1/10/2018 What is Tax Category on General Ledger account?

| SAP Expert

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WHAT IS TAX CATEGORY ON GENERAL

LEDGER ACCOUNT?
 Dmitry Kaglik (http://www.sapexpert.co.uk/author/darkduck/)  August 3, 2015
 SAP (http://www.sapexpert.co.uk/category/sap/)
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The General Ledger (GL) account is a very important element of master data in SAP
(http://www.sapexpert.co.uk/tag/sap-2). It has many con guration parameters that control
system behaviour when a particular GL account is in use, either during document entry or
reporting.

One of these con guration elements is the Tax category. Let’s discuss this element in detail.

Tax category on the GL account

controls the relevance of GL
account to tax reporting. Under
tax reporting I mean Value
Added Tax

(http://www.sapexpert.co.uk/wp-content/uploads/2015/07/Tax-
category.png)
Tax category

(http://www.sapexpert.co.uk/tag/vat), which may have different names in different countries. For

example, this is GST in Singapore and Australia. I will use the word “tax” in this article only in this
generic meaning of it.

Document entry
When you enter the document in SAP, it is tax category that controls the existence of a Tax Code
eld on the document entry screen. If the GL account has no tax category, i.e. the con guration
eld is blank, then you will not have the document eld available. Or, if you use an Enjoy-style
transaction with the table view and try to put tax code in the line item with such a GL account, you
will get a warning message saying that GL account is irrelevant to tax code and the entry will be
ignored.

However, if tax category is populated, you will be able to see the eld on the screen. Moreover,
this will be a mandatory eld, unless the checkbox “posting without tax allowed” is ticked in the
GL account settings.

The value you can enter in the Tax Code eld depends on the Tax Category speci ed for the GL
account. Let’s check what the options are:

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1/10/2018 What is Tax Category on General Ledger account? | SAP Expert

Tax category = “*”. In this case, any tax code will be allowed.
Tax category = “+”. In this case, only tax codes with “Output Tax” category will be allowed.
Tax category = “-“. In this case, only tax codes with “Input Tax” category will be allowed.
Tax category = “+B”. In this case, only tax codes with “Output Tax” category will be allowed, and also
the system will try to process the document as “Down payment” and create additional lines in the
document, if several more conditions are met. This tax category is usually assigned to a customer
reconciliation account when you need special treatment of down payments.
Tax category = “-B”. In this case, only tax codes with “Input Tax” category will be allowed, and also the
system will try to process the document as “Down payment” and create additional lines in the
document, if several more conditions are met. This tax category is usually assigned to a vendor
reconciliation account when you need special treatment of down payments.
Tax category = “>”. This is the GL account for output tax. In this case, only tax codes with “Output
Tax” category will be allowed, but you usually don’t post to this account directly.
Tax category = “<“.This is the GL account for input tax. In this case, only tax codes with “Input Tax”
category will be allowed, but you usually don’t post to this account directly.
Tax category = tax code. In this case, only the tax code entered in the GL master record will be
allowed in the document posting.
I will refer to accounts with categories “<” and “>” as “Tax Accounts”. You can get more details on
“+B” and “–B” tax categories in the free e-book “FREQUENTLY ASKED QUESTIONS ON SAP
FINANCE (http://www.sapexpert.co.uk/free-ebook)“.

Usually, tax category is blank on GL accounts for Assets, salary expenses, bank or retained
earnings. They are not really relevant to tax, are they? You usually assign tax category “+” to a
taxable revenue GL account and tax category “-” to a taxable expenses GL account.

When tax code is entered in the GL account line item, and tax amount for that tax code is not nil,
SAP will automatically generate additional line items in the document. These items usually
contain GL accounts with “<” or “>” tax categories as con gured in the tax code
(http://www.sapexpert.co.uk/sap-tax-con guration-tables). You usually don’t post to tax accounts
directly (http://www.sapexpert.co.uk/special-cases-of-tax-posting), although there may be special
cases.

Reporting
Once the document is entered with a tax code, the system stores tax data for the document. Of
course, some of this data is stored in the main Finance table BSEG. But a more important table in
this case is BSET. This is the table where all the tax information for each document is stored.

Table BSET contains summarized information for each document broken down by tax code.
There is information about the tax code, tax amount, tax base and even condition record from
within the tax procedure settings (http://www.sapexpert.co.uk/sap-tax-con guration-tables).
There may be no tax line items in the documents, but it still records in BSET. This is the case for
zero-rated tax codes.

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Table BSET does not have information on the “source” line items of the initial document where
tax code is used. If there are several “expenses” line items with the same tax code in the
document, table BSET will contain summarized information only. If you also take into account
that there is one auto-generated line item per tax code in the document, you understand that from
the moment of document saving there is no easy way to break down tax information by GL
account details like account number, Cost Centre and so on. The way you can do this in New GL
(http://www.sapexpert.co.uk/tag/new-gl)is to split tax GL (i.e. GL account with “<” or “>” tax
category) in the document. But this will be information from the NewGL level, not from the tax
table.

