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Brazil Localization - Taxes

Version 0.99 (Draft)

March 7, 1997
SAP R/3
GUIA DE IMPLEMENTAÇÃO

Contents
1. Description of the taxes...............................................................6

1.1 IPI Imposto sobre Produtos Industrializados ................................................6

1.2 ICMS Impostos. Circulação de Mercadoria e Serviços ..................................7

1.3 Complement of ICMS.....................................................................................8

1.4 ISS Imposto sobre servicos...........................................................................9

1.5 IRRF (Imposto de Renda retido na Fonte) for companies (CGC)...................9

1.6 IRRF (Imposto de Renda retido na Fonte) for natural persons (CPF)............9

2. Calculation examples of ICMS, IPI, Complement of ICMS, ISS and


IRRF.....................................................................................10

2.1 General calculation rules for the different taxes........................................11

2.1.1 Calculation formula(s) for ICMS................................................................11

2.1.2 Calculation formula for IPI........................................................................12

2.1.3 Calculation formula for ISS.......................................................................12

2.1.4 Calculation formula for IRRF withholding tax (for companies)................12

2.1.5 Calculation formula for IRRF withholding tax (for natural persons).........13

2.2 Sale/purchase within/outside a federal state..............................................13

2.2.1 Usage of goods - industrialization/resale.................................................13

2.2.2 Usage of goods - consumption (buying: only within a federal state).......15

2.2.3 Usage of goods - industrialization - reduced calculation base for ICMS...16

2.2.4 Usage of goods - consumption - reduced calculation base for ICMS.......18

2.2.5 Rules if ICMS or IPI are not applicable......................................................19

2.3 Special cases for purchasing.......................................................................21

2.3.1 Usage of goods - industrialization - vendor = non industry.....................21

2.3.2 Usage of goods - consumption - purchasing from another federal state.22

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2.4 Outgoing/incoming NF with ISS for companies...........................................23

2.5 Outgoing/incoming NF with IRRF for companies (only)...............................24

2.6 Outgoing/incoming NF with ISS and IRRF for companies............................24

2.7 Incoming NF with INSS/IRRF or INNS/ISSF/IRRF for natural persons...........25

2.7.1 Incoming NF with INSS/IRRF - vendor not married...................................26

2.7.2 Incoming NF with INSS/ISSF/IRRF - vendor not married...........................29

2.7.3 Incoming NF with INSS/IRRF - vendor married - 4 family members.........32

2.7.4 Incoming NF with INSS/ISSF/IRRF - married - 2 family members............35

3. Additional tax requirements.......................................................40

3.1 Discounts.....................................................................................................40

3.1.1 Discount not included in the Nota Fiscal (SD only)..................................40

3.1.2 Discount included in the Nota Fiscal........................................................41

3.1.3 Cash Discount..........................................................................................43

3.2 Freight.........................................................................................................44

3.2.1 Freight in a separate ‘conhecimento’ in MM............................................44

3.2.1.1 Intramunicipal Freight ..................................................................................................44

3.2.1.2 Intrastate and Interstate Freight - no base value reduction..........................................45

3.2.1.3 Intrastate and Interstate Freight - base value reduction for carrier (80%)....................46

3.2.2 Freight included in the Nota Fiscal...........................................................47

3.3 Zona Franca................................................................................................47

3.4 Change of usage (industrialization <-> consumption)...............................48

3.5 Substituicao Tributaria (S.T.)......................................................................49

4. Design and implementation of tax calculation..............................61

4.1 Interface to the external tax calculation (‘External tax interface’).............62

4.1.1 Connection of external tax calculation procedure to standard R/3.........62

4.1.2 Standard customizing of the external tax interface................................63

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4.1.3 Layout of tax calculation procedure in MM/FI..........................................64

4.1.4 Definition of tax codes.............................................................................67

4.1.4.1 Tax codes for non taxable transactions........................................................................67

4.1.4.2 Tax codes for incoming movements - Industrialization.................................................68

4.1.4.3 Tax codes for incoming movements - Consumption.....................................................70

4.1.4.4 Tax codes for incoming movements - ICMS Sub.Trib. on freight...................................71

4.1.4.5 Tax codes for incoming movements - Future delivery purchasing / Consignment........73

4.1.4.6 Tax codes for incoming movements - Services - ISS and INSS......................................73

4.1.4.7 Tax codes for outgoing movements - Ind.+Cons. posted in SD....................................74

4.1.4.8 Tax codes for transfer postings - outgoing movements - Ind.+Cons.............................75

4.1.5 Determination of the tax jurisdiction codes.............................................76

4.1.6 Other standard customizing in MM/FI.......................................................78

4.1.7 Tax part of pricing procedure in SD.........................................................79

4.1.8 Other standard customizing in SD...........................................................80

4.1.9 Other Brazil specific customizing in SD....................................................82

4.2 External calculation of taxes.......................................................................83

4.2.1 Interface parameters / parameter determination in standard R/3..........83

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What significant changes have been made to this document:

• Version 0.92: December 12, 1995


Requirement analysis completed, chapter 1. to 3. finished; chapter 4 still under
construction

• Version 0.93: January 23, 1996


Chapter 4 partly changed and completed

• Version 0.94, February 1, 1996


Chapter 2, Formulas for the calculation of taxes with discounts revised

• Version 0.95, March 8, 1996


Chapter 4, Customizing SD adapted for foreign customers; ICMS posting logic
added to SD pricing procedure; FI/SD processing for Zona Franca added; chapter
4 still not completed

• Version 0.96, September 5, 1996


Chapter 2 and 3, several changes and enhancements according to the brazilian
requirement document; chapter 4 still not completed and in some parts not up
to date

• Version 0.99, March 7, 1997


Chapter 2 and 3, again changes in the requirements, status of the document is
the 3.0F delivery; chapter 4 reworked and completed; to avoid double
maintenance no further versions will be generated; requirements which are not
mentioned in this document can be found in the requirement documents
provided by the Brazil development link team.

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1. Description of the taxes

1.1 IPI Imposto sobre Produtos Industrializados

The IPI is a federal tax which is charged when selling, transferring, etc. goods. The
percentage rate and the value-base of IPI depends on several factors which are:

• Type of operation
- The type of operation (CFOP) determines if IPI is charged or not. Type of
operation is defined per line item. Types of operation are e.g. export, sending
goods from one stock to another.
- CFOP is currently implemented in the Nota Fiscal but not in the standard system
and will therefore not be used to determine which tax types have to be
calculated in a special business case.

• Product/NBM-code
- IPI is charged per product, and calculated from the goods value incl. ICMS. The
due percentage rate depends on a product classification which is called NBM-
code.
In the current solution the NBM-code is implemented as a material master
extension.
It is important to make a difference whether a product group (NBM-code) is
taxed with the rate 0% or not taxed at all (exempted). This has to be determined
by the NBM-code to create a correct Nota Fiscal.
- For some products (identified by the NBM-code) IPI is calculated on a reduced
base. That means e.g. 80% of the goods value is taxed and 20% is not taxed.
The reduction of the base can be valid permanently or only for a certain time
range.
- Origin of product (imported/domestic/...) is only important for sales to Zona
Franca (see chapter Zona Franca).

• Customer
- Some companies do not have to pay IPI tax (e.g. some government companies).
This is only relevant if something is sold to such a company (A/R / customers).

• Usage of the goods


- The usage determines how the amounts are posted in purchasing. If a material
is used for production the tax amounts are posted to separate line items. If a
material is used for consumption the tax increases the value of the material and
can not be recovered.

• Vendor (industry equivalent)


- If the vendor is no non IPI paying wholesaler, half of a calculated IPI amount can
be recovered when purchasing from such a vendor. This IPI amount is deducted
from the inventory value of the product. For further details see example.

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1.2 ICMS Impostos. Circulação de Mercadoria e Serviços

The ICMS is a state tax which is charged when selling, transferring, etc. goods. The
percentage rate and the value-base of ICMS depends on several factors which are:

• Type of operation
- The type of operation (CFOP) determines if ICMS is charged or not. Type of
operation is defined per line item. Types of operation are e.g. export, sending
goods from one stock to another.
- CFOP is currently implemented in the Nota Fiscal but not in the standard system
and will therefore not be used to determine which tax types have to be
calculated in a special business case.

• State of origin and state of destination of the goods.


- State of origin and state of destination are determined by the delivering plant,
the customer or by the vendor and the receiving plant
The field ‘Region’ is used for the brazilian states which need not be the same as
the ‘Tax regions’ in the sense of state of origin and state of destination. In most
cases the ‘Region’ (like SP, RJ,...) is the same as the ‘Tax-region’. Only in some
cases there is a 1:N assignment between ‘Region’ and ‘Tax region’ (AM -> AM
and Zona Franca).
- Technically the field ‘Tax jurisdiction’ will be used to define the ship-from and
the ship-to tax region of goods. This field is available in the customer, vendor,
cost center and plant master. The jurisdiction code will be determined
automatically from the address maintained in the object.

• Product/NBM-codes
- Exemptions of ICMS for particular products are possible. Exemptions can be
permanent or only valid until a certain date. It is possible that an exemption is
only valid inside a state or an exemption is valid for all states.
- Different/reduced rates of ICMS for particular products. It is important to make a
difference whether a product is taxed with the rate 0% or not taxed at all. This
has to be determined to create a correct Nota Fiscal.

Reduced rates are only used within a state. Therefore they do not depend on
state of origin and state of destination.
- For some products ICMS is calculated on a reduced base. That means e.g. 80%
of the goods value is taxed and 20% is not taxed. The reduction of the base can
be valid permanently or only for a certain time range.
- Origin of product (imported/domestic/...) is only important for sales to Zona
Franca (see chapter Zona Franca).

• Customer
- Some companies do not have to pay ICMS tax (e.g. some government
companies) This is only relevant if something is sold to such a company (A/R /
customers).

• Usage of the goods

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- The base value for the calculation of ICMS depends on the usage of the goods.
If a customer buys goods for reselling or production, ICMS is calculated on the
goods value without IPI. If the goods are used in a different way (e.g.
consumption), ICMS is calculated on the goods value plus IPI.
Additionally the usage determines how the amounts are posted in purchasing. If
a material is used for production the tax amounts are posted to separate line
items. If a material is used for consumption the tax increases the value of the
material and can not be recovered.
- Concerning the tax calculation in MM/FI the usage has to be implemented as
different tax codes because the tax code determines the account assignment
(distribute tax to separate line items, add tax to expense) in the tax procedure.
In SD the usage has to be entered manually on line-item level in the sales order.

1.3 Complement of ICMS

A special case of ICMS is the complement of ICMS. This tax is calculated and posted
under the following conditions:

• a company buys a product in another state

• the product is used for consumption

The complement of ICMS is calculated as the difference between the ICMS rate
charged by the vendor and the ICMS rate which is valid when buying in the same
state. Comp. ICMS has to be posted as a tax liability but is not added to the product
price.

In addition to the normal calculation of the complement of ICMS the following


exceptions are possible. A state can define that for a certain product (material)

• the complement must not be calculated and paid

• a different calculation base (e.g. 80%) has to be used.

It is important to consider that the complement of ICMS just affects the FI-posting. The
amount is not part of the Nota Fiscal and therefore not stored in the Nota Fiscal
database.

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1.4 ISS Imposto sobre servicos

ISS is a tax on services. It is a municipal tax. The tax rate is determined by the city of
the supplier and by the type of service. There is only one exception for construction
companies which use the ISS rate of the city where they are building/working. The
exception for construction companies is currently not in scope for the localization. The
ISS tax amount is normally included in the service price.

The ‘type of service’ is not implemented in the system and most companies deliver
only one type of service. This means that the ISS-rate depends on the vendor
(supplier) on the incoming side and on the selling company (code) on the outgoing
side.

The calculation of ISS is only relevant on the outgoing side (SD) because the ISS
amount has to be stored in the Nota Fiscal database for reporting purposes. On the
incoming side (MM) the ISS amount is not posted as an ISS credit but is included in
the service price. Therefore in MM no ISS calculation is necessary. ISS is not stored in
the Nota Fiscal database on the incoming side. On the incoming side there is also not
reporting related to ISS necessary.

ISS can be used together with IRRF (income tax). There might be ISS without IRRF.

The calculation of ISS is only necessary when selling a service. When


buying a service ISS need not be calculated and also not stored in the
Nota Fiscal.

1.5 IRRF (Imposto de Renda retido na Fonte) for companies (CGC)

If the vendor of a service is a company (CGC), for some services (e.g. consulting) IRRF
has to be calculated and posted as a withholding tax. The IRRF rate depends on the
type of service. This rate cannot be determined but has to be entered manually. IRRF
for companies can occur together with ISS tax but with no other tax.

In MM the calculation has to be done during invoice verification. In SD the calculation


has to be done when creating the invoice.

IRRF is not charged for all services. The decision if IRRF is calculated has to be
triggered manually. At year end a report about the withholded IRRF amounts per
vendor has to be generated.

1.6 IRRF (Imposto de Renda retido na Fonte) for natural persons


(CPF)

If the vendor of a service is a natural person (CPF), for some services IRRF has to be
calculated and posted as a withholding tax. Together with IRRF there are two other
taxes which might be calculated:

• INSS Instituto Nacional de Previdencia Social (Social Security tax)

• ISSF Imposto Sobres Servicos na Fonte (Service tax withholding)

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IRRF for natural person is only possible in MM. The calculation has to be done during
invoice verification. The decision if IRRF is calculated has to be triggered manually. At
year end a report about the withholded IRRF amounts per vendor has to be
generated.

The calculation is done based on table table defined periodically by the government.
This table defines which rate has to be used for which service amount. The tax
amount and the tax base amount has to be accumulated per vendor and month and
is then calculated according to the intervals given in the calculation table.

A special deduction of the base amount for the calculation is also possible. For each
member of the family of the natural person (wife and children) a fix amount (e.g. R$
90) has to be deducted from the base amount.

2. Calculation examples of ICMS, IPI, Complement of ICMS, ISS and


IRRF

In this chapter some examples for the calculation of ICMS, IPI, Complement of ICMS,
ISS and IRRF are given:

Examples for ICMS / IPI / Complement of ICMS

• Sale/purchase within/outside a federal state


- usage - industrialization
- usage - consumption (purchasing: only within a federal state)
- usage - industrialization - reduced calculation base
- usage - consumption- reduced calculation base

• Special cases for purchasing


- usage - industrialization -> vendor = non industry
- usage - consumption - purchasing from another federal state

Examples for ISS / IRRF (for companies)

• Outgoing/incoming NF with ISS

• Outgoing/incoming NF with IRRF for comanies (only)

• Outgoing/incoming NF with ISS and IRRF for companies

Examples for ISS / IRRF (for natural persons)

• Incoming NF with INSS/IRRF for natural persons - not married

• Incoming NF with INSS/ISSF/IRRF for natural persons - not married

• Incoming NF with INSS/IRRF for natural persons - married (e.g. 4 family


members)

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• Incoming NF with INSS/ISSF/IRRF for natural persons - married (e.g. 2 family


members)

2.1 General calculation rules for the different taxes

2.1.1 Calculation formula(s) for ICMS

The calculation of ICMS is not done as a surcharge to the price (excluding tax) but
the calculation assumes the price including ICMS tax (and sometimes also IPI tax) as
the calculation basis. Depending on the use of the product different formulas are
used.

