2520832 - Tax Exemption from Supplier Master Data not Applied in Purchase order or Supplier invoice

In Supplier Master Data, a Tax Exemption for Country X is maintained.

However, when creating a Purchase Order or Supplier Invoice, for the Supplier with Tax Country X, Tax is still applied and the Tax Exemption isn't taken into account.

SAP Business ByDesign

1. Go to Purchase Requests and Orders work center.
2. Go to Purchase Orders view.
3. Find Purchase Order XYZ (XYZ represents the Purchase Order ID).
4. Select Edit.
5. Go to Items tab.
6. Go to Taxes tab of Item details

A Taxable tax code is selected by the system, despite a Tax Exemption being maintained in the Supplier Master Data, Financial Data - Tax Data.

Cause 1

The purchase is not a pure domestic trade. The Tax Exemptions set up in the Supplier Master Data are only applicable for domestic transactions in most of the countries. Except a few countries like Canada.

Cause 2

For Tax country United Kingdom, 'State' should not be maintained in Supplier master data, Financial Data - Tax Data for Tax Exemptions.

Cause 3

For Tax country India, system cannot pick exemption related tax code automatically. Manual entry is always required. 

For Tax country China, Tax Exemption Reason 'Small Scale Trader' currently cannot be recognized by the system. Development team is working on a permanent resolution but until it manual change on the tax code is required.

Cause 1

If the purchase involves a foreign country (ship to address or Supplier address), the Tax exemptions need to be maintained

• either in the Product Master Data.
• or in the Purchase Order by changing the Tax code manually.

or

For example countries like Canada, an alternative is the functionality of External Tax Determination.

More details about the configuration of the External Tax Determination can be found below:

External Tax Determination for Goods and Services - Configuration Guide

Cause 2

Remove the State information from the Supplier master data, Financial Data - Tax Data for Tax Exemptions.

Cause 3

The Tax exemptions need to be maintained

• either in the Product Master Data.
• or in the Purchase Order by changing the Tax code manually.

1785785 - Tax Rate Type Defaults to Zero in Purchase Order Although Taxes are Expected for the Transaction 

2774426 - Exemption related Tax code is not determined in Purchase order or Supplier invoice 

Exemption reason, exempt, Purchase Order, Supplier Invoice, Zero Tax Rate , KBA , AP-POP , Purchase Order Processing , AP-SIP , Supplier Invoice Processing , How To