How to configure External Tax Determination in SAP

Before you begin

You must install Sovos' Global Tax Determination Adapter for SAP before you can configure External Tax Determination in your SAP system.

The External Tax Determination process supports the United States, Canada, and Puerto Rico. If you're using External Tax Determination for more than one country, you need to set up each country separately. Make sure you've installed the content for the country you're configuring, since country-specific information like the Tax Codes and the Standard Procedure is used in the setup.

The configuration options may be different depending on your SAP version. Check the SAP help documentation for more information.

If you want to use Global Tax Determination with your SAP’s standard process, follow the steps in this guide.

Opening configuration settings in Transaction SPRO

  1. Go to Transaction SPRO (Customizing: Execute Project).



  2. Click SAP Reference IMG.



  3. Most of the settings you'll be editing in this guide are in the External Tax Calculation section. To find this section, follow this path: Financial Accounting (New) > Financial Accounting Global Settings (New) > Tax on Sales/Purchases > Basic Settings > External Tax Calculation.



Define Physical Destination

  1. In Transaction SPRO, go to Financial Accounting (New) > Financial Accounting Global Settings (New) > Tax on Sales/Purchases > Basic Settings > External Tax Calculation > Define Physical Destination.



  2. To create a new connection, click the Create button, which looks like a white page.



  3. Enter the following information:
  • RFC Destination: This is the name that SAP will use for the RFC Destination.
  • Connection Type: Select T – TCP/IP Connection.
  • Description: These are optional fields that you can use to describe the connection. You can enter GTD or GTD connection to show that this is a connection to GTD, or you can leave these fields blank.
  • In the Technical Settings tab:
    • Activation Type: Select Registered Server Program.
    • Program ID: This value needs to match the Program ID configured in the Adapter installation.



  • In the Unicode tab, select Unicode under Communication Type with Target System.



  • Click Save.



The Save button is always located in the toolbar at the top of the screen. As you continue to follow this guide, whenever you're told to save, click the Save button shown in the previous step.

Checking the adapter connection

  1. Make sure the adapter is running, then click Connection Test.



  2. Save the connection, then go back to Transaction SPRO. If the connection isn't working, a connection error will show up in the Result column with a description of the error.



Assign Country to Calculation Procedure

  1. In Transaction SPRO, go to Financial Accounting (New) > Financial Accounting Global Settings (New) > Tax on Sales/Purchases > Basic Settings > Assign Country to Calculation Procedure.



  2. Go to the country where you want to activate External Tax Determination and enter the correct Procedure, then click Save.
    • For the US, use TAXUSX in SAP ECC and 0TXUSX in SAP S/4HANA.
    • For Canada, use TAXCAJ in SAP ECC and 0TXCAJ in SAP S/4HANA.

Specify Structure for Tax Jurisdiction Code

  1. In Transaction SPRO, go to Financial Accounting (New) > Financial Accounting Global Settings (New) > Tax on Sales/Purchases > Basic Settings > Specify Structure for Tax Jurisdiction Code.



  2. If the Procedure you entered in the previous section appears in the list, change its structure to 9 0 0 0. If not, click New Entries and add it as you see in the example below. Save your changes.

    A screen called Change View Jurisdiction Code Structure Overview. Under the Schedule column, enter the procedure. Under the Name column, enter a name for this procedure. In this example, the name is GTD Jurisdiction Code. There are 4 column all labeled Lg. In the first Lg column, enter the number 9. In the other three Lg columns, enter the number 0.

 

Define Number Ranges for External Tax Returns

  1. In Transaction SPRO, go to Financial Accounting (New) > Financial Accounting Global Settings (New) > Tax on Sales/Purchases > Basic Settings > External Tax Calculation > Define Number Ranges for External Tax Returns.



  2. To set the number ranges, select the Change Intervals button, which has a pencil icon.



  3. The number range interval 01 must be defined here. If you don't see this interval in the No. column, add the interval by selecting the Insert Line button, which has a green plus sign.



  4. Enter the information as shown in the example or enter your own values, then click Save.

    A screen called Maintain Intervals: Ext. tax doc. number. If you don't want to enter your own values, you can enter the information from this example. Under the No. column, enter the number 01. Under the From No. column, enter 000000000001. Under the To Number column, enter 000000010000. Under the NR Status column, enter 900. Leave the Ext checkbox blank.

 

Activate External Tax Calculation

  1. In Transaction SPRO, go to Financial Accounting (New) > Financial Accounting Global Settings (New) > Tax on Sales/Purchases > Basic Settings > External Tax Calculation > Activate External Tax Calculation.



  2. To set up the connection, enter and save the following information:
    • External System: Enter A.
    • Tax Interface Vers.: Select TAXDOC00.
    • RFC Destination: Enter the RFC Destination created in the Defining Physical Destination section.
    • Update RFC Destination: Enter the RFC Destination created in the Defining Physical Destination section.
    • TC: Select the checkbox.


 

Activate External Updating

  1. In Transaction SPRO, go to Financial Accounting (New) > Financial Accounting Global Settings (New) > Tax on Sales/Purchases > Basic Settings > External Tax Calculation > Activate External Updating.



  2. In the Change View "View for Component EXTX": Overview window, select the checkbox to activate the configuration, then click Save.

 

Maintaining Tax Codes

  1. Go to Transaction FTXP.



  2. In the Country popup, enter the country you want to configure, then select the check button.



  3. On the next screen, enter the tax code you want to maintain, then press Enter on your keyboard.



  4. The Percentage rates screen will appear. For each Cond Type, enter 100 in the Tax Percent. Rate field. SAP will automatically add the comma and three zeroes to the end of the number. The Cond. Type values may be different depending on the tax code you entered; the example below has Cond. Type values XR1 through XR6.



  5. Click Save.
  6. Repeat this process to update all the tax codes as needed. For a list of tax codes, see Tax code condition record.

Setting a dummy jurisdiction code for non-tax-relevant transactions

  1. Go to Transaction OBCL (Change View "Allocate Co.Cd. -> Non-Taxable Transactions": Overview).



  2. Look for the Company Code used in the country you're configuring. In the same row, enter 000013072 in the Jurisdict. Code field, then click Save.