In case of discounts IPI is charged over the full amount; ICMS is charged on the
discounted amount including IPI.

Calculation base: price including ICMS (industrialization)

 ICMSrate 
EPRICE − DisAmt = IPRICE −  IPRICE * 
 100 

or

EPRICE − DisAmt
IPRICE =
ICMSrate
1−
100
IPRICE = price including ICMS
EPRICE = price excluding ICMS
DisAmt = discount amount (N.F. relevant)

The values for the Nota Fiscal are calculated as follows:

ICMSvalue = IPRICE - ( EPRICE - DisAmt)


ICMSbase = IPRICE

Calculation base: price including ICMS over IPI (consumption)

 ICMSrate   ICMSrate IPIrate  


EPRICE − DisAmt = IPRICE −  IPRICE *  +  IPRICE * * 
 100   100 100  

or

EPRICE − DisAmt
IPRICE =
 IPIrate 
ICMSrate * 1 + 
 100 
1−
100
IPRICE = price including ICMS calculated over IPI

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EPRICE = price excluding ICMS


DisAmt = discount amount (N.F. relevant)

The values for the Nota Fiscal are calculated as follows:

ICMSvalue = IPRICE - ( EPRICE - DisAmt)


ICMSbase = ICMSvale / ( ICMSrate / 100 )

2.1.2 Calculation formula for IPI

The calculation of IPI is done as a ‘surcharge’ to the price (including ICMS). The
formula is therefore:

 IPIrate 
IPRICE = EPRICE +  EPRICE * 
 100 

IPRICE = price including IPI


EPRICE = price excluding IPI but including ICMS
and without regarding discounts

2.1.3 Calculation formula for ISS

The calculation of ISS is not done as a surcharge to the price (excluding tax) but the
calculation assumes the price including ISS tax as the calculation basis. The formula
behind this rule is:

Calculation base: price including ISS

 ISSrate 
EPRICE = IPRICE −  IPRICE * 
 100 

or

EPRICE
IPRICE =
ISSrate
1−
100
IPRICE = price including ISS
EPRICE = price excluding ISS

2.1.4 Calculation formula for IRRF withholding tax (for companies)

The calculation of IRRF for companies is not done as a surcharge to the price
(excluding IRRF but including ISS tax) but the calculation assumes the price including
IRRF and ISS tax as the calculation basis. The formula behind this rule is:

Calculation base: price including IRRF and ISS

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 IRRFrate 
EPRICE = IPRICE −  IPRICE * 
 100 

or

EPRICE
IPRICE =
IRRFrate
1−
100
IPRICE = price including IRRF
EPRICE = price excluding IRRF

2.1.5 Calculation formula for IRRF withholding tax (for natural


persons)

The calculation of IRRF for natural persons is done using the price (excluding)
INSS as a base amount for the calculation. The calculation itself is done using a rate
table which contains the information for which base amount which WT tax rates has
to be used. For each vendor the base amounts and taxes are to be cumulated per
month so that finally the tax is calculated over the total amount of services the
vendor has provided.

For further information see calculation example.

2.2 Sale/purchase within/outside a federal state

When selling or purchasing a product within or without a federal state the same rate
of IPI but different rates of ICMS are used. The additional tax calculation rules apply in
both cases. Therefore all examples are given with only one ICMS rate. As calculation
base the amount incl. ICMS is displayed if the full rate is used. Otherwise the reduced
amount incl. ICMS is printed.

If a special rate for ICMS has to be used the whole calculation is done according to the
normal calculation rules but with this special rate.

If the calculation is done on a reduced base amount there is a special calculation


for the base amount necessary.

Amounts and rates for the examples:

Sales price : 82.000,00 (excluding tax)


ICMS : 12 %
IPI : 10 %

2.2.1 Usage of goods - industrialization/resale

Calculation of ICMS is done based on the amount without IPI

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82. 000,00 82. 000,00


= = 93 .181 ,82
12 0, 88
1−
100

IPI is calculated based on the price incl. ICMS

93.181,82 (including ICMS)


9.318,18 (10 % of IPI)

102.500,00 (invoice value)

Calculation base: 93.181,82

Invoice value: 102.500,00


ICMS amount: - 11.181,82
IPI amount: - 9.318,18

Sales price: 82.000,00

The FI-posting for selling is:

Accounts receivable 102.500,00 D


Sales 93.181,82 C
ICMS tax to be paid 11.181,82 C
IPI tax to be paid 9.318,18 C
ICMS - tax expense 11.181,82 D

Stored in the Nota Fiscal for selling:

Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 11.181,82 12 93.181,82
IPI 9.318,18 10 93.181,82

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Purchasing: If the purchasing company is reselling the product

The FI-posting for purchasing is:

Accounts payable 102.500,00 C


Inventory 91.318,18 D
ICMS tax 11.181,82 D

Stored in the Nota Fiscal for purchasing:

Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 11.181,82 12 93.181,82
IPI 9.318,18 10 93.181,82

Purchasing: If the purchasing company is using the product in production

The FI-posting for purchasing is:

Accounts payable 102.500,00 C


Inventory 82.000,00 D
ICMS tax 11.181,82 D
IPI tax 9.318,18 D

Stored in the Nota Fiscal for purchasing:

Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 11.181,82 12 93.181,82
IPI 9.318,18 10 93.181,82

2.2.2 Usage of goods - consumption (buying: only within a


federal state)

Calculation of ICMS is done based on the amount incl. IPI. According to the calculation
formula the ICMSrate is calculated over IPI as follows:

 IPIrate 
ICMSnew = ICMSrate * 1 + 
 100 

in the example:
 10 
ICMSnew: 12 * 1 +  = 13 ,2
 100 

82. 000,00 82. 000,00


= = 94. 470,05
13 ,2 0, 868
1−
100

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IPI is calculated based on the price incl. ICMS

94.470,05 (including ICMS)


9.447,01 (10 % of IPI)

103.917,06 (invoice value)

Calculation base: 103.917,06

Invoice value: 103.917,06


ICMS amount: - 12.470,05
IPI amount: - 9.447,01

Sales price: 82.000,00

The FI-posting for selling is:

Accounts receivable 103.917,06 D


Sales 94.470,05 C
ICMS tax to be paid 12.470,05 C
IPI tax to be paid 9.447,01 C
ICMS - tax expense 12.470,05 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 12.470,05 12 103.917,05
IPI 9.447,01 10 94.470,05

The FI-posting for purchasing is: (tax is not recoverable in consumption)

Accounts payable 103.917,00 C


Cost account 103.917,00 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 12.470,00 12 103.917,00
IPI 9.447,00 10 94.470,00

2.2.3 Usage of goods - industrialization - reduced calculation


base for ICMS

Only a part of the product price is taxed with ICMS. The reduced base affects the tax
calculation and the data transfer to the Nota Fiscal.

ICMS Tax base reduction: 90%

82. 000,00 82. 000,00


= = 91.928,25
 90 * 12 
1 − 
0, 892
100 100 

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IPI is calculated based on the price incl. ICMS

91.928,25 (including ICMS)


9.192,83 (10 % of IPI)

101.121,08 (invoice value)

Calculation base is the reduced value:

90
CalcBase = * 91 .928,25 = 82. 735 ,43
100

Calculation base: 82.735,43

Invoice value: 101.121,08


ICMS amount: - 9.928,25 = 82.735,43 * 0,12
IPI amount: - 9.192,83

Sales price: 82.000,00

The FI-posting for selling is:

Accounts receivable 101.121,08 D


Sales 91.928,25 C
ICMS tax to be paid 9.928,25 C
IPI tax to be paid 9.192,83 C
ICMS - tax expense 9.928,25 D

Stored in the Nota Fiscal for selling:

Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 9.928,25 12 82.735,43 9.192,82
IPI 9.192,83 10 91.928,25

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Purchasing: If the purchasing company is reselling the product

The FI-posting for purchasing is:

Accounts payable 101.121,08 C


Inventory 91.192,93 D
ICMS tax 9.928,25 D

Stored in the Nota Fiscal for purchasing:

Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 9.928,25 12 82.735,43 9.192,82
IPI 9.192,83 10 91.928,25

Purchasing: If the purchasing company is using the product in production

The FI-posting for purchasing is:

Accounts payable 101.121,08 C


Inventory 82.000,00 D
ICMS tax 9.928,25 D
IPI tax 9.192,83 D

Stored in the Nota Fiscal for purchasing:

Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 9.928,25 12 82.735,43 9.192,82
IPI 9.192,83 10 91.928,25

2.2.4 Usage of goods - consumption - reduced calculation base for


ICMS

Only a part of the product price is taxed with ICMS. The reduced base affects the tax
calculation and the data transfer to the Nota Fiscal. Calculation of ICMS is done based
on the amount incl. IPI.

ICMS Tax base reduction: 90%


90  10 
ICMSnew: * 12 * 1 +  = 11,88
100  100 
82. 000,00 82. 000,00
= = 93 .054 ,93
11 ,88 0, 8812
1−
100

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IPI is calculated based on the price incl. ICMS

93.054,93 (including ICMS)


9.305,49 (10 % of IPI)

102.360,42 (invoice value)

Calculation base is the reduced value:


90
CalcBase = * 102. 360,42 = 92. 124 ,38
100
Calculation base: 92.124,38

Invoice value: 102.360,42


ICMS amount: - 11.054,93
IPI amount: - 9.305,49

Sales price: 82.000,00

The FI-posting for selling is:

Accounts receivable 102.360,42 D


Sales 93.054,93 C
ICMS tax to be paid 11.054,93 C
IPI tax to be paid 9.305,49 C
ICMS - tax expense 11.054,93 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 11.054,93 12 92.124,38 10.236,04
IPI 9.305,49 10 93.054,93

The FI-posting for purchasing is: (tax is not recoverable in consumption)

Accounts payable 102.360,42 C


Cost account 102.360,42 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 11.054,93 12 10.236,04 92.124,38
IPI 9.305,49 10 93.054,93

2.2.5 Rules if ICMS or IPI are not applicable

In some cases of the tax calculation only one of the taxes (ICMS/IPI) has to be
calculated while the other tax is not applicable. To make sure that the information
about both ICMS and IPI calculation is available in all cases even data about the non
applicable tax has to be stored (e.g. for the legal books).

The general rule to handle such cases is to calculate the base amount also for the tax
which is not applicable and to keep this base amount in the field ‘Others’ of the
respective Nota Fiscal record. The tax amount for this tax then is zero.

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From 3.0F on it is also possible to store the base amount for ICMS and IPI as ‘Exempt’
instead of ‘Others’. This function is activated by two special indicators on tax code
level.

To simplify the documentation just one case is given as an example. All other case
work similar.

Example: Sales by commercial or industrial establishment - third party


production

Calculation of ICMS is done based on the amount without IPI

IPI is not applicable in this special case !

82. 000,00 82. 000,00


= = 93 .181 ,82
12 0, 88
1−
100

Calculation base: 93.181,82

Invoice value: 93.181,82


ICMS amount: - 11.181,82

Sales price: 82.000,00

The FI-posting for selling is:

Accounts receivable 102.500,00 D


Sales 93.181,82 C
ICMS tax to be paid 11.181,82 C
ICMS - tax expense 11.181,82 D

Purchasing: If the purchasing company is reselling the product

The FI-posting for purchasing is:

Accounts payable 102.500,00 C


Inventory 82.000,00 D
ICMS tax 11.181,82 D

Stored in the Nota Fiscal for selling and purchasing:

Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 11.181,82 12 93.181,82
IPI 10 93.181,82

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2.3 Special cases for purchasing

In addition to the standard case in sales and purchasing there are some special cases.

Amounts and rates for the examples:

Sales price : 82.000,00 (excluding tax)


ICMS : 12 %
IPI : 10 %

2.3.1 Usage of goods - industrialization - vendor = non industry

If the vendor is non IPI paying wholesaler 50% of the calculated IPI value can be
recovered. Since the wholesaler does not charge any IPI at all this IPI credit is
deducted from the inventory value. The IPI is not stored and printed in the Nota Fiscal.

Calculation of ICMS is done based on the amount without IPI

82. 000,00 82. 000,00


= = 93 .181 ,82
12 0, 88
1−
100

IPI is calculated based on the price incl. ICMS

93.181,82 (including ICMS)



93.181,82 (invoice value) - the wholesaler does not charge IPI

9.318,18 (10 % of IPI)


4.659,09 50% of the IPI value -> has to be posted as tax credit

Calculation base: 93.181,82

Invoice value: 93.181,82


ICMS amount: - 11.181,82

Sales price: 82.000,00
IPI credit(50%): - 4.659,09

Inventory value 77.340,91
IPI amount(50%) - 4.659,09

The FI-posting for purchasing is:

Accounts payable 93.181,82 C


Inventory 77.340,91 D
ICMS tax 11.181,82 D
IPI tax 4.659,09 D

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Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 11.181,82 12 93.181,82
IPI1 4.659,09 10 46.590,91
IPI2 -4.659,09 10 46.590,91

2.3.2 Usage of goods - consumption - purchasing from another


federal state

If a company buys a product in another state and the product is used for
consumption, then the complement of ICMS has to be calculated and posted. This
special ICMS is the difference between the ICMS rate charged by the vendor and the
ICMS rate which is valid when buying in the same state.

ICMS rate charged by the vendor: 12%


ICMS rate when buying in the same state: 18%
Difference is Comp. ICMS: 6%

ICMS is calculated on the sales price including IPI:


 10 
ICMS - charged by the vendor : 12 * 1 +  = 13 ,2
 100 
82. 000,00 82. 000,00
= = 94. 470,05
Value incl. ICMS 13 ,2 0, 868
1−
100

IPI is calculated based on the price incl. ICMS (charged by vendor);


Comp. ICMS is also calculated based on the price incl. ICMS:

94.470,05 (including ICMS)


9.447,01 (10 % of IPI)

103.917,06 (invoice value)

Based on the invoice value (including ICMS and IPI) the complement of ICMS is
calculated:

CompIcmsRate
CompIcms = Amount (incl .IPI ,incl .ICMS )*
100

6
CompIcms =103 .917 ,06 * = 6235 ,02
100

Calculation base: 103.917,06

Invoice value: 103.917,06


ICMS amount: - 12.470,05
IPI amount: - 9.447,01

Sales price: 82.000,00

Complement of ICMS 6.235,02

The FI-posting for purchasing is: (tax is not recoverable in consumption)

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Accounts payable 103.917,06 C


Cost account 103.917,06 D
Comp. ICMS expense 6.235,02 C
Comp. ICMS (dummy) 6.235,02 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 12.470,05 12 103.917,05
IPI 9.447,01 10 94.470,05
CompICMS 6.235,02 6 103.917,06

2.4 Outgoing/incoming NF with ISS for companies

For services a municipal tax (ISS) is charged. The rate is determined by the city of the
vendor.