You can check details stored in table BSET by going into the document and clicking the “Taxes”
button on the panel. A pop up window contains the tax-related document information, extracted
from table BSET.

Further, BSET is the most important table for tax return. Tax return usually is generated by a
program RFUMSV00, which can be modi ed in some countries to account for local speci cs. This
program may be called by different transaction codes, of which the most common one is F.12.
This program extracts BSET information, enriches it with some external data, like vendor address
for example, and then groups information to be represented in the tax return view. Of course,
there is a lot of additional logic in the program, but it deserves a separate discussion.

When the document is processed by program RFUMSV00 in “Update mode”, the same tax return
program updates BSET records with the date and time stamp. This prevents the same document
from appearing in different tax returns more than once.

The same program RFUMSV00 can generate a batch input session that transfers amounts from
the tax return from tax accounts (with categories “<” and “>”) to a tax reconciliation account – to
be paid later to tax authorities.

If there is no tax category in the GL account details, the system will not ask for tax code for line
items posted on this account. The BSET table will not be populated for the document. The
document display will not contain the “Taxes” button. The document will not show in the Tax
Return output. Very simple logic: no tax code – no tax return.

Changing tax category

You need to de ne tax category for the GL account at the time you create it. This is because there
are many dependencies around: tax code con guration, automatic postings, variants and so on.

But life is life. Business requirements change with time, and it becomes necessary to change the
GL account tax category.

Changing the tax category for the GL account is a possible though often a painful operation.

In this case, rst think if there is an alternative way. Would creating a new GL account with a
similar name and number solve the issue? If yes, then go ahead and create the account.

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If changing the tax category is still the only possible way, you will very likely need to bring the
account balance to zero before making the GL account con guration change.

Of course, remember that changing the tax category for the GL account only affects the
documents posted after the change. It will not update the existing documents retroactively. There
is no way for doing this. Remember it before agreeing to the tax category change.

Do you have more questions for SAP Expert in regards to tax settings of GL account? Ask them
directly (http://www.sapexpert.co.uk/you-need-our-help) or in comments to this article.

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10 Comments

Anjan on January 21, 2017

Thanks

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1/10/2018 What is Tax Category on General Ledger account? | SAP Expert

Reply (http://www.sapexpert.co.uk/what-is-tax-category-on-general-ledger-account/?
replytocom=643#respond)
Dmitry Kaglik (http://sapexpert.co.uk) on January 21, 2017
You are welcome!

Reply (http://www.sapexpert.co.uk/what-is-tax-category-on-general-ledger-account/?
replytocom=644#respond)

Ahmed on October 25, 2017

Hi Dmity,

Very useful article, thanks. I have a question with regard to tax category for OUTPUT and
INPUT GL master. Specially for scenario of reverse charge is it correct to use the tax
category * for OUTPUT GL master.

Reply (http://www.sapexpert.co.uk/what-is-tax-category-on-general-ledger-account/?
replytocom=715#respond)

Dmitry Kaglik (http://sapexpert.co.uk) on October 25, 2017

Thanks for the comment! Reverse charge tax codes usually use 2 different GLs, one
with < , another with > category.

Reply (http://www.sapexpert.co.uk/what-is-tax-category-on-general-ledger-account/?
replytocom=717#respond)

Ahmed on October 25, 2017

Thanks for the reply Dmitry,

I have the same con g for my reverse charge tax code, I am facing an issue
here. When posting document with reverse charge tax code system is issuing
error Message No. FS215 Only output tax is allowed for account 175000
1000, RX is not allowed.
Appreciate your comments to resolve this.

Dmitry Kaglik (http://sapexpert.co.uk) on October 25, 2017

Please check that tax code has EU Category in the Properties section. I don’t
remember exactly, but it’s very likely to be 8 or 9.

Ahmed on October 26, 2017

Thanks a lot Dmitry,

Actually the scenario is not for EU countries, i used the code B and it helped.

Reply (http://www.sapexpert.co.uk/what-is-tax-category-on-general-ledger-account/?
replytocom=722#respond)

Javed on December 20, 2017

What do you mean by de ning the tax category in Balance sheet accounts. The tax category
mainly should be assigned with Income & expense GL accounts.

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Reply (http://www.sapexpert.co.uk/what-is-tax-category-on-general-ledger-account/?
replytocom=1254#respond)
Dmitry Kaglik (http://sapexpert.co.uk) on December 20, 2017
That is not exactly correct. As a minimum, tax accounts with categories < and > are
still BS accounts. You may also need to assign categories +B and -B to certain BS
accounts. You can read more in the free e-book (http://www.sapexpert.co.uk/free-
ebook/).

Reply (http://www.sapexpert.co.uk/what-is-tax-category-on-general-ledger-account/?
replytocom=1256#respond)

Javed on December 20, 2017

Ok. Thanks for sharing

Reply (http://www.sapexpert.co.uk/what-is-tax-category-on-general-ledger-account/?
replytocom=1257#respond)

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