I recently helped a company in Thailand with a successful application of value-added tax (VAT) to its import purchases. In Thailand you need to apply a 7 percent VAT to import purchases. The steps I used avoid the need for configuration of a new tax procedure to handle VAT on import purchases. They apply to any business and country in which VAT is mandatory for import purchases.

To achieve this goal, I use a direct posting to the general ledger (G/L) account via invoice posting transaction MIRO. At the time of creating the import purchase order (PO) for Thailand, I entered 0 percent for tax, not 7 percent, because otherwise the system applies this 7 percent on the net price, not the total price as needed. Also, I needed to ensure that VAT did not post to an inventory account.

When materials arrive at a Thai port, companies pay customs duties and VAT to the customs department as per the invoice provided. Then in the SAP system, the VAT paid to the customs department is captured against the G/L account created for VAT. Below I provide the step-by-step process to achieve this:

Step 1. Create a PO Using Assign and Process

Follow menu path Logistics > Materials Management > Purchasing > Purchase Requisition > Follow-on Functions > ME57 – Assign and Process. First, the buyer has to determine what purchase requisitions are available. To get a list of purchase requisitions for a buyer, enter the following:

• Purchasing group code (TRT in my example in Figure 1). If you don’t know the code, press F4 while highlighting the Purchasing group field and select the code from drop-down list.
• Plant code (this is the plant code in SAP that a buyer needs to process the purchase requisition, which is 8399 in my example).
• Scope of List (A in my example). Always put A for this field.
• Sort Indicator (1 in my example). Always put 1 for this field.

Also, check the boxes for Assigned Purchase Requisitions and Released Requisitions Only. Then click the execute icon  or press F8.

Figure 1

Provide information as part of creating a PO

The screen in Figure 2 appears. Here, select the purchase requisition by clicking on the check box  along the left. This shows you the purchasing information record (i.e., information about the supplier who provides the material). I also highlight the purchase information record at the bottom of Figure 2.

Figure 2

A purchasing information record

Once you check the record box in Figure 2, click the Assignments button at the top and the screen in Figure 3 appears.

Figure 3

A process requisition assignment

Put your cursor on bottom line, which in my example shows 1 as a PReqs value, and click the Process assignment button at the top. This opens a pop-up window to create a PO (Figure 4).

Figure 4

Pop-up window to create a PO

Confirm that the purchasing group code, purchasing order type (which should be NB), and purchasing organization details are correct and click the check mark icon .  

In the next screen, select the purchase requisition number by clicking once (it will turn yellow) under the Document overview panel (Figure 5). Click the adopt icon . This copies the date from the purchase requisition to the PO shown on right half of the screen.

Figure 5

Select a purchase requisition number

Click the Invoice tab and enter the Tax Code as V0 (Figure 6). V0 is the tax code for VAT – 0 percent, while N1 is the tax code for VAT – 7 percent. At the time of PO creation, you need to enter 0 percent tax only. You capture VAT – 7 percent later at the time of invoice posting.

Figure 6

PO details for tax code entry

Click the Taxes button, which displays the tax calculations (Figure 7). This is just to display the tax percentage captured after entering V0 in Figure 6.

Figure 7

Tax calculations screen

Press F3 to go back to the main PO screen. Save the PO by pressing Ctrl+S.

Step 2. Book Liability – Payment of Custom Duty and VAT

Follow menu path Logistics > Materials Management > Logistics Invoice Verification > Document Entry > MIRO > Enter Invoice.

In the subsequent screen, enter your company code (if you know it) or press F4 on the Company Code field to find the relevant code from the drop-down menu (Figure 8). Once you enter the code, click the check mark icon.

Figure 8

Enter the company code

Enter the invoice date, posting date, reference (i.e., the number on the vendor invoice), and business place (designated as Bus. place/sectn) as shown in Figure 9. Bus. place/sectn is a mandatory field in Thailand (designated by the BP00 value), but it may not be required for your country, so leave it blank unless you know it is mandatory. Select 1 Purchase Order/Scheduling Agreem and 1 Goods/service items as shown.

Figure 9

Enter various invoice data

On the same screen, enter the PO number in the field next to 1 Purchasing Order/Scheduling Agreem (Figure 10).

Figure 10

Enter the PO number

Click the G/L account tab. Under the G/L acct column, enter the accrual account number for both customs duties and for VAT, using separate lines. Check with your finance team about what G/L accounts are configured for customs duties and VAT in your company code.

On the first line (i.e., G/L account for customs duties), enter the customs duty currency amount (you can find this amount on the invoice provided by your supplier) under the Amount in doc. curr. column and press Enter on your keyboard. In my example, I enter 700.00 into this field (Figure 11).

Likewise, on the second line (i.e., G/L account for VAT) enter the VAT amount from the invoice under the Amount in doc. curr. column and press Enter on your keyboard. In my example, I enter 600.00 in this field. In the same line, enter the tax code under the T column. In my example, N1 is the tax code for VAT – 7 percent.

Figure 11

Enter custom duty and VAT amounts

Press Enter on your keyboard and the message in Figure 12 appears prompting you to enter a tax base amount.

Figure 12

Message about entering tax base amount

Select the second line for VAT and click the Tax Base button as shown in Figure 13.

Figure 13

Enter the tax base amount

In the subsequent screen, click the Determine Tax Base button and review the base amount (it should match with the amount on which VAT needs to be applied). Then click the Continue button (Figure 14).

Figure 14

Click the Determine Tax Base button

In the next screen, go to the Details tab and populate the Invoice Party field (designated as Inv. Party) with your custom vendor number (Figure 15). Check with your finance department about this vendor number. Generally it is the vendor number created for the government which collects taxes and duties.

Figure 15

Enter the custom vendor number in the Inv. Party field

Now click on the Basic data tab and enter the total amount of the invoice in the Amount field as highlighted in Figure 16.

Figure 16

Enter the total amount of the invoice

After entering the amount, make sure the Balance field at the top right has the green light symbol and a $0 amount in it. If it is not zero then you have to check if amount entered by you is correct as it should match with amount mentioned on invoice. Once you have confirmed the balance, press Ctrl+S to post your custom duty and VAT amount.

As a final reminder, the above steps work for any country in which VAT is applicable on import procurement.