Amounts and rates for the example:

Service price : 9.000,00 (excluding tax)


ISS rate : 10 %

9. 000,00 9. 000,00
= = 10 .000,00
10 0,90
1−
100

Invoice value: 10.000,00


ISS amount: - 1.000,00

Sales price: 9.000,00

The FI-posting for selling is:

Accounts receivable 10.000,00 D


Sales 9.000,00 C
ISS tax to be paid 1.000,00 C

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ISS 1.000 10 10.000,00

The FI-posting for purchasing is:

Accounts payable 10.000,00 C


Expenses 10.000,00 D

Stored in the Nota Fiscal:


Base

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Tax type Tax amount Rate Amount Exclude Others

2.5 Outgoing/incoming NF with IRRF for companies (only)

For some services IRRF (income tax) is charged. An automatic determination if IRRF
has to be calculated or not is not possible and foreseen. The applicable percentage
rates has to be set manually per business transaction (by using a certain
withholding tax code).

Amounts and rates for the example:

Service price : 10.000,00

IRRF rate : 2 %

Invoice value: 10.000,00



Sales price: 10.000,00

The FI-posting for selling is:

when issuing the Nota Fiscal / SD-billing

Accounts receivable 9.800,00 D


IRRF tax 200,00 D
Sales 10.000,00 C

The FI-posting for purchasing is:

when receiving the invoice / invoice verification

Accounts payable 9.800,00 C


IRRF tax to be paid 200,00 C
Expenses 10.000,00 D

These postings mean that the tax is withholded by the receiver of the goods.
The vendor just gets the invoice value reduced by the IRRF amount. The clearing on
the outgoing side is done at the end of the year according to the tax information
delivered by the company which withholded the IRRF tax.

Stored in the Nota Fiscal for selling and purchasing:

Base

Tax type Tax amount Rate Amount Exclude Others

2.6 Outgoing/incoming NF with ISS and IRRF for companies

IRRF can also be charged in combination with ISS. The same rules as for ISS and IRRF
only apply.

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Amounts and rates for the example:

Service price : 9.000,00 (excluding tax)


ISS rate : 10 %

IRRF rate : 2 %

ISS calculation:

9000,00 9000,00
= = 10 .000,00
10 0,90
1−
100

Invoice value: 10.000,00


ISS amount 1.000,00

Sales price: 9.000,00

The FI-posting for selling is:

when issuing the Nota Fiscal / SD-billing

Accounts receivable 9.800,00 D


IRRF tax 200,00 D
Sales 9.000,00 C
ISS tax to be paid 1.000,00 C

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ISS 1.000 10 10.000,00

The FI-posting for purchasing is:

when receiving the invoice / invoice verification

Accounts payable 9.800,00 C


IRRF tax to be paid 200,00 C
Expenses 10.000,00 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others

See also example for IRRF only (see chapter Outgoing/incoming NF with IRRF for
companies (only) )

2.7 Incoming NF with INSS/IRRF or INNS/ISSF/IRRF for natural


persons

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If the vendor of a service is a natural person, taxes have to be withholded by the


company buying the service. If the vendor has only a CPF and is registered in the city
where he provides the service must pay the ISS to the city. This is done according to
the ISS rate of the city but does not affect our calculation.

If the vendor of a service is a natural person, taxes have to be withholded by the


company buying the service. If the vendor has only a CPF and is NOT registered in
the city where he provides the service in addition to INSS and IRRF also the ISS has to
be withholded by the company which buys the service. This is done according to the
normal ISS calculation. The withholded ISS is then called ISSF. The ISSF amount does
not affect the calculation of the other taxes.

INSS is a social security tax which the company has to pay when receiving the
service. INSS is no withholding tax. The calculation of INSS is like ISS.

For IRRF the tax amount and the base amount is cumulated per month and in each
posting of a month the already posted invoices of the vendor are taken into account
to calculate the IRRF which has to be withholded in the current posting.

As the base amount for IRRF the gross amount minus the INSS amount is used.

A special rules applies if the vendor is married. Then for each dependent member of
his family a fix amount is deducted from the tax base amount. This amount is
currently R$ 90,--.

Amounts and rates for the example:

IRRF rate table (given by the government):

Service amount Rate Base amount deduction

until R$ 900,00 exempt (0%) 0

R$ 900,01 to R$ 1800,00 15 % R$ 900,00

over R$ 1800,00 25 % R$ 1800,00

INSS rate: 15 %

ISS(F) rate: 5%

Base deduction for each dependent family member: R$ 90

2.7.1 Incoming NF with INSS/IRRF - vendor not married

To show the impact of the cumulation of the IRRF amount and the base amount the
example consists of three posting done in the same month and a fourth posting in the
next month.

1. posting (05/01/96): (first vendor invoice in month 01)

Service price 1.200,00

Base amount for INSS 1.200,00

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INSS - 180,00

Base amount for IRRF 1.020,00

IRRF amount 18,00 ( 900,00 - 0) * 0 % +


(1.020,00 - 900) * 15 %

The FI-posting for purchasing is:

when receiving the invoice / invoice verification

Accounts payable 1.182,00 C


IRRF tax to be paid 18,00 C
Expenses 1.020,00 D
INSS expenses 180,00 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others

2. posting (25/01/96):

Service price 3.000,00

Base amount for INSS 3.000,00


INSS - 450,00

Base amount for IRRF 2.550,00
Base amount of prev. inv. 1.020,00

Base amount for calculation 3.570,00

IRRF amount 577,50 ( 900,00 - 0) * 0 % +


(1.800,00 - 900) * 15 % +
(3.570,00 - 1.800) * 25 %
IRRF amount of prev. inv. - 18,00

IRRF amount to be paid 559,50

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The FI-posting for purchasing is:

when receiving the invoice / invoice verification

Accounts payable 2.440,50 C


IRRF tax to be paid 559,50 C
Expenses 2.550,00 D
INSS expenses 450,00 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others

3. posting (27/01/96):

Service price 2.000,00

Base amount for INSS 2.000,00


INSS - 300,00

Base amount for IRRF 1.700,00
Base amount of prev. inv. 3.570,00

Base amount for calculation 5.270,00

IRRF amount 1.002,50 ( 900,00 - 0) * 0 % +


(1.800,00 - 900) * 15 % +
(5.270,00 - 1.800) * 25 %
IRRF amount of prev. inv. - 577,50

IRRF amount to be paid 425,00

The FI-posting for purchasing is:

when receiving the invoice / invoice verification

Accounts payable 1.575,00 C


IRRF tax to be paid 425,50 C
Expenses 1.700,00 D
INSS expenses 300,00 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others

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4. posting (03/02/96):

Service price 3.000,00

Base amount for INSS 3.000,00


INSS - 450,00

Base amount for IRRF 2.550,00
Base amount of prev. inv. 0,00

Base amount for calculation 2.550,00

IRRF amount 322,50 ( 900,00 - 0) * 0 % +


(1.800,00 - 900) * 15 % +
(2.550,00 - 1.800) * 25 %
IRRF amount of prev. inv. - 0,00

IRRF amount to be paid 322,50

The FI-posting for purchasing is:

when receiving the invoice / invoice verification

Accounts payable 2.677,50 C


IRRF tax to be paid 322,50 C
Expenses 2.550,00 D
INSS expenses 450,00 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others

2.7.2 Incoming NF with INSS/ISSF/IRRF - vendor not married

To show the impact of the cumulation of the IRRF amount and the base amount the
example consists of three posting done in the same month and a fourth posting in the
next month.

1. posting (05/01/96): (first vendor invoice in month 01)

Service price 800,00

Base amount for INSS 800,00


INSS - 120,00

Base amount for IRRF 680,00

IRRF amount 0,00 ( 900,00 - 0) * 0 %

Base amount for ISSF 800,00

ISSF amount 40,00 800,00 * 5%

The FI-posting for purchasing is:

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when receiving the invoice / invoice verification

Accounts payable 760,00 C


IRRF tax to be paid 0,00 C
ISSF tax to be paid 40,00 C
Expenses 680,00 D
INSS expenses 120,00 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others

2. posting (15/01/96):

Service price 1.000,00

Base amount for INSS 1.000,00


INSS - 150,00

Base amount for IRRF 850,00
Base amount of prev. inv. 680,00

Base amount for calculation 1.530,00

IRRF amount 94,50 ( 900,00 - 0) * 0 % +


(1.530,00 - 900) * 15 %
IRRF amount of prev. inv. - 0,00

IRRF amount to be paid 94,50

Base amount for ISSF 1000,00

ISSF amount 50,00 1000,00 * 5%

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The FI-posting for purchasing is:

when receiving the invoice / invoice verification

Accounts payable 855,50 C


IRRF tax to be paid 94,50 C
ISSF tax to be paid 50,00 C
Expenses 850,00 D
INSS expenses 150,00 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others

3. posting (28/01/96):

Service price 3.000,00

Base amount for INSS 3.000,00


INSS - 450,00

Base amount for IRRF 2.550,00
Base amount of prev. inv. 1.530,00

Base amount for calculation 4.080,00

IRRF amount 705,00 ( 900,00 - 0) * 0 % +


(1.800,00 - 900) * 15 % +
(4.080,00 - 1800) * 25 %
IRRF amount of prev. inv. - 94,50

IRRF amount to be paid 610,50

Base amount for ISSF 3000,00

ISSF amount 150,00 3000,00 * 5%

The FI-posting for purchasing is:

when receiving the invoice / invoice verification

Accounts payable 2.239,50 C


IRRF tax to be paid 610,50 C
ISSF tax to be paid 150,00 C
Expenses 2.550,00 D
INSS expenses 450,00 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others

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4. posting (06/02/96):

Service price 1.200,00

Base amount for INSS 1.200,00


INSS - 180,00

Base amount for IRRF 1.020,00
Base amount of prev. inv. 0,00

Base amount for calculation 1.020,00

IRRF amount 18,00 ( 900,00 - 0) * 0 % +


(1.020,00 - 900) * 15 %
IRRF amount of prev. inv. - 0,00

IRRF amount to be paid 18,00

Base amount for ISSF 1200,00

ISSF amount 60,00 1200,00 * 5%

The FI-posting for purchasing is:

when receiving the invoice / invoice verification

Accounts payable 1.122,00 C


IRRF tax to be paid 18,00 C
ISSF tax to be paid 60,00 C
Expenses 1.020,00 D
INSS expenses 180,00 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others

2.7.3 Incoming NF with INSS/IRRF - vendor married - 4 family


members

To show the impact of the cumulation of the IRRF amount and the base amount the
example consists of three posting done in the same month and a fourth posting in the
next month.

1. posting (10/01/96): (first vendor invoice in month 01)

Service price 1.200,00

Base amount for INSS 1.200,00


INSS - 180,00

Subtotal 1.020,00
Deduction 360,00 ( 4 * 90,00)

Base amount for IRRF 660,00

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IRRF amount 0,00 ( 900,00 - 0) * 0 %

The FI-posting for purchasing is:

when receiving the invoice / invoice verification

Accounts payable 1.200,00 C


Expenses 1.020,00 D
INSS expenses 180,00 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others

2. posting (25/01/96):

Service price 3.000,00

Base amount for INSS 3.000,00


INSS - 450,00

Subtotal 2.550,00
Base amount of prev. inv. 1.020,00

Subtotal 3.570,00
Deduction - 360,00 ( 4 * 90,00)

Base amount for calculation 3.210,00

IRRF amount 487,50 ( 900,00 - 0) * 0 % +


(1.800,00 - 900) * 15 % +
(3.210,00 - 1.800) * 25 %
IRRF amount of prev. inv. - 0,00

IRRF amount to be paid 487,50

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The FI-posting for purchasing is:

when receiving the invoice / invoice verification

Accounts payable 2.512,50 C


IRRF tax to be paid 487,50 C
Expenses 2.550,00 D
INSS expenses 450,00 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others

3. posting (27/01/96):

Service price 2.000,00

Base amount for INSS 2.000,00


INSS - 300,00

Subtotal 1.700,00
Base amount of prev. inv. 3.570,00

Subtotal 5.270,00
Deduction - 360,00 ( 4 * 90,00)

Base amount for calculation 4.910,00

IRRF amount 912,50 ( 900,00 - 0) * 0 % +


(1.800,00 - 900) * 15 % +
(4.910,00 - 1.800) * 25 %
IRRF amount of prev. inv. - 487,50

IRRF amount to be paid 425,00

The FI-posting for purchasing is:

when receiving the invoice / invoice verification

Accounts payable 1.575,00 C


IRRF tax to be paid 425,50 C
Expenses 1.700,00 D
INSS expenses 300,00 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others

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4. posting (03/02/96):

Service price 3.000,00

Base amount for INSS 3.000,00


INSS - 450,00

Base amount for IRRF 2.550,00
Base amount of prev. inv. 0,00

Subtotal 2.550,00
Deduction - 360,00 ( 4 * 90,00)

Base amount for calculation 2.190,00

IRRF amount 232,50 ( 900,00 - 0) * 0 % +


(1.800,00 - 900) * 15 % +
(2.190,00 - 1.800) * 25 %
IRRF amount of prev. inv. - 0,00

IRRF amount to be paid 232,50

The FI-posting for purchasing is:

when receiving the invoice / invoice verification

Accounts payable 2.767,50 C


IRRF tax to be paid 232,50 C
Expenses 2.550,00 D
INSS expenses 450,00 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others

2.7.4 Incoming NF with INSS/ISSF/IRRF - married - 2 family members

To show the impact of the cumulation of the IRRF amount and the base amount the
example consists of three posting done in the same month and a fourth posting in the
next month.

