Within the European Union (EU) a value-added tax (VAT) has to be applied on almost all purchases and sales. In most countries, a low and a high rate of VAT is to be applied. Although historically the rates rarely change, in several countries the rates are being changed owing to the economic crisis. For many companies this is a new situation. They are used to setting up the VAT codes for new countries in which they roll out their SAP systems, but in this case, there is also an impact on the existing data.

I provide a checklist of the most common activities in the SAP ERP Central Component (SAP ECC) system to be done if the VAT rates change. It is impossible to provide a complete list of activities that are to be executed by every company because every SAP implementation is different.

Note
In the screenprints in this article, I use the rate change from 19 percent to 21 percent as my example, which just recently happened in the Netherlands.

First Settings to Be Made

The first settings to be made are the new VAT codes to be used for the new rate percentage change. With a standard SAP system, it isn’t possible to change the percentage of existing VAT codes from a certain date onward. For companies doing business in many countries, this process is already difficult because the VAT codes in the SAP system are just two characters.

For some countries, for legal purposes, companies are required to have 40 to 50 VAT codes, so if you do business in 50 countries, you run out of possibilities because the SAP system cannot accommodate 50 codes for 50 countries.

In Figure 1, enter the country key for the tax country and then click the Copy button. In the pop-up screen that appears enter the old tax code in the From field and the new tax code in the To field. Press Enter or click the green check icon.

Figure 1

Copy the old VAT code to the new VAT code

All the data related to the old VAT code is copied to the new VAT code. On the next screen that appears you need to change the description and the percentage. Because this is basic customizing, this screen is not shown.

SAP is aware of this problem, and has modified the system so that it is possible to use special characters for VAT codes as well. Although this change adds more options, this is not always sufficient to meet the requirements of companies. For the time being no fundamental solution is foreseen.

Use transaction FTXP to maintain tax codes. Follow IMG menu path Financial Accounting > Financial Accounting Global Settings > Tax on Sales/Purchases > Calculation > Define Tax Codes for Sales and Purchases. You normally need to define new tax codes for:

• Local sales
• Local purchases
• Purchase of services within the EU
• Purchase of goods within the EU
• Purchase of services or goods outside the EU

When you start transaction FTXP you are asked to enter the tax country. This is the country for which the tax rate is changed. You don’t need to change tax rates for other countries. Because the tax codes already exist for the old VAT rates, you can create the new codes by copying the old codes. Transaction FTXP has a copy functionality (Figure 1).

In Figure 1, enter the country key for the tax country and then click the Copy button. In the pop-up screen that appears enter the old tax code in the From field and the new tax code in the To field. Press Enter or click the green check icon.

All the data related to the old VAT code is copied to the new VAT code. On the next screen that appears you need to change the description and the percentage. Because this is basic customizing, this screen is not shown.

For some companies determining the account for the VAT posting is based on the VAT code. If this is the case, the account determination for the VAT must be adjusted. You can make this adjustment in transaction FTXP, or you can use transaction OB40. The latter transaction can be found in IMG menu path Financial Accounting > Financial Accounting Global Settings > Tax on Sales/Purchases > Posting > Define Tax Accounts.

Although you can use transaction OB40 instead of transaction FTXP to complete this process, using transaction FTXP is easier because FTXP immediately informs you if an adjustment is required. When you use FTXP, you can immediately see whether the tax code is already allocated to a general ledger account. Figure 2 shows an example of the account determination via transaction FTXP.

Figure 2

Account determination using FTXP

After you click the Tax accounts button, the pop-up screen shown in Figure 2 appears. One disadvantage of using transaction FTXP is that the entries must manually be put in a transport request. However, that is also the standard procedure for tax codes, so the disadvantage is not that great.

To prevent errors when selecting tax codes, the SAP system enables you to limit the tax codes that can be used per functional area; for example, accounts receivable, accounts payable, and invoice verification.

You also can set a default value per functional area. In case you use this functionality, you must adjust these settings as well. The customizing transaction is OBZT. This transaction can be found at several places in the IMG; for example, via menu path Financial Accounting > Accounts Receivable and Accounts Payable > Business Transactions > Incoming Invoices/Credit Memos - Enjoy > Define Tax Code per Transaction. In Figure 3 you see an example for this transaction. All existing VAT codes appear on the list, including the new VAT codes A4 and V4, and the default value has also been changed to the new codes. After you select the settings, click the save icon (not shown in Figure 3) to save your entries.

Figure 3

Select settings for tax codes

Once you create the new tax codes, you can make the other adjustments. I discuss these adjustments per area.

Financial Accounting

In the general ledger master data no modifications are required unless you use VAT codes in the G/L accounts. When you use a VAT code as a tax classification in the G/L account, you must change this code on the day the new percentage becomes effective. Figure 4 shows an example of how this may look. You use transaction code FSS0 for this step. For example, you can use transaction code S_ALR_87012328 (report RFSKVZ00) to search for G/L accounts having a fixed VAT code. In this transaction you must use the dynamic selection to select on Tax category. This is part of the company code data. You can use transaction FSS0 to change the accounts on the day the change becomes valid. Enter the G/L account number and company code and click the change icon. Change the existing VAT code to the new VAT code and click the save icon. Alternatively, you may use transaction OB_GLACC12 to do a mass change, but users often don’t have authorization for this transaction.

