You are from country France (FR) and selling service or material to DOM countries i.e. Martinique (MQ). When creating sales order in the system and put account (from MQ), the tax code is not determined as expected. You expect the DOM tax with rate 8.5% to be used but system failed to determine the tax details. The auto-determined tax code is empty and rate 20% is used.
Reproducing the Issue
- Go to the Sales Orders work center.
- Go to the Sales Orders view.
- Create a new sales order and enter the necessary data like account (which is from country MQ), sales organizational data and then enter the product XYZ. (XYZ represents the ID of the product).
- Go to the Taxes tab, you find the Automatic Tax Determination is ticked but no tax code determined. And the tax rate defaults to 20%.
- At the bottom of the screen, there is an error message:Determination of tax code failed.
However, you expect the tax code 535 with rate 8.5% for DOM countries could be determined automatically by system.
The determination of tax code fails because the decision tree determines the tax event “313 - Sale of Services to DOM (GP, MQ, and RE)” and this tax event has only the tax code “535 – Sale of Services to DOM (GP, MQ, and RE), DOM Standard Rate” assigned. The tax code 535 can only be determined automatically if the corresponding product used in the sales document has following tax classification in its master data: Country FR, Region – empty, Tax Type 1-VAT, Tax Rate Type 3 – DOM Standard, the rest empty.
DOM Standard Rate (8,5%) is not marked as standard rate for VAT FR in this case (instead 1-Standard with 20% maintained). Because this classification is missing, the tax code determination fails as there is no tax code in the system for tax event 313 and standard rate for FR.
The system can only have one VAT classification per country for each product. You will need to modify the taxes setting in product master data to following DOM tax.
- Go to the Product and Service Portfolio work center.
- Go to the Services view.
- Find the service product XYZ, edit it and go to Taxes tab.
- Find the row for country FR, you can see the currently setting for country FR is with Tax Rate Type as 1 - Standard. This is not for DOM country.
- You need to select the Tax Rate Type as 3 - DOM Standard in this case, and save it.
- Now when you creating new sales order with this product XYZ, the tax code 535 for DOM standard (with rate 8.5%) will be used.
KBA , AP-CI , Customer Invoice Processing , How To