4.
Tax On Sale (Output) and Purchase (Input)_VAT
4.1. Check Calculation Procedure (TAX Procedure)
Output VAT (Tax on Sales)
● Definition: VAT charged by the company when selling goods or services.
● Accounting Treatment:
○ Customer pays Sales Value + VAT.
○ VAT portion is recorded as Output Tax Liability (payable to the tax
authority).
● Example:
○ Sales Invoice = 10,000 EGP
○ VAT @ 14% = 1,400 EGP
○ Customer pays 11,400 EGP
○ Posting:
■ Debit Customer: 11,400
■ Credit Revenue: 10,000
■ Credit Output VAT: 1,400
Input VAT (Tax on Purchases)
● Definition: VAT paid by the company when purchasing goods or services.
● Accounting Treatment:
○ Supplier charges Purchase Value + VAT.
○ VAT portion is recorded as Input Tax Receivable (recoverable from the tax
authority).
● Example:
○ Purchase Invoice = 5,000 EGP
○ VAT @ 14% = 700 EGP
○ The company pays 5,700 EGP
○ Posting:
■ Debit Expense/Asset: 5,000
■ Debit Input VAT: 700
■ Credit Vendor: 5,700
In summary:
● Output VAT = Tax collected on sales → Liability.
● Input VAT = Tax paid on purchases → Asset.
● SAP S/4HANA handles this via tax codes, tax procedures, and automatic
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Account determination.
Output VAT = Liability → Payable to tax authority.
Input VAT = Asset → Recoverable from tax authority.
Tax Codes must be carefully maintained per the country’s VAT law.
Automatic postings are controlled via account determination in OB40.
Path: Sap Customizing Implementation Guide → Financial Accounting → Tax on Sales/Purchases → Basic
Settings → Check Calculation Procedure
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Configuration Steps:
Step (1)
Step (2)
Step (3)
In SAP S/4HANA, BASB, MWVS, and MWAS are tax condition types used in the tax
procedure for VAT. They represent different aspects of VAT calculation:
● BASB → Output Tax (Sales VAT, liability to tax authority)
● MWAS → Input Tax (Purchases VAT, recoverable from tax authority)
● MWVS → Non-deductible Input Tax (portion of VAT that cannot be claimed back,
treated as expense)
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BASB – Output Tax
● Purpose: Used to calculate VAT on sales transactions.
● Accounting Impact:
○ Credit Output VAT G/L account (liability).
○ Customer pays Sales Value + VAT.
● Example:
○ Sales = 10,000 EGP
○ BASB (14%) = 1,400 EGP
○ Posting: Debit Customer 11,400 / Credit Revenue 10,000 / Credit Output
VAT 1,400.
MWAS – Input Tax
● Purpose: Used to calculate VAT on purchases.
● Accounting Impact:
○ Debit Input VAT G/L account (asset/receivable).
○ Vendor invoice includes Purchase Value + VAT.
● Example:
○ Purchase = 5,000 EGP
○ MWAS (14%) = 700 EGP
○ Posting: Debit Expense 5,000 / Debit Input VAT 700 / Credit Vendor 5,700.
MWVS – Non-Deductible Input Tax
● Purpose: Represents VAT that cannot be reclaimed (e.g., on certain expenses like
entertainment or restricted items).
● Accounting Impact:
○ Posted as part of the expense rather than recoverable VAT.
● Example:
○ Purchase = 1,000 EGP
○ VAT = 140 EGP
○ If 50% deductible → MWAS = 70 EGP, MWVS = 70 EGP.
○ Posting: Debit Expense 1,070 / Debit Input VAT 70 / Credit Vendor 1,140.
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In summary:
● BASB = Output VAT (sales tax liability).
● MWAS = Input VAT (recoverable purchase tax).
● MWVS = Non-deductible Input VAT (expensed portion).
4.2. Assign Country/Region to Calculation Procedure
Step (1)
Step (2)
-Click Save
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4.3. Define Tax Codes for Sales and Purchases
Step (1)
Step (2)
Step (3)
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Step (4)
Exempt from Output VAT 0%
Step (5)
Exempt from Output VAT 14%
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Step (6)
Step (7)
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4.4. Define Tax Account
Step (1)
Step (2)
Step (3)
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Step (4)
Step (5)
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4.5. Display Gl Account_VAT(Output Tax)
Step (1)
Step (2)
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Step (3)
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4.6. Assign Country/Region and Tax Code to G/L Accounts
Step (1)
Step (2)
Step (3)
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Step (4)
I b r a h i m A b o u K h a l i l
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