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

You are creating Purchase Order XYZ (XYZ represents the Purchase Order ID) for your company located in Country A (A represents the country of your company) to a Supplier located in Country B (B represents the Supplier's country).

In the Supplier Master Data, under Financial Data, in Tax Data, you have maintained a Tax Exemption for Country X with the Tax Reason Resale- Exempt Purchase, Taxable sale.

In the Taxes tab of the Item details, you can see that Taxes have been applied and the Tax Exemption isn't taken into account.

SAP Business ByDesign

1. Go to Purchase Requests and Orders.
2. Go to Purchase Orders.
3. Select Show All Purchase Orders.
4. Find XYZ.
5. Select Edit.
6. Select View All.
7. Go to the Items tab.
8. Go to the 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.

1.The Tax Exemptions set up in the Supplier Master Data are only applicable for domestic transactions.( In most of the countries except countries like  for example Canada)(Currently in tax decision trees of Canada you wil see no questions related to supplier exempt .)

2.As per the Indian localization, we cannot expect the system to pick exemption related tax code automatically. so always enter Tax code manually.

3.For Tax country GB, you should not maintain 'state or region' in Supplier master data

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 cananda use below:

Our suggestion as an alternative is the functionality of External Tax Determination, creating parameters according to your scenario.

You can find more details about the configuration of the External Tax Determination on Help Document available in the link:

External Tax Determination for Goods and Services - Configuration Guide

https://help.sap.com/viewer/2754875d2d2a403f95e58a41a9c7d6de/latest/en-US/b11703c6833e466a8213ebdd4457d456.html

You can refer  other KBAs given below for useful  and related information

1528596 - How To Create Supplier Invoices Without Import Tax Calculation On Items for a Supplier Abroad (as default) for the first option.

 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, , KBA , AP-PRP , Purchase Request Processing , AP-POP-PO , Purchase Order , AP-SIP , Supplier Invoice Processing , How To