Figure 4

An example of a general ledger account with tax code

Recurring entries also need to be checked for the VAT codes. With transaction S_ALR_87012346 you can check the recurring entries. This transaction provides a list of all recurring entries, including the individual line items. You can filter the line items on the old VAT codes to see which documents need to be adjusted.

Account assignment templates may have tax in them as well. Use transaction FKMT to check the account assignment templates. Be aware that you can change the templates only on the day the new VAT codes become valid. You can also create new templates to be used after the VAT codes become valid and delete the old templates afterward.

The SAP system enables you to store financial documents without posting them in the general ledger. These documents need to be completed at a later time. They are called parked documents. Parked documents need to be checked for the VAT codes. The easiest way to check the parked documents is to use transaction FBL3N. On the dynamic selections you must select the tax code. Make sure that you select it from the document part. Furthermore, to select only parked documents, click the parked items indicator at the bottom of the screen and deselect the other indicators (Figure 5).

Figure 5

Line-item display using transaction FBL3N

You need to check parked documents one by one for VAT codes that will become obsolete and adjust them if necessary. This is a manual exercise that cannot be automated because the status of the parked documents may vary.

Intercompany Intermediate Document (IDoc) Processing

IDoc processing is used to automatically transfer an outgoing intercompany invoice into an incoming invoice. Transaction OBCD contains the settings to transfer the outgoing VAT code into an incoming VAT code. The settings are among others based on the receiving country and the tax rate used in the outgoing invoice. The settings have to be adjusted for each entry that has as its receiving country the country for which the VAT rate is changed. There are two example conditions.

Figure 6 shows two conditions stored via transaction OBCD. The first entry is an example of an acquisition from an EU country to the Netherlands. The second entry is a local sale from one Dutch company to another Dutch company. The data in the first entry causes an issue because the tax rate for the other EU country does not change. It remains 0 percent. However, for the receiving country, the tax rate percentage changes. The best thing to do in this scenario is to change this condition on the date the new tax rate becomes valid.

Figure 6

Tax condition settings stored before adjustment

The second entry must remain as is. For the local situation, an additional entry needs to be added. Figure 7 shows how this entry looks. Because the tax percentage changes from 19 percent to 21 percent, you can add the new condition.

Figure 7

Tax condition settings after adjustment

Note
Settings made in transaction OBCD cannot be transported, but have to be made in each individual environment.

VAT Reporting

Depending on the country and the way of reporting, some adjustments may have to be made. For Belgium and Germany, for example, you always need to adjust the Group Tax Base Balances and the grouping of tax balances. This is also the case if you use electronic tax declarations.

The group tax base balances are used to report the base amounts for the VAT. The grouping of tax balances is used to calculate the VAT amounts to be reported.

You can find the transactions for the maintenance of both customizing tables in IMG menu path Financial Accounting > General ledger accounting > Business Transactions > Closing > Report > Sales/Purchase Tax Returns > Group Tax Base Balances/Group Tax Balances. Or you can use transaction OBCG for the tax base balances and transaction OBCH for the tax balances. Be aware that you may have to adjust the variants used for VAT reporting.

The Cash Journal

The cash journal is a journal used to manage the postings for cash transactions. The settings for the cash journal may have fixed VAT codes that need to be changed. With transaction FBCJC2 you can maintain the business transactions for cash journals. Follow IMG menu Financial Accounting > Bank Accounting > Business Transactions > Cash Journal > Create, Change, Delete Business Transactions. Figure 8 shows an example of such a business transaction. In this case you assign the tax code V2 to the business transaction for training costs. The best modification is to create a new business transaction for training costs with the new VAT code. However, this can be very confusing for users. Therefore, a better solution is to change the VAT code and transport the change to the production environment at the date the new VAT rate becomes valid.

Figure 8

Business transaction for the cash journal

Within Electronic Bank Statements (EBS) you have the possibility to define search strings. Search strings are used to modify the postings generated by the EBS upload transactions. For instance, they can be used to derive VAT codes. This can be useful in a situation in which you don’t receive an invoice, but the amount is automatically transferred to the vendor.

You can customize search strings via IMG menu path Financial Accounting > Bank Accounting > Business Transactions > Payment Transactions > Electronic Bank Statement > Define Search String for Electronic Bank Statement. Figure 9 shows an example of a part of the search string. In this case the field BSEG-MWSKZ (the field for tax code in a posting line) is filled with the value V2.

Figure 9

A search string

There is no date in the search string. Therefore, for example, if value V2 is to be changed to V4, then this change can only be done as soon as the new VAT rates become valid. Even then you cannot be sure that it is correct because a payment may relate to a future or an old invoice. An alternative might be to first replace the code by an invalid value. This forces a manual correction of the postings. Then after a while you can make the final correction.

Purchasing

Purchase information records contain conditions regarding the purchasing of materials (e.g., prices). However, these records may also contain VAT codes. Report RM06IMWS changes the old VAT codes into the new VAT codes.

