Certain counties (India, Brazil, Philippines, South Korea, Taiwan & Thailand) require tax reporting at level below company code.
Let’s take the example of India:
TIN number needed for VAT
VAT (tax on purchase and sales of product within state) reporting is done at state level. Company has to collect & file VAT returns to state tax authority (state tax authority is below central tax authority).
- Whichever person/authority in the company is liable to collect & file VAT returns has to obtain VAT registration number or Tax identification number (TIN) from state tax authority.
- One person/ authority (responsible for filing VAT returns) cannot have more than one TIN number. Hence different person/ authority responsible for collecting & filing VAT returns need to have its own TIN number.
- If same person/authority is responsible for collecting & filing VAT returns for multiple plants then VAT can be applied on transactions done in all those plants under single TIN number.
Whenever a VAT applicable transaction is done, VAT amount is applied (calculated & recorded) under the TIN number obtained from state tax authority. (TIN number is assigned by state tax authority to each person/authority responsible for collecting & filing VAT).
Example:
You got to restaurant and order food. The bill that you receive has VAT amount applied and a VAT number is also written on the bill. The VAT number (TIN) is basically identification number assigned to restaurant by state tax authority for the purpose of collecting & filing VAT with state government for transactions done within state.
TAN number needed for withholding tax
Withholding tax reporting is done at central level. Company has to file withholding tax returns to central tax authority.
- Whenever person/authority makes a payment and if as per income tax act 1961 withholding tax is applicable on the payment then it’s the liability of payer to deduct withholding tax from payment to payee.
Person/ authority that is liable for collecting & filling withholding tax has to obtain TAN number from central tax authority. - One person/ authority (responsible for collecting & filling withholding tax returns) cannot have more than one TAN number. Hence different person/ authority responsible for collecting & filing withholding tax returns need to have its own TAN number.
- If same person/authority is responsible for collecting & filing withholding tax returns for multiple plants then withholding tax can be applied on transactions done in all those plants under single TAN number.
Example:
Employer deducts tax (tax at source) from employee’s salary on behalf of central tax authority. Later on employer has to remit the deducted tax and file withholding tax returns with central tax authority under the TAN number.
TAN (Tax Deduction & Collection Account Number) is assigned by central tax authority to the employer.
Now let’s apply above concept and understand why we need Business place and Section code in sap
Different place of business will have different person/ authority responsible for collecting & filling VAT returns with state tax authority. Hence each person/authority has to obtain is own TIN number from state tax authority.
In sap, place of business is represented as business place. Business place captures TIN number.
Plant is assigned to a business place, whenever transaction is posted software picks the business place from plant involved in the transaction and hence fetches the TIN number as well.
For transactions where software is not able to determine business place, business place information is entered manually.
Different place of business will have different person/ authority responsible for collecting & filling withholding tax returns with central tax authority. Hence each person/authority has to obtain is own TAN number from central tax authority.
In sap, each business place is mapped to a section code. Section code captures TAN number.
Plant is assigned to a business place and business place is mapped with section code, whenever transaction is posted software picks the business place from plant involved in the transaction and hence fetches the TAN number as well.
For transactions where software is not able to determine business place, business place information is entered manually.
Below example to help you apply the above concepts and understand better
GL ACCOUNTING
- What is SAP FICO ?What business requirement is fulfilled in this module?
- What is enterprise structure in sap fico?
- What is GL account? What is account group? What is operational chart of accounts?
- What is the need of country chart of account or alternate chart of account? How country chart of account helps fulfill a business requirement?
- What is the need for group chart of account? How group chart of account helps in consolidation of financial data?
- What is non leading ledger in sap fico?
- What is company code global settings? What global parameter is assigned to company code?
- What is fiscal year variant? Why fiscal year variant is assigned to company code?
- What is posting period variant? Why posting period variant is assigned to company code?
- What is field status variant? What is field status group?
- What is document type in sap? Explain the purpose of document type?
- Document date vs Posting date vs Entry date vs Translation date. Explain
- What is posting key? what is the use of posting key?
- Document header & line items capture information of business transaction.
- Everything about currency & exchange rate in sap.
- Foreign currency valuation in sap. Explain with example
- Retained earnings account helps in year end balance carry forward. Explain
- What is the significance of tolerance groups in sap?
- What parameters are maintained in GL master and how does it impact in document posting?
ACCOUNTS PAYABLE
- What is meant by accounts payable in sap?
- Understanding procure to pay (PTP) cycle and accounting document at each step.
- Understanding MM FI integration in very simple terms.
- Purchase order price determination in SAP. Explained in very simple words.
- House bank, Bank key, Account ID in SAP
- What configuration (FBZP) needed for executing F110 in sap ?
ACCOUNTS RECEIVABLE
- How sap overcomes challenges in accounts receivable process?
- What is customer reconciliation account?
- Understanding order to cash cycle in sap.
- Understanding SD FI integration in very simple terms.
- What is lock box? How lockbox helps in collection from customers?
TAX ACCOUNTING
- How sap helps in tax accounting?
- Tax configuration in sap: Tax procedure, Tax code & Tax jurisdiction code
- Concept of tax jurisdiction code & tax jurisdiction structure
- Significance of “Tax category & Posting without tax allowed” in GL master.
- Tax base amount and Discount base amount
- Assigning tax code V0 & A0 for non taxable transaction?
- Deductible input tax vs non deductible input tax
WITHHOLDING TAX
- Withholding tax in sap explained with example.
- How sap overcomes challenges in managing withholding tax?
- Withholding at the time of invoice or payment
- Withholding tax configuration in sap
- Business place & Section code in sap
- Withholding tax certificate numbering in sap
- Withholding tax report for filling tax returns
ASSET ACCOUNTING
- How sap helps in asset accounting?
- What is meant by asset accounting?
- What is the use of asset class?
- What is the use of depreciation key in asset accounting?
- Depreciation area and Chart of depreciation in sap.
- Derived depreciation area VS real depreciation area?
- Understanding asset accounting configuration needed in sap
- GL account determination for posting asset transaction
- Asset transaction and corresponding accounting document?
- How depreciation is posted in sap?
SAP CONTROLLING