Business place & Section code in sap


Certain counties (India, Brazil, Philippines, South Korea, Taiwan & Thailand) require tax reporting at level below company code.

 

Let’s take the example of India:

TIN number needed for VAT 

VAT (tax on purchase and sales of product within state) reporting is done at state level. Company has to collect & file VAT returns to state tax authority (state tax authority is below central tax authority).

  • Whichever person/authority in the company is liable to collect & file VAT returns has to obtain VAT registration number or Tax identification number (TIN) from state tax authority.
  • One person/ authority (responsible for filing VAT returns) cannot have more than one TIN number. Hence different person/ authority responsible for collecting & filing VAT returns need to have its own TIN number.
  • If same person/authority is responsible for collecting & filing VAT returns for multiple plants then VAT can be applied on transactions done in all those plants under single TIN number.

Whenever a VAT applicable transaction is done, VAT amount is applied (calculated & recorded) under the TIN number obtained from state tax authority. (TIN number is assigned by state tax authority to each person/authority responsible for collecting & filing VAT).

 

Example:

You got to restaurant and order food. The bill that you receive has VAT amount applied and a VAT number is also written on the bill. The VAT number (TIN) is basically identification number assigned to restaurant by state tax authority for the purpose of collecting & filing VAT with state government for transactions done within state.

 

TAN number needed for withholding tax

Withholding tax reporting is done at central level. Company has to file withholding tax returns to central tax authority.

  • Whenever person/authority makes a payment and if as per income tax act 1961 withholding tax is applicable on the payment then it’s the liability of payer to deduct withholding tax from payment to payee.
  • Person/ authority that is liable for collecting & filling withholding tax has to obtain TAN number from central tax authority.
  • One person/ authority (responsible for collecting & filling withholding tax returns) cannot have more than one TAN number. Hence different person/ authority responsible for collecting & filing withholding tax returns need to have its own TAN number.

If same person/authority is responsible for collecting & filing withholding tax returns for multiple plants then withholding tax can be applied on transactions done in all those plants under single TAN number.

 

Example:

Employer deducts tax (tax at source) from employee’s salary on behalf of central tax authority. Later on employer has to remit the deducted tax and file withholding tax returns with central tax authority under the TAN number.

TAN (Tax Deduction & Collection Account Number) is assigned by central tax authority to the employer.

 

Now let’s apply above concept and understand why we need BUSINESS PLACE & SECTION CODE in sap

Different place of business will have different person/ authority responsible for collecting & filling VAT returns with state tax authority. Hence each person/authority has to obtain is own TIN number from state tax authority.

In sap, place of business is represented as business place. Business place captures TIN number.

Plant is assigned to a business place, whenever transaction is posted software picks the business place from plant involved in the transaction and hence fetches the TIN number as well.

For transactions where software is not able to determine business place, business place information is entered manually.

 

 

Different place of business will have different person/ authority responsible for collecting & filling withholding tax returns with central tax authority. Hence each person/authority has to obtain is own TAN number from central tax authority.

In sap, each business place is mapped to a section code. Section code captures TAN number.

Plant is assigned to a business place and business place is mapped with section code, whenever transaction is posted software picks the business place from plant involved in the transaction and hence fetches the TAN number as well.

For transactions where software is not able to determine business place, business place information is entered manually.

 

 

Below example to help you apply the above concepts and understand better

business-plance-section-code