1. posting (05/01/96): (first vendor invoice in month 01)

Service price 800,00

Base amount for INSS 800,00


INSS - 120,00

Subtotal 680,00
Deduction - 180,00 ( 2 * 90,00)

Base amount for IRRF 500,00

IRRF amount 0,00 ( 900,00 - 0) * 0 %

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Base amount for ISSF 800,00

ISSF amount 40,00 800,00 * 5%

The FI-posting for purchasing is:

when receiving the invoice / invoice verification

Accounts payable 760,00 C


IRRF tax to be paid 0,00 C
ISSF tax to be paid 40,00 C
Expenses 680,00 D
INSS expenses 120,00 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others

2. posting (15/01/96):

Service price 1.000,00

Base amount for INSS 1.000,00


INSS - 150,00

Subtotal 850,00
Base amount of prev. inv. 680,00

Subtotal 1.530,00
Deduction 180,00 ( 2 * 90,00)

Base amount for calculation 1.350,00

IRRF amount 67,50 ( 900,00 - 0) * 0 % +


(1.350,00 - 900) * 15 %
IRRF amount of prev. inv. - 0,00

IRRF amount to be paid 67,50

Base amount for ISSF 1000,00

ISSF amount 50,00 1000,00 * 5%

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The FI-posting for purchasing is:

when receiving the invoice / invoice verification

Accounts payable 882,50 C


IRRF tax to be paid 67,50 C
ISSF tax to be paid 50,00 C
Expenses 850,00 D
INSS expenses 150,00 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others

3. posting (28/01/96):

Service price 3.000,00

Base amount for INSS 3.000,00


INSS - 450,00

Subtotal 2.550,00
Base amount of prev. inv. 1.530,00

Subtotal 4.080,00
Deduction 180,00 ( 2 * 90,00)

Base amount for calculation 3.900,00

IRRF amount 660,00 ( 900,00 - 0) * 0 % +


(1.800,00 - 900) * 15 % +
(3.900,00 - 1800) * 25 %
IRRF amount of prev. inv. - 67,50

IRRF amount to be paid 592,50

Base amount for ISSF 3000,00

ISSF amount 150,00 3000,00 * 5%

The FI-posting for purchasing is:

when receiving the invoice / invoice verification

Accounts payable 2.257,50 C


IRRF tax to be paid 592,50 C
ISSF tax to be paid 150,00 C
Expenses 2.550,00 D
INSS expenses 450,00 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others

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4. posting (06/02/96):

Service price 1.200,00

Base amount for INSS 1.200,00


INSS - 180,00

Subtotal 1.020,00
Base amount of prev. inv. 0,00

Subtotal 1.020,00
Deduction 180,00 ( 2 * 90,00)

Base amount for calculation 840,00

IRRF amount 0,00 ( 900,00 - 0) * 0 %


IRRF amount of prev. inv. - 0,00

IRRF amount to be paid 0,00

Base amount for ISSF 1200,00

ISSF amount 60,00 1200,00 * 5%

The FI-posting for purchasing is:

when receiving the invoice / invoice verification

Accounts payable 1.140,00 C


ISSF tax to be paid 60,00 C
Expenses 1.120,00 D
INSS expenses 180,00 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others

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3. Additional tax requirements

3.1 Discounts

In Brazil there are three different situations for discounts:

• Discount not included in the Nota Fiscal (Commercial Discount)

• Discount included in the Nota Fiscal (Commercial Discount)

• Cash Discount

Discount not included in the Nota Fiscal (SD only)

In SD (pricing) discounts can be given before calculating the tax base amount. These
discounts are not included in the Nota Fiscal.

There is no effect on the tax base amount. These kind of discounts are just part of the
company internal pricing strategy and do not appear on any documents.

Discount included in the Nota Fiscal (SD and MM)

The discounts can be given before calculating the tax base amount and included in
the Nota Fiscal. The legal requirement how these discounts affect the tax calculation
are:

• For ICMS the discount is not included in the base amount. ICMS is
calculated on the discounted amount.

• For IPI the discount is included in the base amount. IPI is calculated on
the not discounted (full) amount.

Cash Discount

Cash discounts are handled in the A/P and A/R modules. When giving cash discounts
the taxes are always calculated over the full value because the cash discount is not
known in the MM (invoice verification) or the SD (billing). A correction of the taxes
based on the price after the cash discount in A/P or A/R is not foreseen.

That means that the Brazilian company codes have to be set up with:

• Tax base is gross value


• Cash discount base is gross value

3.1.1 Discount not included in the Nota Fiscal (SD only)

Amounts and rates:

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Gross price : 91.111,11 (excluding tax)


ICMS : xx %
IPI : xx %
Discount not in N.F. : 10 % on gross price

Calculation of price with discounts not included the Nota Fiscal:

Gross value: 91.111,11


Discount 10%: 9.111,11

Price in the Nota Fiscal 82.000,00

The discount has no effect on the tax base amounts and the FI document. For the
accounting the gross sales amount is the discounted amount.

All further processing is done exactly in the same way as if there is no discount. The
price for the following processing the ‘Price in the Nota Fiscal’ = ‘Sales price’. The
normal processing is documented in chapter 2.2.1 (Industrialization) and 2.2.2
(Consumption) of this document.

3.1.2 Discount included in the Nota Fiscal

Amounts and rates:

Gross price : 82.000,00 (excluding tax)


ICMS : 18 %
IPI : 10 %
Discount in N.F. : 5 % on Nota Fiscal price

Discount included in the Nota Fiscal - Usage = Industrialization

Net value before discount: 82.000,00


ICMS amount on net: - 18.000,00

Price incl. ICMS 100.000,00 (1)
N.F. discount (5%) 5.000,00

Price incl. ICMS - discount 95.000,00 (2)

IPI amount: 10.000,00 IPI calculated from (1)


ICMS amount: 17.100,00 ICMS calculated from (2)

Price incl. ICMS - discount 95.000,00


IPI amount 10.000,00

Sales price 105.000,00
- ICMS 17.100,00
- IPI 10.000,00

Real net value: 77.900,00

The FI-posting for selling is:

Accounts receivable 105.000,00 D


Sales 100.000,00 C

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Sales Deduction 5.000,00 D


ICMS tax to be paid 17.100,00 C
IPI tax to be paid 10.000,00 C
ICMS - tax expense 17.100,00 D

The FI-posting for purchasing is:

Accounts payable 105.000,00 C


Inventory 77.900,00 D
ICMS tax 17.100,00 D
IPI tax 10.000,00 D

Stored in the Nota Fiscal for selling and purchasing:

Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 17.100,00 18 95.000,00
IPI 10.000,00 10 100.000,00

Discount included in the Nota Fiscal - Usage = Consumption

Net value before discount: 82.000,00


ICMS amount on net: - 20.244.39 ICMS over IPI

Price incl. ICMS 102.244,39 (1)
N.F. discount (5%) 5.112,22

Price incl. ICMS - discount 97.132,17
IPI amount: 10.244,44 IPI calculated from (1)

Sales price 107.356,61 (2)

ICMS amount: 19.324,19 ICMS calculated from (2)

Sales price 107.356,61


- ICMS 19.324,19
- IPI 10.244,44

Real net value: 77.807,98

The FI-posting for selling is:

Accounts receivable 107.356,61 D


Sales 102.244,39 C
Sales Deduction 5.112,22 D
ICMS tax to be paid 19.324,19 C
IPI tax to be paid 10.244,44 C
ICMS - tax expense 19.324,19 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others

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ICMS 19.324,19 18 107.356,61


IPI 10.244,44 10 102.244,39

The FI-posting for purchasing is:

Accounts payable 107.356,61 C


Cost account 107.356,61 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 19.324,19 18 107.356,61
IPI 10.244,44 10 102.244,39

3.1.3 Cash Discount

Amounts and rates:

Gross price : 91.111,11 (excluding tax)


ICMS : 18 %
IPI : 10 %
Discount not in N.F. : 10 % on gross price
Cash discount : 4.100,00

Calculation of price:

Gross value: 91.111,11


Discount 10% not in N.F. 9.111,11

Price in the Nota Fiscal 82.000,00

The discount has no effect on the tax base amounts and the FI document related to
the Nota Fiscal.

All further processing is done exactly in the same way as if there is no cash discount.
The price for the following processing the ‘Price in the Nota Fiscal’ = ‘Sales price’. The
normal processing is documented in chapter 2.2.1 (Industrialization) and 2.2.2
(Consumption) of this document.

Cash discount processing takes place when the incoming/outgoing payment is


posted:

The FI-posting for payment from customer with discount is:

Accounts receivable 102.500,00 C


Discount 4.100,00 D
Bank 98.400,00 D

The FI-posting for payment to the vendor with discount is:

Accounts payable 102.500,00 D


Discount Received 4.100,00 C

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Bank 98.400,00 C

3.2 Freight

Expenses on purchasing and selling like freight are handled in two different ways in
Brazil:

• freight in a separate Nota Fiscal called ‘conhecimento’

• freight included in the Nota Fiscal of the material.

Having a ‘conhecimento’ is the most common way to handle freight in Brazil. In the
‘conhecimento’ only ICMS or ISS but no IPI is calculated.

3.2.1 Freight in a separate ‘conhecimento’ in MM

As a general scope decision, conhecimentos will only be supported on the incoming


side (MM). Therefore only these requirements are documented here.

3.2.1.1 Intramunicipal Freight

If the transportation is done within the same municipal area, the only applicable tax is
the ISS.

BASE AMOUNT freight price including ISS,


RATE is determined by the city of the carrier.

Example :

Freight price : 9.000,00 (excluding tax)


ISS rate : 10 %

9. 000,00 9. 000,00
= = 10 .000,00
10 0,90
1−
100

Invoice value: 10.000,00


ISS amount: - 1.000,00

Freight price: 9.000,00

The FI-posting for purchasing is:

Accounts payable 10.000,00 C


Expenses 10.000,00 D

If the freight is used for material which is used for industrialization, the freight amount
has to be posted to an inventory account. If the freight is charged for a delivery of
sales products to a customer an account for ‘freight on sales’ must be used for debit.

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Technically these posting have to be done manually in the invoice verification. If a


distribution on different materials is necessary even this has to be done by hand.

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others

3.2.1.2 Intrastate and Interstate Freight - no base value reduction

If the transportation is done within the same state or between states, the only
applicable tax is ICMS. Therefore the calculation in case of industrialization and
consumption is the same. The only difference between these case is how the ICMS is
posted in FI and the conhecimento.

BASE AMOUNT freight price including ICMS,


RATE is determined using the states involved (normal ICMS procedure).
For example : Intrastate São Paulo = 12%, São Paulo - South &
Southeast =
12% , São Paulo - other regions = 7%.

Example :

Freight price : 82.000,00 (excluding tax)


ICMS : 12 %
IPI : Not applicable

Calculation of ICMS is done based on the amount without IPI

82. 000,00 82. 000,00


= = 93 .181 ,82
12 0, 88
1−
100

93.181,82 (invoice value)

Calculation base: 93.181,82

Invoice value: 93.181,82


ICMS amount: - 11.181,82

Freight price: 82.000,00

Usage of goods on the related Nota Fiscal - industrialization

The FI-posting for purchasing is:

Accounts payable 93.181,82 C


Inventory 82.000,00 D (distributed)
ICMS tax 11.181,82 D

Note that the inventory posting must be distributed between all the received
materials, according to manual, volume or value criteria.

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Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 11.181,92 12 93.181,82

Usage of goods on the related Nota Fiscal - consumption

The FI-posting for purchasing is: (tax is not recoverable in consumption)

Accounts payable 93.181,82 C


Expense account 93.181,82 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 11.181,92 12 93.181,82

Note that in the case of buying freight for the delivery of goods to customers, an
account for ‘freight on sales’ should be used for debiting the freight.

3.2.1.3 Intrastate and Interstate Freight - base value reduction for carrier (80%)

The carrier has the option of choosing reduction of the base amount. In that case, the
ICMS to be paid by the carrier may be calculated over 80% of the freight price. The
consequence of this choice is that the carrier will not be able to recover ICMS in the
purchase of goods that are used in the transportation (e.g. gasoline, tires etc.).

This special rule leads to the fact that a vendor dependent base reduction for the
ICMS calculation is required. The calculation itself work similar to ‘normal’ base
reductions for ICMS.

Example :

Freight price : 82.000,00 (excluding tax)


ICMS : 12 %
IPI : Not applicable

Base amount reduction for carrier to 80% !

Usage of goods on the related Nota Fiscal - industrialization

The FI-posting for purchasing is:

Accounts payable 90.707,96 C


Inventory 82.000,00 D
ICMS tax 8.707,96 D

Stored in the Nota Fiscal for purchasing:

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Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 8.707,96 12 72.566,37 18.141,59

Usage of goods on the related Nota Fiscal - consumption

The FI-posting for purchasing is:

Accounts payable 90.707,96 C


Inventory 90.707,96 D

Stored in the Nota Fiscal for purchasing:

Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 8.707,96 12 18.141,59 72.566,37

3.2.2 Freight included in the Nota Fiscal

The calculation and posting of freight in the Nota Fiscal is not in scope of the
localization.

If the freight is included in the price and has not to be mentioned somewhere in the
Nota Fiscal, the standard processing in SD and MM fulfills the requirements. All other
ways of freight in the N.F. are not supported in the integrated solution.

For further information please check the requirement analysis


created by the Brazil development link team.

3.3 Zona Franca

For domestic products which are sold to Zona Franca for industrialization/resale
special processing of ICMS and IPI takes place. On the Nota Fiscal the amount
including ICMS is printed and a special discount equal to the ICMS amount has to be
given. IPI is not calculated at all. If products are sold for consumption taxes are
charged in the normal way.

Imported products are processed in the normal way. The decision if a product is
imported has to be done by the vendor because this rule is also valid via several sales
steps.

When buying from a company located in Zona Franca the normal processing of taxes,
... takes place.

Example: Usage of goods - industrialization

Amounts and rates:

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Sales price : 82.000,00 (excluding tax)


ICMS : 12 %

Calculation of ICMS is done based on the amount without IPI

82. 000,00 82. 000,00


= = 93 .181 ,82
12 0, 88
1−
100

Calculation base: 93.181,82

Invoice value: 82.000,00


ICMS amount: - 11.181,82
Discount in Z.F. 11.181,82

Sales price: 82.000,00

The FI-posting for selling is:

Accounts receivable 82.000,00 D


Sales 93.181,82 C
ICMS tax 11.181,82 C
ICMS tax discount Z.F. 11.181,82 D
ICMS tax expense 11.181,82 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 11.181,82 12 93.181,82
ICZF -11.181,82 12
IPI 0 0 93.181,82

3.4 Change of usage (industrialization <-> consumption)

When changing the usage of a product form industrialization to consumption or vice


versa some special processing has to be done.

Industrialization -> consumption

An internal Nota Fiscal with taxes has to be issued. The price of the material does not
change. The taxes are calculated considering either
- MAP moving average price or
- price of last purchase.

Consumption -> industrialization

Manual correction postings of tax credit have to be done.

For further information please check the requirement analysis


created by the Brazil development link team.

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3.5 Substituicao Tributaria (S.T.)

S.T. is the ICMS amount due on a surcharge to the original price including ICMS and
IPI or on a fixed price per unit.

In SD S.T. depends on the customer. Not for every customer S.T. has to be calculated.

In MM S.T. depends on the plant. Not every company/plant has to pay S.T.

The calculation of S.T. generally depends on:

• Customer (SD) or Plant (MM)


• Usage of the goods
• State of origin of the goods
• State of destination of the goods
• Product (not NBM-code)

This data determines if S.T. is charged or not and if yes, how S.T. is calculated.