Start transaction SA38 (or SE38) and enter the report name RM06IMWS. Click the execute icon to advance to the selection screen of the report (Figure 10). You need to enter the old and new VAT codes. When you don’t set the indicator called Implement database change, the report produces an overview of only the information records to be changed. When the indicator has been set, the information records are updated.

Figure 10

The selection screen for report RM061MWS

A similar report exists for the update of purchase orders and similar documents, such as contracts. Report RM06ENMW changes the old VAT code to the new VAT code. Figure 11 shows the selection screen of report RM06ENMW. The Scope of List field determines what information is to be displayed. By default, it is set to BEST. You also need to enter the old and the new VAT codes. When you don’t set the indicator called Implement Database Change, the report produces only an overview of the information records to be changed. When the indicator has been set, the selected purchase documents are updated.  

Figure 11

The selection screen for report RM06ENMW

When you click the Choose…  button, a pop-up window appears (not shown) in which you can select the documents you want. You can choose from:

• Purchase orders
• Contracts
• Schedule agreements
• Request for quotations

Logistics Invoice Verification (LIV) is the functionality developed by SAP to register incoming invoices that relate to purchase invoices. You can define default VAT codes for LIV. You use transaction OMR2 to define these codes. Follow IMG menu path Materials Management > Logistics Invoice verification > Incoming Invoice > Maintain Default Values for Tax Codes. You may need to change the default value of the VAT code. Because of the simplicity of this setting I am not including a screenprint.

Sales

For the sales process the main activity is to change existing condition records and create new ones for the VAT. To complete this process, use transaction VK12. After starting transaction VK12 (not shown), you enter the condition type, which is MWST. After you fill in the condition type and press Enter, a pop-up screen appears. On that screen indicate the kind of VAT conditions you want to process. These are the so-called domestic taxes.

Now press Enter. In the next screen that appears (Figure 12) enter the country code, tax classification for the customer, tax classification for the material, and a date to select the condition valid on this date. The tax classifications are used to indicate whether a customer is liable for VAT and the rate that should be applied (high, low, or medium).

Figure 12

The selection screen to modify condition types

When you execute the program by clicking the execute icon, you move to the overview screen (Figure 13). You can see that tax code A2 has a value of 19 percent (in the Amount column) and is valid until the year 9999.

Figure 13

The overview screen

Because of the rate change you need to set the date in the field under the Valid to column to the last date the percentage is valid. Now save the entry by clicking the Save button (not shown in Figure 13).

With transaction VK11 create a new condition just like the one shown in Figure 13, but with a Valid From date that is the first day the new VAT rate is to be applied and a Valid to date in the year 9999. You also set the percentage to 21 percent, and the VAT code must be A4 instead of A2. With transaction VK12 you cannot show both conditions at the same time because there is only one valid condition (i.e., either A2 or A4, but never both) for the Valid On date.

For the existing sales orders, no action is required because in a standard SAP system the tax condition MWST is based on the pricing date. This date is also set in the sales order. For billing plans the VAT rate change is rather complex. You have to activate source code found in SAP Note 938856 for user exit RV60FUS5 and then run report RVFPLA02 to make manual adjustments. See SAP Note 938856 for further details.

Travel Management

As travel management is very country specific, I describe only the common corrections to be made. However, depending on the country other modifications may be required.

First of all you may have to correct the global settings for travel management. You can maintain the global settings via menu path Financial Accounting > Travel Management > Travel Expenses > Master Data > Control Parameters for Travel Expenses > Define Global Settings. On the selection screen (not shown) you select the travel provision variant by double-clicking it.

You need to check the settings of the variant as shown in Figure 14. In this example the input tax is determined per expense. Therefore, you also need to check the VAT per expense type.

Figure 14

VAT settings for the travel provision variant

Expense types for per diem or flat rates are examples of a type of expense. For each vehicle type made (e.g., car, bus, and train), you need to define an expense type per diem or flat rate. Follow IMG menu path Financial Accounting > Travel Management > Travel Expenses > Master Data > Travel Expense Types > Create Travel Expense Types For Per Diem/Flat Rates.

In Figure 15 you see the overview of all expense types for per diem or flat rates. By double-clicking a line you can drill down to the details of each expense type.

Figure 15

An overview of an expense type for a per diem or flat rate

Figure 16 shows the details for expense type FAK. As you can see, tax code R1 is being used for this expense type. If you need to change the tax code, you can either change the tax code and transport this to your production environment or create a new expense type with a start date at the beginning of the new tax rate.

Figure 16

Details of an expense type for a per diem or flat rate

Depending on your country you may need to check all the expense types used. The expense types may or may not be tax relevant, depending on the country in which your business is located.

Miscellaneous

Check the interfaces used for any VAT codes used and, if necessary, make modifications. When you use variants for your reporting, you need to check them as well. Especially important are the variants used for VAT, Intrastat, and European Commission (EC) sales list reporting. (EC sales list reporting is legally required reporting for sales between two EU countries.) Most of these reports are country specific, and the use by each company can be very different. Therefore it is not possible give specific guidelines other than to check the variants.

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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