PO can only be registered for goods that have been received. If you do not set the indicator, the report for acquisition tax accrual sends a warning. Figure 8 shows the VAT code on the PO item and the GR-based invoice indicator.

Figure 8

VAT code on the Invoice tab of the PO line item

After you create the PO, you are ready to post the GR. Figure 9 shows the financial document related to the GR. Note that there is no VAT code used for the posting; however, if the financial document has a VAT code, the tax code appears in the Tx column. The GR/invoice receipt (IR) account has been highlighted, as this account is used later as a selection criterion for the tax accrual posting.

Figure 9

Financial posting for the GR

Now you are ready to start reporting the acquisition tax accrual. The first part of this process is creating the tax accrual. Because no invoice has been received, this GR must initiate an acquisition tax accrual. To create this accrual, start report RFIDEUVP via user menu path Accounting > Financial Accounting > General Ledger > Reporting > Tax Reports > Poland >  Acquisition Tax Accruals > Create. Figure 10 shows the selection screen of the report. The test indicator is not shown on the selection screen. This indicator can be found at the bottom of the screen.

Figure 10

Selection screen report RFIDEUVP

On the selection screen, make the following settings:

• In the G/L account selection section, specify which G/L account you use for the GR/IR account.
• In the Invoice section enter the Key Date (i.e., the date by when the invoices must arrive). In most cases, this is the 15th day of the month that follows the month of the VAT return. Specify whether the invoice’s Posting Date or Document Date counts as the key date in the corresponding radio buttons.
• In the Goods Receipt section, select all GRs from the month of the VAT return. Use either the Posting Date fields or the Document Date fields, depending on what the tax authorities in your country require. Enter the dates that the VAT return is to cover.
• In the Posting section, make the settings for the accounting documents for the accruals. Specify the document type with which the documents are to be created (in the standard system, you can use SA).
• In the Dates section, enter the posting date and the document date. You can copy these dates from the GR posting by clicking the related check boxes or you can enter a date manually in the fields Other Posting Date and Other Document Date.
• In the Currency Conversion section, specify the exchange rate (type and date) with which to convert foreign currency items.

Once you have entered all the selection parameters, start the report by clicking the execute icon.

Figure 11 shows the result of the report. The first line shows the document number of the original GR. The second line shows the document number of the financial posting made for the acquisition tax accrual. In case of a test run, this number is blank. The report does not process any GR twice.

Figure 11

Results from report RFIDEUVP

The details of the financial document resulting from report RFIDEUVP are shown in Figure 12. In the Text field you can see the number of the GR document and the PO number followed by the item number.

Figure 7

Financial posting made by report RFIDEUVP

The second part of the acquisition tax accrual reporting process is reversing acquisition tax accruals. To demonstrate how this works, I use the same PO. I assume that the vendor has sent the invoice and that the invoice has been registered in the system. This means that the acquisition tax accrual must be reversed. Start report RFIDEUVR or alternatively follow SAP user menu path Accounting > Financial Accounting > General Ledger > Reporting > Tax Reports > Poland > Acquisition Tax Accruals > Reverse. Figure 13 shows the selection screen of report RFIDEUVR.

Figure 13

Selection screen report RFIDEUVR

Complete these steps to enter the selection parameters:

1. In the General Selections section, enter the Company Code and the Invoice date.
2. In the Postings section, make the settings for the reversal documents.
3. In the Simulation section, indicate whether you are performing a test run or a production run.

After entering the parameters, start the report by clicking the execute icon. Figure 14 shows the result of report RFIDEUVR. Compared with Figure 11, two lines have been added: one for the incoming invoice and one for the reversal of the acquisition tax accrual.

Figure 14

Results of report RFIDEUVR

Figure 15 shows the financial posting of the reversal. It is the exact opposite of the original posting shown in Figure 12.

Figure 15

Financial posting of the reversal of the acquisition tax accrual

Once you execute the reports for acquisition tax accruals and their reversal, the VAT reporting is correct.

Czech Republic and Slovakia: Tax Code Substitution

By default, the Create Acquisition Tax Accruals program generates tax accruals using the same tax code as in the original PO. However, the tax authorities in the Czech Republic and Slovakia require companies to post acquisition tax accruals as nondeductible taxes. Therefore, the program must substitute the tax code in the PO (which is deductible) with one that is nondeductible. This process requires one additional customizing activity.

Within the customizing for financial accounting (FI), you have to specify the tax code with which the system is to post acquisition tax accruals. Follow customizing menu path Financial Accounting Global Settings > Tax on Sales/Purchases > Basic Settings > Settings for Tax on Sales/Purchases in the Czech Republic or Slovakia >  Specify Tax Codes for Acquisition Tax Accruals. Figure 16 shows that instead of using VAT code CL, the acquisition tax accrual is to be posted with VAT code CA.

Figure 16

Indicate which VAT code is to replace the original VAT code

Kees van Westerop

Kees van Westerop has been working as an SAP consultant for more than 25 years. He has an MBA degree in mathematics and a degree in finance. Kees has been concentrating on the financial modules, especially in general ledger accounting, cost center accounting, and consolidation. He also has a great deal of experience with rollouts of kernel systems and integrating finance and logistics.

You may contact the author at keesvanwesterop@hotmail.com.

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