The processing logic is:


1 Check if the customer (SD - determined by flag in customer master) or the plant
(MM - determined by tax code) is due to pay S.T. at all. If not no calculation is
necessary.
2 If S.T. has to be calculated according rule 1
state of origin/state of destination/material
determine again if S.T. has to be calculated at all and if yes, how the base amount
for the calculation is determined:
- percentage rate
- fixed price (per unit)

Additional rules:

• Percentage rate for ICMS calculation on surcharged value (ICMS rate


for S.T.):

The percentage rate to calculate the ICMS amount on the surcharged value is
taken from the state of destination. If the processed material has a special ICMS
rate in the state of destination this rate has to be used to calculated the ICMS on
the surcharged value.

• S.T when selling to Zona Franca

The calculation base for S.T. is the material value. The calculated normal
ICMS value must be discounted when selling to Zona Franca. Therefore this
ICMS value is not deducted from the ICMS value calculated on the surcharged
value.

• Reduced calculation base for S.T.

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For S.T. also the reduction of the calculation base is possible. This reduction
affects the amount on which the ICMS for S.T. is calculated. The amounts which
are reduced are:

- Invoice value + surcharge


OR
- Fixed price given

depending on the way S.T is calculated. The reduction rate is taken from the
material dependent ICMS table from which also the S.T. rate is determined.

• Freight included in the price

If S.T. is calculated for a Nota Fiscal line S.T. is also calculated for the freight
value included in the line item.

In Case 1 to Case 6 listed below some of the possible S.T. scenarios are given

The general calculation rules for S.T. are:

S.T. surcharge as a percentage rate - standard calculation

Sales price (excl. taxes)


+ ICMS amount1
+ IPI amount

Invoice value (without S.T.)
- ICMS amount1
+ IMCS calculated with 100% base

Subtotal
+ Surcharge (% rate / calculated prev. subtotal)

Subtotal
- Base reduction for S.T. (e.g. 80% of prev. subtotal)

Subtotal (base for IMCS amount2 calculation)

ICMS amount2 (calculated on Invoice value + % surcharge)


- ICMS amount1

Amount of S.T.

Invoice value (without S.T.)


+ Amount of S.T.

Invoice value (incl. S.T.)

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S.T based on a fixed price per unit - standard calculation

Sales price (excl. taxes)


+ ICMS amount1
+ IPI amount

Invoice value (without S.T.)

Fixed price per unit


- Base reduction for S.T. (e.g. 80% of fixed price)

Subtotal (base for IMCS amount2 calculation)

ICMS amount2 (calculated on prev. subtotal)


- ICMS amount1

Amount of S.T.

Invoice value (without S.T.)


+ Amount of S.T.

Invoice value (incl. S.T.)

Case 1 and Case 2: Selling/buying of goods with S.T. for industrialization

Amounts and rates:

Sales price : 82.000,00 (excluding tax)


ICMS : 12 %
IPI : 10 %

Calculation base: 93.181,82

Invoice value: 102.500,00


ICMS amount: - 11.181,82
IPI amount: - 9.318,18

Sales price: 82.000,00

Case 1: S.T. surcharge as a percentage rate

Surcharge rate : 20 %
ICMS % rate for S.T. : 18 %

Invoice value without S.T.: 102.500,00


Surcharge: + 20.500,00 20% on 102.500,00

Subtotal: 123.000,00

ICMS amount 2 22.140,00 18% on 123.000,00


ICMS amount 1 - 11.181,82

ICMS Sub. Trib. 10.958,18

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Invoice value without S.T.: 102.500,00


ICMS Sub. Trib. + 10.958,18

Invoice value incl. S.T.: 113.458,18

The FI-posting for selling is:

Accounts receivable 113.458,18 D


Sales 93.181,82 C
ICMS tax to be paid 11.181,82 C
SubTrib ICMS tax to be paid 10.958,18 C
IPI tax to be paid 9.318,18 C
ICMS - tax expense 11.181,82 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 11.181,82 12 93.181,82
IPI 9.218,18 10 93.181,82
SubTribICM 10.958,18 18 123.000,00 123.000,00
S

The FI-posting for purchasing (for industrialization) is:

Accounts payable 113.458,18 C


Inventory 82.000,00 D
ICMS tax 11.181,82 D
SubTrib ICMS - tax expense 10.958,18 D
IPI tax 9.318,18 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 11.181,82 12 93.181,82
IPI 9.218,18 10 93.181,82
SubTribICM 10.958,18 18 123.000,00
S

The FI-posting for purchasing (for reselling) is:

Accounts payable 113.458,18 C


Inventory 91.418,18 D
ICMS tax 11.181,82 D
SubTrib ICMS - tax expense 10.958,18 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 11.181,82 12 93.181,82
IPI 9.218,18 10 93.181,82

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SubTribICM 10.958,18 18 123.000,00


S

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Case 2: S.T based on a fixed price per unit

Number of units : 10
Fixed price per unit : 11.000,00
ICMS % rate for S.T. : 18 %

Invoice value without S.T.: 102.500,00


Price given: 110.000,00 10 units * 11.000,00

Subtotal: 110.000,00

ICMS amount 2 19.800,00 18% on 110.000,00


ICMS amount 1 - 11.181,82

ICMS Sub. Trib. 8.618,18

Invoice value without S.T.: 102.500,00


ICMS Sub. Trib. + 8.618,18

Invoice value incl. S.T.: 111.118,18

The FI-posting for selling is:

Accounts receivable 111.118,18 D


Sales 93.181,82 C
ICMS tax to be paid 11.181,82 C
SubTrib ICMS tax to be paid 8.618,18 C
IPI tax to be paid 9.318,18 C
ICMS - tax expense 11.181,82 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 11.181,82 12 93.181,82
IPI 9.218,18 10 93.181,82
SubTribICM 8.618,18 18 110.000,00
S

The FI-posting for purchasing (for industrialization) is:

Accounts payable 111.118,18 C


Inventory 82.000,00 D
ICMS tax 11.181,82 D
SubTrib ICMS - tax expense 8.618,18 D
IPI tax 9.318,18 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 11.181,82 12 93.181,82
IPI 9.218,18 10 93.181,82
SubTribICM 8.618,18 18 110.000,00

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The FI-posting for purchasing (for reselling) is:

Accounts payable 111.118,18 C


Inventory 91.418,18 D
ICMS tax 11.181,82 D
SubTrib ICMS - tax expense 8.618,18 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 11.181,82 12 93.181,82
IPI 9.218,18 10 93.181,82
SubTribICM 8.618,18 18 110.000,00
S

Case 3: Selling to Zona Franca with S.T. for industr. - surcharge as a


percentage rate

Amounts and rates:

Sales price : 82.000,00 (excluding tax)


ICMS : 7 %
IPI : 0 %

Calculation base: 88.172,04

Invoice value: 82.000,00


ICMS amount: 6.172,04
ICMS discount: - 6.172,04
IPI amount: - 0,00

Sales price: 82.000,00

Surcharge rate : 20 %
ICMS % rate for S.T. : 17 %

Invoice value without S.T.: 82.000,00


Surcharge: + 16.400,00 20% on 82.000,00

Subtotal: 98.400,00

ICMS amount 2 16.728,00 17% on 98.400,00


ICMS amount 1 - 0,00

ICMS Sub. Trib. 16.728,00

Invoice value without S.T.: 82.000,00


ICMS Sub. Trib. + 16.728,00

Invoice value incl. S.T.: 98.728,00

The FI-posting for selling is:

Accounts receivable 98.728,00 D

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Sales 88.172,04 C
ICMS tax to be paid 6.172,04 C
ICMS - tax expense 6.172,04 D
ICMS - discount Z.F. 6.172,04 D
SubTrib ICMS tax to be paid 16.728,00 C

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 6.172,04 12 88.172,04
ICZF 6.172,04 12 0
IPI 0 0 0
SubTribICM 16.728,00 18 98.400,00
S

Case 4: Selling/buying of goods with S.T. for consumption - surcharge as a


percentage rate

Amounts and rates:

Sales price : 82.000,00 (excluding tax)


ICMS : 12 %
IPI : 10 %

Calculation base: 93.181,82

Invoice value: 103.917,06


ICMS amount: - 12.470,05
IPI amount: - 9.447,01

Sales price: 82.000,00

Surcharge rate : 20 %
ICMS % rate for S.T. : 18 %

Invoice value without S.T.: 103.917,06


Surcharge: + 20.783,41 20% on 103.917,06

Subtotal: 124.700,47

ICMS amount 2 22.446,08 18% on 124.700,47


ICMS amount 1 - 12.470,05

ICMS Sub. Trib. 9.976,03

Invoice value without S.T.: 103.917,06


ICMS Sub. Trib. + 9.976,03

Invoice value incl. S.T.: 113.893,09

The FI-posting for selling is:

Accounts receivable 113.983,09 D


Sales 94.470,05 C

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ICMS tax to be paid 12.470,05 C


SubTrib ICMS tax to be paid 9.976,03 C
IPI tax to be paid 9.447,01 C
ICMS - tax expense 12.470,05 D

Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 12.470,05 12 103.917,05
IPI 9.470,01 10 94.470,05
SubTribICM 9.976,03 18 124.470,47
S

The FI-posting for purchasing is:

Accounts payable 113.983,08 C


Inventory 113.983,08 D

Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 12.470,05 12 103.917,05
IPI 9.470,01 10 94.470,05
SubTribICM 9.976,03 18 124.470,47
S

Case 5: Selling/buying of goods with S.T. for industrialization - Reduced base


for ICMS

Amounts and rates:

Sales price : 82.000,00 (excluding tax)


ICMS : 12 %
ICMS base : 80 %
IPI : 10 %

Calculation base 100%: 93.181,82


Calculation base 80%: 72.566,37

Invoice value: 99.778,76


ICMS amount: - 8.707,96
IPI amount: - 9.070,80

Sales price: 82.000,00

Surcharge rate : 20 %
ICMS % rate for S.T. : 18 %

Invoice value without S.T.: 99.778,76


Surcharge: + 19.955,75 20% on 99.778,76

Subtotal: 119.734,51

ICMS amount 2 21.552,21 18% on 119.734,51


ICMS amount 1 - 8.707,96

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
ICMS Sub. Trib. 12.844,25

Invoice value without S.T.: 99.778,76


ICMS Sub. Trib. + 12.844,25

Invoice value incl. S.T.: 112.623,01

The FI-posting for selling is:

Accounts receivable 112.623,01 D


Sales 90.707,96 C
ICMS tax to be paid 8.707,96 C
SubTrib ICMS tax to be paid 12.844,25 C
IPI tax to be paid 9.070,80 C
ICMS - tax expense 8.707,96 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 8.707,96 12 72.566,37 18.141,59
IPI 9.070,80 10 90.707,96
SubTribICM 12.844,25 18 119.734,51
S

The FI-posting for purchasing (for industrialization) is:

Accounts payable 112.623,01 C


Inventory 82.000,00 D
ICMS tax 8.707,96 D
SubTrib ICMS - tax expense 12.844,25 D
IPI tax 9.070,80 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 8.707,96 12 72.566,37 18.141,59
IPI 9.070,80 10 90.707,96
SubTribICM 12.844,25 18 119.734,51
S

The FI-posting for purchasing (for consumption) is:

Accounts payable 112.623,01 C


Inventory 90.070,80 D
ICMS tax 8.707,96 D
SubTrib ICMS - tax expense 12.844,25 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 8.707,96 12 72.566,37 18.141,59

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IPI 9.070,80 10 90.707,96


SubTribICM 12.844,25 18 119.734,51
S

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Case 6: Selling/buying of goods with S.T. for industrialization - Reduced base


for S.T.

Amounts and rates:

Sales price : 82.000,00 (excluding tax)


ICMS : 12 %
ICMS base : 80 %
IPI : 10 %

Calculation base: 93.181,82

Invoice value: 102.500,00


ICMS amount: - 11.181,82
IPI amount: - 9.318,18

Sales price: 82.000,00

Surcharge rate : 20 %
ICMS % rate for S.T. : 18 %
S.T. base : 80 %

Invoice value without S.T.: 102.500,00


Surcharge: + 20.500,00 20% on 102.500,00

Subtotal: 123.000,00

Calc.base 80% 98.400,00 80% on 123.000,00

ICMS amount 2 17.712,00 18% on 98.400,00


ICMS amount 1 - 11.181,82

ICMS Sub. Trib. 6.530,18

Invoice value without S.T.: 102.500,00


ICMS Sub. Trib. + 6.530,18

Invoice value incl. S.T.: 109.030,18

The FI-posting for selling is:

Accounts receivable 109.030,18 D


Sales 93.181,82 C
ICMS tax to be paid 11.181,82 C
SubTrib ICMS tax to be paid 6.530,18 C
IPI tax to be paid 9.318,18 C
ICMS - tax expense 11.181,82 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 11.181,82 12 93.181,82
IPI 9.318,18 10 93.181,82
SubTribICM 6.530,18 18 98.400,00
S

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The FI-posting for purchasing (for industrialization) is:

Accounts payable 109.030,18 C


Inventory 82.000,00 D
ICMS tax 11.181,82 D
SubTrib ICMS - tax expense 6.530,18 D
IPI tax 9.318,18 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 11.181,82 12 93.181,82
IPI 9.318,18 10 93.181,82
SubTribICM 6.530,18 18 98.400,00
S

The FI-posting for purchasing (for reselling) is:

Accounts payable 109.030,18 C


Inventory 91.318,18 D
ICMS tax 11.181,82 D
SubTrib ICMS - tax expense 6.530,18 D

Stored in the Nota Fiscal:


Base

Tax type Tax amount Rate Amount Exclude Others


ICMS 11.181,82 12 93.181,82
IPI 9.318,18 10 93.181,82
SubTribICM 6.530,18 18 98.400,00
S

4. Design and implementation of tax calculation

The basic idea for the tax calculation in Brazil is the usage of an external calculation
routine which determines the amounts for the several tax types

• IPI
• ICMS
• CompICMS (Complement of ICMS
• SubTribICMS (Substituicao Tributaria)
• ISS

The calculation of IRRF will be covered by the new solution for withholding taxes.

The tax calculation consists of three major parts which are:

• Interface of the current tax calculation methods to an external calculation


function (in MM/FI and SD). For the ext. calculation the external tax interface
(created initially for the USA) will be used as a common business API.

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• Calculation of the tax amounts, tax rates and tax base values per line item
according to the rules given in chapters 1. to 3. of this document.

• Transfer of calculated tax amounts per line item to Nota Fiscal and in MM return
of manually changed tax items back to R/3 standard.

4.1 Interface to the external tax calculation (‘External tax


interface’)

For the external tax calculation the new ‘External tax interface’ is used as a common
business API. Basis for the tax calculation in the interface is the tax jurisdiction code
to determine the ship-to and also the ship-from location of a tax relevant business
transaction. The structure of the tax jurisdiction (levels of tax calculation and size of
the level-codes) is be defined in the customizing.

The ‘External tax interface’ consists of two main functions which are:

• Automatic determination of tax-jurisdiction codes


• Calculation of the tax amounts

Contents of this chapter is the description how the external tax calculation procedure
is connected to the standard procedures in MM/FI and SD, which kind of system setup,
and which kind of customizing is necessary.

4.1.1 Connection of external tax calculation procedure to standard


R/3

The basic idea of the external interface is the usage of calculation exits for conditions
in a tax procedure instead of calculating everything within the procedure. In these
calculation-exits the external processing is called and condition amount and
percentage rate for the different tax types are calculated and returned to the
standard processing. All tax values are calculated at the same time within one
function-call and then stored in global variables for later assignment to the single
conditions by other calculation-exits.

A ‘simple’ layout of a calculation procedure with the external interface is therefore:

Ste Condition Name fro stati Formul Acc. key


p m s. a
100 BASB Base Amount
105 Formula call / ext. calc. X 300
200 IPI1 IPI Industrialization 100 301 VS1
210 ICM1 ICMS Industrialization 100 302 VS2
... ... ... ... ... ...

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4.1.2 Standard customizing of the external tax interface

To activate the external tax interface some customizing has to be done:

Table T005 R3TR VDAT V_005_E

Country Vehicle code Language TaxProcedure Shortname


BR BRA P TAXBRJ BRAZIL

In table T005 the tax calculation procedure for MM/FI is assigned to the country code
which is then assigned to a company, a plant, a customer, a vendor.

Table TTXD R3TR VDAT V_TTXD

Tax Description L1 L2 L3 L4 LI Ex.


Procedure
TAXBRJ Brazil: External tax calc. 3 X B

In table TTXD the activation of the external tax calculation with tax jurisdiction if
done. If an entry for a procedure in TTXD exists and the ‘EX’ indicator is set, the
calculation is active. This means that the check logic goes via several tables. E.g. for a
company code the check is done in the order T001-LAND1 -> reads T005 -> T005-
KALSM -> TTXD.

Additionally the TTXD controls if the calculation of taxes is done per line item (as
required in Brazil) or per tax code. In Brazil the flag for the calculation per line item
has to be set to ‘X’.

The tax jurisdiction code for Brazil is build as a one-level jurisdiction which just
consists of a 3 character tax region code. For further information see chapter .

Table TTXC R3TR TABU TTXC

Ex EVENT Function module Destination


B JUR J_1BDETERMINE_JURISDICTION
B TAX J_1BCALCULATE_TAXES

If the external calculation is active, the system uses a function-call to determine the
jurisdiction code of plant, customer, vendor and cost center. The function-call is
processed, if in the master file maintenance of these objects the appropriate country
is used. Also for the calculation of the taxes a function-call is used.

The names of these function-calls are stored in table TTXC for each external system
indicator from table TTXD. The different event for the function calls are:

• JUR function to determine tax jurisdiction from address information


• TAX function to calculate tax amounts

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4.1.3 Layout of tax calculation procedure in MM/FI

In the tax calculation procedure in MM/FI it is necessary to distinguish between taxes


which are posted to separate accounts and taxes which are distributed to the line
items. The information to decide which kind of FI-posting is done, is the usage of the
goods, and the industry equivalent indicator (which is defined in the vendor master
extension).

Because of this different posting logic depending on the usage it is not possible to use
the same tax code for both industrialization and consumption in MM.

In the tax calculation procedure for each way to post the tax (to special tax account or
distributed to the line items) a condition has to be defined. Each of these conditions
has a formula to determine the condition value, and percentage rate. The calculation
function calculates the amounts for all active conditions and returns them to the
calculation procedure.

The types of taxes which are calculated on the incoming side (MM) are
determined by the tax codes. Every tax code represents a certain combination of
taxes to be calculated.

The usage of the material on the incoming side (MM) is determined by the tax
code. For each tax code the usage has to be defined which means that a tax code can
either be used to trigger the tax calculation for industrialization or for consumption.

The layout of the tax calculation procedure for Brazil is fix and must not be changed.
If different requirements have to be implemented a copy of the standard calculation
procedure has to be used.

Calculation procedure: NEW development Brazil

R3TR VDAT V_T683


R3TR VDAT V_T683S

Ste Cond Name from st Cond. Base Accoun


p . ati formul formul t
type s. a a key
100 BASB Base Amount
105 Formula call / ext. calc. X 300
200 Level 200 - Industrialization X
210 IPI1 IPI Industrialization In 100 301 301 VS1
230 ICM1 ICMS Industrialization In 100 303 303 VS2
240 ICS1 Substituicao Tributaria In 100 304 304 VS3
250 ICMF ICMS S.T. freight offset 100 307 307 IC1
260 IP1C IPI Ind. clearing 100 301 301 IPC
265 IP1O IPI Ind. clearing offset 210 IPC
270 IC1C ICMS Ind. clearing 100 303 303 ICC
275 IC1O ICMS Ind. clearing offset 230 ICC
300 Level 300 - Consumption X
310 IPI2 IPI Concumption In 100 302 302 NVV
320 ICM2 ICMS Concumption In 100 303 303 NVV
350 ICOP ICMS complement 100 305 305 ICP
360 ICOX ICMS complement 100- 350 ICX
500 Level 500 - SD outgoing X
510 IPI3 IPI from SD Out 100 301 301 MW1
520 ICM3 ICMS from SD Out 100 303 303 MW2

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530 ICS3 Substituicao Tributaria Out 100 304 304 MW3


540 ISS3 ISS from SD Out 100 306 306 MW4
550 ICZF ICMS Reverse (Z.F.) 100 305 305 ICZ
700 Other taxes X
710 INSS INSS incoming 100 VST
720 INSX INSS offset (100-) 710 INX

Condition types: NEW development Brazil

R3TR VDAT V_T685A

The condition types determine which types of taxes can be calculated at all. The
definition of the condition types follows the standard definition of condition types for
the external US tax calculation. All conditions are defined in the same way. Fields in
the condition definition not mentioned in the following table are initial / not marked.

Condition Access Conditio Calc.type Cond. Item Manual


type sequence n class category cond. entries
IC1C MWST D A 1 Yes D
IC1O =
ICM1 =
ICM2 =
ICM3 =
ICM3 =
ICMF =
ICOP =
ICOX =
ICS1 =
ICS2 =
ICS3 =
ICZF =
INSS =
INSX =
IP1C =
IP1O =
IPI1 =
IPI2 =
IPI3 =
ISS3 =

Cond. formulas: STANDARD (300-306)


NEW development Brazil (307-309)

The cond. formulas are used to determine the condition value - tax value. Every
formula represents a certain type of tax. If a type of tax (like IPI) can occur twice in a
posting two different formulas are necessary. Otherwise the same formula can be
used for all conditions related to this tax type. The formulas used in the brazilian
calculation procedure are defined as follows:

Frm Description
.
300 Call to the external tax calculation
301 IPI for the industrialization case (301 + 302 may occur together)
302 IPI for the consumption case (301 + 302 may occur together)

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303 ICMS for all cases


304 Substituicao Tributaria
305 ICMS complement (in MM) and ICMS Zona Franca discount (in SD)
306 ISS (only calculated in SD)
307 ICMS Sub.Trib. on freight offset
308 not used
309 Zero value

Base. formulas: NEW development Brazil

The base formulas are used to determine the base value for a condition. Every base
formula belongs to a condition value formula. Therefore the base formula has to be
used always in combination with the corresponding condition value formula. The
formulas used in the brazilian calculation procedure are defined as follows:

Frm Description
.
301 IPI for the industrialization case (301 + 302 may occur together)
302 IPI for the consumption case (301 + 302 may occur together)
303 IMCS for all cases
304 Substituicao Tributaria
305 ICMS complement (in MM) and ICMS Zona Franca discount (in SD)
306 ISS (only calculated in SD)
307 ICMS Sub.Trib. on freight offset
308 not used
309 Zero base

Account keys: STANDARD

The account keys are used to determine how the tax amounts are posted in FI.

Key Description Type Non Posting Std.


. deduct.
VS1 Sales Tax 1 / input Input Yes Sep. line item Yes
VS2 Sales Tax 2 / input Input Yes Sep. line item Yes
VS3 Sales Tax 3 / input Input Yes Sep. line item Yes
VST Sales Tax / input Input Yes Sep. line item Yes
NVV Non-d.input tx dist. Input Yes Expense/revenue Yes
MW1 Sales Tax 1 / output Output No Sep. line item Yes
MW2 Sales Tax 2 / output Output No Sep. line item Yes
MW3 Sales Tax 3 / output Output No Sep. line item Yes
MW4 Sales Tax 5 / output Output No Sep. line item Yes

Remark for VSx account keys:

The account keys VSx are marked as ‘non-deductible’ in the standard. This setting is
only relevant for some standard tax reporting and does not affect any processing.
Therefore it is not necessary to change this for Brazil or to create new account keys
for input tax.

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Account keys: NEW development Brazil

R3TR VDAT V_T007B


R3TR VDAT V_T687

The account keys are used to determine how the tax amounts are posted in FI.

Key Description Type Not Posting Std.


. deduct.
IC1 ICMS offset No tax. Yes Sep. line item No
ICC ICMS clearing No tax. Yes Sep. line item No
ICP ICMS complementar Add. Yes Sep. line item No
ICX ICMS comp. offset No tax Yes Sep. line item No
ICZ ICMS reversal (Z.F.) Output Yes Sep. line item No
INX INSS offset No tax. Yes Sep. line item No
IPC IPI clearing No tax. Yes Sep. line item No

4.1.4 Definition of tax codes

In the Brazilian localization tax codes are used to determine


- which type of taxes are calculated for a line item,
- the usage of the material on the incoming side (MM),
- and how the taxes are posted in FI (separate line items or not).

To simplify the documentation only the active lines per tax codes are listed. The tax
codes are defined as follows.

Note: Any other setup of tax codes can lead to wrong calculation of taxes. The only
valid and properly tested setup of tax codes is given in this chapter. Any
other combination can lead to unexpected results.

4.1.4.1 Tax codes for non taxable transactions

For non taxable transactions special tax codes have to be defined on company code
level. In the properties of these tax code the field ‘Relevant to tax’ must be set to ‘2’:

Tax code IE
Input: Tax exempt transactions

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 200
IPI Industr. VS1 IPI1

Tax code SE

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Output: Tax exempt transactions

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 200
IPI Industr. VS1 IPI1

4.1.4.2 Tax codes for incoming movements - Industrialization

For each of the industrialization tax codes the field ‘Usage’ of the brazilian tax code
enhancements to be set to ‘Industrialization’.

Tax code I0
Input: Industrialization: No tax

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 200
IPI Industr. VS1 IPI1

Tax code I1
Input: Industrialization: ICMS only

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 200
ICMS Industr. VS2 100,000 ICM1

Tax code I2
Input: Industr.: ICMS + Sub.Trib.

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 200
ICMS Industr. VS2 100,000 ICM1
Sub.Tributaria VS3 100,000 ICS1

Tax code I3
Input: Industrialization: ICMS +
IPI
Tax type Acc. Rate Condition type
key
Base amount BASB
Level 200
IPI Industr. VS1 100,000 IPI1
ICMS Industr. VS2 100,000 ICM1
Level 300
IPI Consumption NVV 100,000 IPI2

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Tax code I4
Input: Industr.: ICMS + Sub.Trib.
+ IPI
Tax type Acc. Rate Condition type
key
Base amount BASB
Level 200
IPI Industr. VS1 100,000 IPI1
ICMS Industr. VS2 100,000 ICM1
Sub.Tributaria VS3 100,000 ICS1
Level 300
IPI Consumption NVV 100,000 IPI2

Tax code I5
Input: Industrialization: IPI only

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 200
IPI Industr. VS1 100,000 IPI1
Level 300
IPI Consumption NVV 100,000 IPI2

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Tax code I6
Input: Ind.: ICMS+IPI: Reselling

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 200
ICMS Industr. VS2 100,000 ICM1
Level 300
IPI Consumption NVV 100,000 IPI2

Tax code I7
Input: Ind.: ICMS+Sub.Trib.+IPI :
Reselling
Tax type Acc. Rate Condition type
key
Base amount BASB
Level 200
ICMS Industr. VS2 100,000 ICM1
Sub.Tributaria VS3 100,000 ICS1
Level 300
IPI Consumption NVV 100,000 IPI2

4.1.4.3 Tax codes for incoming movements - Consumption

For each of the industrialization tax codes the field ‘Usage’ of the brazilian tax code
enhancements to be set to ‘Consumption’.

Tax code C0
Input: Consumption: No tax

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 200
IPI Industr. VS1 IPI1

Tax code C1
Input: Consumption: ICMS + ICMS
comp.
Tax type Acc. Rate Condition type
key
Base amount BASB
Level 300
ICMS Consumption NVV 100,000 ICM2
ICMS complementar ICP 100,000 ICOP
ICMS complementar 100- ICX 100,000- ICOX

Tax code C2

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Input: Cons.: ICMS + ICMS comp.


+ S.T.
Tax type Acc. Rate Condition type
key
Base amount BASB
Level 300
ICMS Consumption NVV 100,000 ICM2
S.T. Consumption NVV 100,000 ICS2
ICMS complementar ICP 100,000 ICOP
ICMS complementar 100- ICX 100,000- ICOX

Tax code C3
Input: Cons.: ICMS + ICMS comp.
+ IPI
Tax type Acc. Rate Condition type
key
Base amount BASB
Level 300
IPI Consumption NVV 100,000 IPI2
ICMS Consumption NVV 100,000 ICM2
ICMS complementar ICP 100,000 ICOP
ICMS complementar 100- ICX 100,000- ICOX

Tax code C4
Input: Cons.: ICMS+ICMS comp.
+IPI+S.T.
Tax type Acc. Rate Condition type
key
Base amount BASB
Level 300
IPI Consumption NVV 100,000 IPI2
ICMS Consumption NVV 100,000 ICM2
S.T. Consumption NVV 100,000 ICS2
ICMS complementar ICP 100,000 ICOP
ICMS complementar 100- ICX 100,000- ICOX

Tax code C5
Input: Consumption: IPI only

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 300
IPI Consumption NVV 100,000 IPI2

4.1.4.4 Tax codes for incoming movements - ICMS Sub.Trib. on freight

For the processing of ICMS Sub.Trib. on freight special tax codes are necessary to
support the required posting logic. Depending on the material usage of the respective
material a different tax code must be used (industrialization / consumption). The
calculation and posting of the tax is the same for both tax codes:

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Tax code IF
Input: Ind.: ICMS (S.T. on freight)

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 200
ICMS Industr. VS2 100,000 ICM1
ICMS S.T. freight offset IC1 100,000 ICMF

Tax code CF
Input: Consump.: ICMS (S.T. on
freight)
Tax type Acc. Rate Condition type
key
Base amount BASB
Level 200
ICMS Industr. VS2 100,000 ICM1
ICMS S.T. freight offset IC1 100,000 ICMF

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4.1.4.5 Tax codes for incoming movements - Future delivery purchasing /


Consignment

Tax code K0
Future Delivery purchasing G/R

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 200
ICMS Industrialization VS2 100,000 ICM1
ICMS Ind. clearing offset ICC 100,000- IC1O

Tax code K1
Future Delivery purchasing I/R

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 200
IPI Industrialization VS1 100,000 IPI1
ICMS Ind. clearing ICC 100,000 IC1C

Tax code K5
Consignment - Shipment G/R

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 200
IPI Industrialization VS1 100,000 IPI1
ICMS Industrialization VS2 100,000 ICM1
IPI Ind. clearing offset IPC 100,000- IP1O
ICMS Ind. clearing offset ICC 100,000- IC1O

Tax code K6
Consignment - Invoice I/R

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 200
IPI Ind. clearing IPC 100,000 IP1C
ICMS Ind. clearing ICC 100,000 IC1C

4.1.4.6 Tax codes for incoming movements - Services - ISS and INSS

For the incoming services tax code the field ‘Service’ of the brazilian tax code
enhancements has to be marked.

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Tax code I9
Input: ISS

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 200
IPI Industr. VS1 IPI1

For INSS the tax code must contain the proper tax rate (here: 15% INSS)

Tax code IN
INSS 15%

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 300
INSS Incoming VST 15,00 INSS
INSS offset (100-) INX 100- INSX

4.1.4.7 Tax codes for outgoing movements - Ind.+Cons. posted in SD

For each of these tax codes the field ‘Usage’ of the brazilian tax code enhancements
to be set to ‘Industrialization’ as a default. In SD the usage of the product by the
customer is always taken from the Brazil specific SD tax code in the sales order item.

Tax code SD
Output-SD tax: IPI/ICMS/Sub.Trib.

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 500
IPI from SD MW1 100,000 IPI3
ICMS from SD MV2 100,000 ICM3
Substituicao Tributaria MV3 100,000 ICS3

Tax code SZ
Output-SD tax: ICMS Zona Franca

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 500
ICMS from SD MV2 100,000 ICM3
Substituicao Tributaria MV3 100,000 ICS3
ICMS Reversal (Zona Franca) ICZ 100,000 ICZF

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Tax code S0
Output-SD tax: No tax

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 500
IPI from SD MW1 IPI3
ICMS from SD MV2 ICM3
Substituicao Tributaria MV3 ICS3
ISS from SD MV4 ISS3

For the outgoing services tax code the field ‘Service’ of the brazilian tax code
enhancements has to be marked.

Tax code SI
Output-SD tax: ISS

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 500
ISS from SD MV4 100,000 ISS3

4.1.4.8 Tax codes for transfer postings - outgoing movements - Ind.+Cons.

For the MM-IM transfer postings the following tax codes can be used for outgoing
movements. For incoming movements the normal codes ‘Ix’ and ‘Cx’ can be used.

Tax code A0
Output: Industrialization: No tax

Tax type Acc. Rate Condition type


key
Base amount BASB
IPI from SD MW1 IPI3
ICMS from SD MV2 ICM3

Tax code A1
Output: Industrialization: ICMS

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 500
ICMS from SD MV2 100,000 ICM3

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Tax code A3
Output: Industrialization: ICMS +
IPI
Tax type Acc. Rate Condition type
key
Base amount BASB
Level 500
IPI from SD MW1 100,00 IPI3
ICMS from SD MV2 100,00 ICM3

Tax code B0
Output: Consumption: No tax

Tax type Acc. Rate Condition type


key
Base amount BASB
Level 500
IPI from SD MW1 IPI3
ICMS from SD MV2 ICM3

4.1.5 Determination of the tax jurisdiction codes

In the external interface the ship-from and ship-to processing is implemented using
tax jurisdiction codes according to the structure defined in table ‘TTXD’. Tax
jurisdictions are available in the following master files
• vendor
• customer
• plant
• cost center

The maintenance of the tax jurisdictions is done by automatic determination from the
respective address in the master file. The trigger to start the automatic determination
is the country which is entered in the address (using tables TTXD and TTXC).

Address.Country = ‘BR’ -> Determine tax jurisdiction automatically

Jurisdiction determination for Brazil:

The tax jurisdiction for Brazil is a one level jurisdiction which consists of a 3 digit ‘Tax
region’. ‘Tax region’ is the entity used for the maintenance of ship-from / ship-to
dependent tax rate tables.

The determination of ‘Tax region’ is done by the standard ‘Region’ maintained in the
address of the master files. Each ‘Region’ can have one or more ‘Tax regions’. If a
‘Region’ has just one ‘Tax region’ the system automatically assigns a ‘Tax region’. If a
‘Region’ has more than one ‘Tax region’ the user has to choose one from a list.

The tables for ‘Tax region’ are:

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J_1BTREGX Tax region


Field Key DE Type L Chk. table Description
MANDT X MANDT CLNT 3 T000 Client
LAND1 X LAND1 CHAR 3 T005 Country key
TXREG X J_1BTXREG CHAR 3 Tax region
BLAND REGIO CHAR 3 T005S Region

J_1BTREGXT Tax region description


Field Key DE Type L Chk. table Description
MANDT X MANDT CLNT 3 T000 Client
SPRAS X SPRAS CHAR 1 T002 Language key
LAND1 X LAND1 CHAR 3 T005 Country key
TXREG X J_1BTXREG CHAR 3 Tax region
TXT J_1BTXREG CHAR 20 Tax region descr.
T

If a the system cannot find a ‘Tax region’ for a ‘Region’, the jurisdiction code cannot
be determined and the system issues a message during the master file maintenance.

The be sure that a jurisdiction code exists in all cases the ‘Tax region’ table has to be
maintained correctly.

In the screen layout for the master file maintenance the field ‘Region’ should be a
mandatory field.

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Jurisdiction determination for foreign customers:

In Brazilian tax calculation, tax rates are partly dependent on the ship-from and ship-
to region of goods (e.g. ICMS rates). Within Brazil, the ship-from and ship-to region is
implemented as a tax jurisdiction code in the customer, vendor, and plant master
data.

The jurisdiction code/tax region is automatically derived from the geographical region
when creating new master data for Brazilian customers/vendors/plants.

If master data for foreign customers/vendors is created, the jurisdiction code is not
automatically determined via Brazilian functions. Furthermore, there might be even a
different use of this code by other countries.

According to the requirements it is possible to define and assign special tax regions
for any country which is not Brazil. With this functionality it is also possible to group
countries together so that they use the same special tax region.

If the Brazilian tax processing is called in conjunction with a foreign customer or


vendor the tax region is then dynamically determined from this table (depending of
the country code). This happens even if the foreign customer/vendor has a jurisdiction
code maintained in the master data.

The table for ‘Tax regions for foreign customers/vendors’ is:

J_1BTREGC Tax reg. foreign


countries
Field Key DE Type L Chk. table Description
MANDT X MANDT CLNT 3 T000 Client
LAND1 X LAND1 CHAR 3 T005 Country key
COUNTRY X J_1BTXEXP CHAR 3 T005 Foreign country
C
TXREG J_1BTXREG CHAR 3 J_1BTREGX Tax region

4.1.6 Other standard customizing in MM/FI

Company code setup:

On the company code level for Brazilian company code the flags

• Tax base is net value


• Discount base is net value

have to set to ‘SPACE’ (not marked).

Plant setup in MM:

For each plant in country ‘BR’ the tax jurisdiction has to be assigned properly. The
assignment is done in the material management customizing ‘Define tax jurisdiction’;
transaction ‘OMGJ’; table T001W maintained with view ‘V_001W_JD’.

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Vendor master / customer master / cost center:

Maintain/check maintenance of tax jurisdiction in those master files defined for


country ‘BR’.

4.1.7 Tax part of pricing procedure in SD

In the SD the external tax calculation is done within the ‘normal’ pricing procedure. To
get the connection to FI the tax-conditions must have the same name as the
according conditions in FI. Additionally there is a kind of ‘lead’-condition necessary to
call the external tax calculation.

Brazilian tax processing part of SD pricing procedure:

R3TR VDAT V_T683


R3TR VDAT V_T683S

Level Cond Name Fro Sta Ma Sub Alt. Alt. Acct


. m- t. n- To calc. base Keys
type To ual type value
... ... ... ...
290 Price excl. ICMS X K
300 ICMI Price+Tax (for NF) 323 323 ERL
... ... ... ...
600 IBRX Brazil tax calc. 600 X 300
610 IPI3 IPI X 301 301 MW1
620 ICM3 ICMS X 303 303 MW2
630 ICS3 Sub. Tributaria X 304 304 MW3
640 ISS3 ISS from SD X 306 306 MW4
650 ICZF ICMSReverse Z.F. X 305 305 MWS
700 Total tax 610-
690
720 ICMO ICMS offset 620 BRI
730 ICSO ISS offset 640 BRI
... ... ...

For more details check the example pricing procedures RVXBRn (n= 1,2,A,E,F,K,L)

Condition types: NEW development Brazil


R3TR VDAT V_T685A

The condition types used in SD have to be defined in the same way as in FI but
without access sequence. The only exception is the ‘lead’ condition which triggers the
external calculation function. There is no equivalent condition in the FI procedure.
Fields in the condition definition not mentioned in the following table are initial / not
marked.

Condition Access Conditio Calc.type Cond. Item Manual


type sequence n class category cond. entries
IBRX IBRX D A 1 Yes D
IPI3 D A 1 Yes D
ICM3 like IPI3
ICS3 like IPI3
ISS3 like IPI3
ICZF like IPI3

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Additional condition which are defined for the Brazil pricing procedure are:

Condition Access Conditio Calc.type Cond. Item Manual


type sequence n class category cond. entries
ICMI B C Yes D
ICMO IBRR A A H Yes D
ICMP A A Yes D
ICMR B C Yes
ICSO IBRR A A H Yes D
IPIC IBRR A A H Yes D
IPIO IBRR A A H Yes D

Access sequence: NEW development Brazil

The access sequence defines how the tax codes are determined for the FI posting.
The access sequence ‘IBRX’ is defined as follows:

Access sequence IBRX Ext. Tax calculation Brazil


AcNo Table Requirement Exclusive
1 2 Domestic Taxes

For the special ICMS treatment the access sequence is used to create the additional FI
postings .The access sequence ‘IBBR’ is defined as follows:

Access sequence IBRR Brazil: 100% reversals


AcNo Table Requirement Exclusive
1 390 Brazil: 100% reversals

Account keys: NEW development Brazil

R3TR VDAT V_T687

The account keys are used to determine how the tax amounts are posted in FI.

Key Description Std.


.
BRI Offset posting NO

4.1.8 Other standard customizing in SD

Some additional customizing in SD is necessary to activate the tax processing and to


determine the FI tax code which is necessary in the billing process to create proper FI
document.

To complete the customizing the following steps in the SD customizing have to be


done:

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Definition of tax determination rules:

R3TR VDAT V_TSTL

After creating the conditions and the access sequence, the tax category by country
has to be maintained. IMG: Define tax determination rules -> Control: tax types per
country; Transaction ‘OVK1’, table ’TSTL’ maintained with view ‘V_TSTL’.

Tax country Seq Tax category


.
BR Brazil Tax-Test 1 IBRX Brazil tax calc.

Allocation of delivering plants for tax determination:

The allocations of delivering plants should not be done in SD. The maintenance of the
plant table ‘T001W’ should only be done from the MM-side because only there the
necessary determination of the tax jurisdiction is implemented in a proper way.
Maintaining the region code for a plant using the SD customizing transaction ‘OVK6’
(view ‘V_T001W_RE’ can lead to unexpected wrong results in the tax calculation.

Definition of tax relevancy of master records:

R3TR VDAT V_TSKM


R3TR VDAT V_TSKD

To determine a tax code (for the transfer to FI), tax classifications assigned to the
customer and the material are used.

To make a difference between tax calculation with IPI/ICMS/Sub.Trib. and the


calculation of ISS two different tax codes ‘SD’ and ‘SI’ are defined in the FI
customizing. Depending on which tax types are calculated one of these tax codes
have to be determined by the pricing. This determination is done depending on the
tax classification of the material. Therefore the possible tax classifications for Brazil
are:

For materials: Transaction ‘OVK4’; view ‘V_TSKM’

Tax category Tax classification


IBRX Brazil tax calc. 1 IPI/ICMS/Sub.Trib.
IBRX Brazil tax calc. 2 ISS

For customers: Transaction ‘OVK3’; view ‘V_TSKD’

Tax category Tax classification


IBRX Brazil tax calc. 0 Not taxable
IBRX Brazil tax calc. 1 Normal taxes
IBRX Brazil tax calc. 2 Zona Franca - ICMS

Note: In the customer and material master data the tax classifications have to be
maintained. Otherwise the system cannot determine a proper tax code in the
pricing procedure.

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Create conditions for tax determination in SD:

According to the access sequence brazilian taxes in SD, tax rates and tax codes have
to be maintained.

Country Category Category Rate Tax code


Customer Material
BR 0 1 0 S0
BR 01 2 0 S0
BR 1 1 100,00 SD
BR 1 2 100,00 SI
BR 2 1 100,00 SZ
BR 2 2 100,00 SI

4.1.9 Other Brazil specific customizing in SD

A brazilian requirement is that taxes are calculated in a different way depending on


the usage of the sold good by the customer who ordered the product. In the standard
R/3 sales order line item there is no option to enter this information and to hand it
over to the tax calculation.

Additionally there is the need to decide per sales order line item which taxes
(IPI/ICMS/Sub.Trib./ISS) are calculated for this item and which not.

In MM these informations are delivered by the tax code which is entered per line item.
In SD the tax code is determined automatically depending on the customer and the
material. A manual choice like in MM is not possible.

To fulfill the brazilian requirements a new input field for an so called ‘SD tax code’ is
added to the sales order line item. This SD tax code defines two things:

• Does the customer use the product for industrialization or consumption?

• Which taxes are calculated for this line item/product?

The definition of the SD tax code is done independent of the standard tax codes.

The tables for ‘SD tax code’ are:

J_1BTXSDC SD tax code


Field Key DE Type L Chk. Description
MANDT X MANDT CLNT 3 T000 Client
TAXCODE X J_1BTXSDC CHAR 2 SD tax code
CUSTUSAGE J_1BTXSDU CHAR 1 SD tax code: Usage
ICMS J_1BTXSDIC CHAR 1 SD tax code: Calc. ICMS
IPI J_1BTXSDIP CHAR 1 SD tax code: Calc. IPI
SUBTRIB J_1BTXSDST CHAR 1 SD tax code: Calc. S.T.
ISS J_1BTXSDIS CHAR 1 SD tax code: Calc. ISS
ICMS_EX J_1BTXICEX CHAR 1 ICMS stored as exempt

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IPI_EX J_1BTXIPEX CHAR 1 IPI stored as exempt

J_1BTXSDCT SD tax code


-description
Field Key DE Type L Chk. Description
MANDT X MANDT CLNT 3 T000 Client
TAXCODE X J_1BTXSDC CHAR 2 SD tax code
TXT J_1BTXSDCT CHAR 50 SD tax code description

4.2 External calculation of taxes

Contents of this chapter is the description how the external calculation is done and
how the processing can be implemented in SAP R/3.

4.2.1 Interface parameters / parameter determination in standard R/3

To be able to calculate the taxes (externally) the following information is basically


necessary:

For IPI:

Field Source Purpose


NBM-code Material master extension (table Determination of rate, exemption, base
‘MARA’) and material group reduction and tax law for IPI
extension (table ‘T023’)
Customer due to pay IPI Customer master extension (table Determines in SD (outgoing side) if IPI is
‘KNA1’) calculated at all..
Vendor industry Vendor master extension (table Determines in MM (incoming side) if IPI is
equivalent ‘LFA1’) split into 50% recoverable tax and 50%
tax which is added to the material price.
Only relevant if ‘Usage’ is
industrialization
Usage of the goods In MM: different tax codes in In MM: Determines how the tax is
purchase order or invoice calculated and how the FI posting is done
verification (separate line items for tax or tax value
In SD: different SD-tax codes in added to material value)
sales order In SD: Determines how the tax is
calculated

For ICMS:

Field Source Purpose


Material Line Item Determination of rate, exemption, base
reduction and tax law for ICMS
State of origin (tax Tax jurisdiction code (tax region) Determines ‘ship-from region’ for the
region) of delivering plant in SD or vendor region dependent ICMS rate definitions

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in MM
State of destination (tax Tax jurisdiction code (tax region) Determines ‘ship-to region’ for the region
region) of receiving plant in MM or the dependent ICMS rate definitions
customer in SD
Customer due to pay Customer master extension (table Determines in SD (outgoing side) if ICMS
ICMS ‘KNA1’) is calculated at all.
Usage of the goods In MM: different tax codes in In MM: Determines how the tax is
purchase order or invoice calculated and how the FI posting is done
verification (separate line items for tax or tax value
In SD: different SD-tax codes in added to material value)
sales order In SD: Determines how the tax is
calculated

For Complement of ICMS (only MM):

Field Source Purpose


Material Line Item Determination of exemption, base
reduction for certain states
State of origin (tax Tax jurisdiction code (tax region) Determines ‘ship-from region’ to
region) of delivering plant in SD or vendor determine of complement of ICMS has to
in MM be calculated at all
State of destination (tax Tax jurisdiction code (tax region) Determines ‘ship-to region’ to determine
region) of receiving plant in MM or the if complement of ICMS has to be
customer in SD calculated at all
Usage of the goods In MM: different tax codes in In MM: Determines if complement of ICMS
purchase order or invoice is calculated at all
verification

For Substituicao Tributaria:

Field Source Purpose


Material Line Item Determination of calculation rules for
Sub.Trib.
State of origin (tax Tax jurisdiction code (tax region) Determines ‘ship-from region’ for the
region) of delivering plant in SD or vendor region for the Sub.Trib. rules
in MM
State of destination (tax Tax jurisdiction code (tax region) Determines ‘ship-to region’ for the region
region) of receiving plant in MM or the for the Sub.Trib. rules
customer in SD
Customer due to pay Customer master extension (table Determines in SD (outgoing side) if
ICMS ‘KNA1’) Sub.Trib. is calculated at all
Usage of the goods In MM: different tax codes in Determines if Sub.Trib. is calculated at all
purchase order or invoice
verification
In SD: different SD-tax codes in
sales order

For ISS:

Field Source Purpose

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ISS calculation In MM: tax code enhancement Determination if ISS is processed instead
In SD: special SD tax code and of ICMS and IPI
material
Material - in SD Line Item Determination if ISS is charged and if yes
determination of the ISS rate

The standard interface structure for the external tax interface is a DDIC structure
named ‘COM_TAX’ which contains the following fields:

SAP Field Name Length In Out Comment

CLIENT char03 X SAP Client (note: this field might be used for
separation of audit file records, if a company uses
more than one SAP client with the external tax
interface
COMP_CODE char04 X Company code (note: this field will be filled always by
the SAP company code)
DIVISION char04 X Division Code (note: this field will be filled with the
actual SAP business area when available)
COUNTRY char03 X country key (ISO code to be expected)
DOC_NUMBER char10 X Document number of the financial or sales document
(No. of financial doc document = No. of SD billing
document), used for updating the audit file/sales tax
register
POS_NO char06 X Item number of the financial or sales document (No. of
financial doc document = No. of SD billing document),
used for updating the audit file/sales tax register
ACCNT_NO char16 X Customer (A/R) or vendor (A/P) account number
ACCNT_CLS char10 X Customer (A/R) or vendor (A/P) account class (note:
this field is currently not supported by SAP, it can be
filled in an SAP User-Exit by the customer)
TAX_DATE char08 X Date for tax calculation
TXJCD_ST char15 X Tax Jurisdiction Code of the ship-to
TXJCD_SF char15 X Tax Jurisdiction Code of the ship-from
TXJCD_POA char15 X Tax Jurisdiction Code of the point of order acceptance
(note: this field is currently not supported by SAP, it
can be filled in an SAP User-Exit by the customer)
TXJCD_POO char15 X Tax Jurisdiction Code of the point of order origin (note:
this field is currently not supported by SAP, it can be
filled in an SAP User-Exit by the customer)
TXJCD_IND char01 X X Indicates which tax jurisdiction code is used(note:
values: '1' = ST, '2' = SF, '3' = POA, '4' = POO; this
field is currently not supported by SAP, it can be filled
in an SAP User-Exit by the customer)
PTP_IND char01 X Indicates which Jurisdiction is the Point of Title
Passage(note: values: '0' = ST, '1' = SF; this field is
currently not supported by SAP, it can be filled in an
User-Exit by the customer)
APAR_IND char01 X Indicates, whether the actual transaction is an
accounts payable or an accounts receivable
transaction. The value is filled from SAP T007A;

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values: 'A' = accounts receivable, 'V' = accounts


payable)
TXJCD_L1 char02 X Length of first structure element of the Tax Jurisdiction
Code (usually used for the state code)
TXJCD_L2 char02 X Length of second structure element ot the tax
jurisdiction code (used for state or Zipcode)
TXJCD_L3 char02 X Length of third structure element of the tax jurisdiction
code (used for Geocode or Citycode)
TXJCD_L4 char02 X Length of fourth structure element of the tax jurisdiction
code (probably used for the city in/out indicator)
TAX_TYPE char01 X X Type of tax -sales/use/service/lease/... (note: values:' '
or '0' = Sales Tax, '1' = Consumer Use Tax, '2' =
Service Tax, '3' = Rental/Lease Tax, other values could
be later defined)

MATNR char18 X Material number


PROD_CODE char10 X Product code (from SAP-table TTXP - user defined)
QUANTITY char13 X Item quantity (note: this value is not available for all
SAP transactions i.e. not for financial documents)
UNIT char03 X Unit of item quantity (note: this value is not available for
all SAP transactions i.e. not for financial documents)
AMOUNT char15 X Gross Amount
CURRENCY char05 X Document currency (note: ISO currency code to be
expected)
CURR_DEC char03 X Number of decimals used for the currency in the SAP-
system (note: value comes out of TCURX-CURRDEC)
FREIGHT_AM char15 X Freight Amount (note: this field is currently not used by
SAP)
EXEMPT_AMT char15 X Tax exempt amount (note: this field is currently not
used by SAP)
EXEMPT_IND char01 X Tax exempt indicator (note: values: ' ' or '0' = decision
about taxability always external, '1' = transaction is
taxable, '2' = transaction is non-taxable;this field is
currently not used by SAP,SAP defaults '0')
CREDIT_IND char01 X Indicates whether the transaction is doing a tax credit
or tax debit (note: this is used for the update of the
sales tax register/audit file; values: ' ' or '0' = debit, '1' =
credit)
UPDATE_IND char01 X Update indicator (note: 'X' = update, ' ' = no update to
sales tax register/audit file)
OVRWRT_IND char01 X Overwrite indicator (note: this indicator tells the
external tax systems not to recalculate the taxes but to
use the given amounts and rates; this is used for the
update of the sales tax register/audit file only)
TAXPCT0 char15 X X Federal tax percentage (note: Within SAP only used for
display purposes; currently not used by SAP)
TAXPCT1 char15 X X State tax percentage (note: Within SAP only used for
display purposes)
TAXPCT2 char15 X X County tax percentage (note: Within SAP only used for
display purposes)
TAXPCT3 char15 X X City/local tax percentage (note: Within SAP only used
for display purposes)
TAXPCT4 char15 X X District/secondary county tax percentage (note: Within
SAP only used for display purposes)
TAXPCT5 char15 X X Secondary city tax percentage (note: Within SAP only

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used for display purposes)


TAXPCT6 char15 X X Other tax percentage (note: Within SAP only used for
display purposes)
TAXPCT7 char15 X X Other tax percentage (note: Within SAP only used for
display purposes; currently not used by SAP)
TAXPCT8 char15 X X Other tax percentage (note: Within SAP only used for
display purposes; currently not used by SAP)
TAXPCT9 char15 X X Other tax percentage (note: Within SAP only used for
display purposes; currently not used by SAP)
TAXPCOV char15 X X Overall combined tax percentage (note: currently not
used by SAP)

TAXAMT0 char15 X X Federal tax amount (note: currently not used by SAP)
TAXAMT1 char15 X X State tax amount
TAXAMT2 char15 X X County tax amount
TAXAMT3 char15 X X City/local tax amount
TAXAMT4 char15 X X District/secondary county tax amount
TAXAMT5 char15 X X Secondary city tax amount
TAXAMT6 char15 X X Other tax amount
TAXAMT7 char15 X X Other tax amount
TAXAMT8 char15 X X Other tax amount
TAXAMT9 char15 X X Other tax amount
TAXBAS0 char15 X X Federal tax base amount (note: Within SAP only used
for display purposes; currently not used by SAP; only
to be filled if different from AMOUNT field)
TAXBAS1 char15 X X State tax base amount (note: Within SAP only used for
display purposes; only to be filled if different from
AMOUNT field)
TAXBAS2 char15 X X County tax base amount (note: Within SAP only used
for display purposes; only to be filled if different from
AMOUNT field)
TAXBAS3 char15 X X City/local tax base amount (note: Within SAP only used
for display purposes; only to be filled if different from
AMOUNT field)
TAXBAS4 char15 X X District/secondary county base amount (note: Within
SAP only used for display purposes; only to be filled if
different from AMOUNT field)
TAXBAS5 char15 X X Secondary city tax base amount (note: Within SAP
only used for display ; only to be filled if different from
AMOUNT field)
TAXBAS6 char15 X X Other tax base amount (note: Within SAP only used for
display purposes; only to be filled if different from
AMOUNT field)
TAXBAS7 char15 X X Other tax base amount (note: Within SAP only used for
display purposes; currently not used by SAP; only to be
filled if different from AMOUNT field)
TAXBAS8 char15 X X Other tax base amount (note: Within SAP only used for
display purposes; currently not used by SAP; only to be
filled if different from AMOUNT field)
TAXBAS9 char15 X X Other tax base amount (note: Within SAP only used for
display purposes; currently not used by SAP; only to be
filled if different from AMOUNT field)
EXMATFLG char02 X Product exemption flag (note: only output parameter,
indicates material exemption reason, currently not used
by SAP)

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EXCUSFLG char02 X Customer exemption flag (note: only output parameter,


indicates material exemption reason, currently not used
by SAP)

EXAMT0 char15 X Federal exempt amount (note: currently not used by


SAP)
EXAMT1 char15 X State exempt amount (note: currently not used by
SAP)
EXAMT2 char15 X County exempt amount (note: currently not used by
SAP)
EXAMT3 char15 X City/local exempt amount (note: currently not used by
SAP)
EXAMT4 char15 X District/secondary county exempt amount (note:
currently not used by SAP)
EXAMT5 char15 X Secondary city exempt amount (note: currently not
used by SAP)
EXAMT6 char15 X Other exempt amount (note: currently not used by
SAP)
EXAMT7 char15 X Other exempt amount (note: currently not used by
SAP)
EXAMT8 char15 X Other exempt amount (note: currently not used by
SAP)
EXAMT9 char15 X Other exempt amount (note: currently not used by
SAP)
EXCODE0 char02 X Federal+G41 exempt code (note: currently not used by
SAP)
EXCODE1 char02 X State exempt code (note: currently not used by SAP)
EXCODE2 char02 X County exempt code (note: currently not used by SAP)
EXCODE3 char02 X City/local exempt code (note: currently not used by
SAP)
EXCODE4 char02 X District/secondary county exempt code (note: currently
not used by SAP)
EXCODE5 char02 X Secondary city exempt code (note: currently not used
by SAP)
EXCODE6 char02 X Other exempt code (note: currently not used by SAP)
EXCODE7 char02 X Other exempt code (note: currently not used by SAP)
EXCODE8 char02 X Other exempt code (note: currently not used by SAP)
EXCODE9 char02 X Other exempt code (note: currently not used by SAP)
EXCERTIF char25 X Number of tax exemption certificate (note: forseen for
later use)
EXREASON char02 X Reason for tax exemption (note: forseen for later use)
USER_DATA char50 X User defined field (for reporting purposes)

For the calculation the following input parameters of COM_TAX are used:

• AMOUNT Price (excluding taxes)


• MATNR Product-/Materialnumber
• TXJCD_SF State of origin (jurisdiction code)
• TXJCD_ST State of destination (jurisdiction code)
• TAX_DATE Date to find time dependent tax rates
• COUNTRY Source country
• QUANTITY Quantity for Sub.Trib. calculation on fixed price basis
• CURR_DEC Number of decimals stored in currency text fields

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The transfer of other input parameter for the tax calculation is done by a modification
which transfers all information from ‘FV64A300’ to the external tax calculation for
Brazil. The transfered data is:

• KOMK Pricing header information


• KOMP Pricing line item information
• XKOMV Pricing processing table
• T007A Tax code data

Information from these structure is partly used because not all information is
available in COM_TAX. Used information is:

• MWSKZ Tax code in COM_TAX from 3.0B


• MATKL Material group
• LIFNR Vendor number easier to determine from KOMK
• KUNNR Customer number easier to determine from KOMK

Additionally the XKOMV table is used to determine the active tax conditions in the
pricing/tax procedure.

The calculation then fills the following output parameters:

• Tax amount per tax type (TAXAMT1 to TAXAMT9)


• Tax rate per tax type (TAXPCT1 to TAXPCT9)
• Tax base per tax type (TAXBAS1 to TAXBAS9)

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