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Tax V2

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ayham Harahshah
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12 views

Tax V2

Uploaded by

ayham Harahshah
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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TAXES IN

ACCOUTING
INCOME & SALES TAX
CLASSES OF TAX
Tax Rate Structure
TAX IN SAP S/4HANA
What Are the Taxes?
•Taxes are mandatory contributions levied on individuals or
corporations by a government entity—whether local, regional, or
national

•Taxes are mandatory contributions levied on individuals or corporations by a government


entity—whether local, regional, or national
Income tax
What Is Income Tax?
•Income tax expense is the amount of tax that a company owes on
its taxable income for a given period. It is calculated by applying
the tax rate to the net income before tax.
•The income tax expense and income tax payable accounts will be
reported on the income statement and balance sheet, respectively.
The income tax expense will reduce the company’s net income for
the period, while the income tax payable will increase the
company’s liabilities
Types of Income
Tax
•Individual Income Tax: Individual income tax is referred to
as personal income tax. This type of income tax is levied on
an individual’s wages, salaries, and other types of income

•Business Income Tax: Tax levied on the profits of


corporations or businesses. Depending on the business
structure, the corporation, its owners, or shareholders report
their business income and then deduct their operating and
capital expenses. Generally, the difference between their
business income and their operating and capital expenses is
considered their taxable business income
Tax rates in Jordan
•income Taxes rates :
•The tax for a natural person is levied on taxable income according to
the following rates:
•(5%) Five percent for every dinar of the first five thousand dinars.
•(10%) Ten percent for every dinar of the next five thousand dinars.
•(15%) Fifteen percent for every dinar of the next five thousand dinars.
•(20%) Twenty percent for every dinar of the next five thousand dinars.
•(25%) Twenty-five percent for every dinar beyond this amount up to
one million dinars.
•(30%) Thirty percent for every dinar of taxable income exceeding one
million dinars.
Example
• ABC Corp. earned a net
income of $500,000 before
Journal Entries for Income Tax Expenses
tax during its fiscal year. DR. Income tax expense $125,000
With an effective income CR. Income tax payable $125,000
tax rate of 25%, ABC Journal Entries for Income Tax Payments
Corp. will recognize DR. Income tax payable $125,000
$125,000. CR. Income tax cash $125,000
Withholding tax
That is type of income tax paid to the government by
the payer of the income rather than by the recipient of
the income.
It helps ensure that the government collects taxes on
income at the source, reducing the risk of tax evasion
by the income recipient.
Sales tax
Sales tax is a consumption tax imposed by the government on the sale of goods and services. The seller
collects the tax from the buyer and then remits it to the government.

Sales Tax Rates: Rates can vary by country, state, or even city. It's important to know the applicable rates for
each location where your business operates.

Taxable vs. Non-Taxable Sales: Not all sales are subject to sales tax. Many jurisdictions have exemptions for
certain goods (like food or medical supplies) or services.
Types of Sales tax

General Sales Tax:


• Applied broadly to most goods and services.
• The rate can vary depending on the type of product or service.
Excise Tax:
• Applied to specific goods, often considered non-essential or luxury items such as gasoline.
Value-Added Tax (VAT):
• A type of consumption tax placed on a product whenever value is added at each stage of the supply chain.
Use Tax:
• Applied to goods purchased out of state but used within the state.
• Ensures that local businesses are not disadvantaged by consumers purchasing goods elsewhere to avoid
sales tax.
Sales tax in
accounting
•Sales Tax Payable: This liability account records the amount of sales
tax collected by a business from customers, which is owed to the
government.When a sale is made, the sales tax is collected and credited
to this account.

•Sales Tax Expense: This expense account is used if a business incurs


sales tax on its purchases.
Output / input tax
•Output Tax:The sales tax collected from customers on taxable sales of
goods and services.Recorded as a liability because it is collected on
behalf of the government and must be remitted.

•Input Tax: The sales tax paid by a business on its purchases. In


jurisdictions with Value-Added Tax (VAT) or Goods and Services Tax
(GST), this input tax can often be reclaimed or credited against output
tax liabilities.
Net tax

Net Tax =Output Tax−Input Tax


(+) Net Tax Payable
(-) Net Tax Receivable
simplified example

•Imagine you own a bakery, and you buy flour and sugar from a supplier. Let's say the total cost of these
ingredients is €100, and the VAT rate is 20%. This means you will pay €20 in VAT on this purchase. This $20 is
your input VAT.

•Now, you use the flour and sugar to make cakes that you sell in your bakery. Let's say you sell a cake for €20,
including a 20% VAT of €4. When you collect this €4 from your customer, it becomes your output VAT.

Net Tax =Output Tax−Input Tax

= 4- 20 = -16 this is Net Tax Receivable


Journal Entry

•Journal Entry for Sale

DR. Accounts Receivable $24


CR. Sales Revenue $ 20 (Sale amount)
CR. Output Tax $ 4 (Sales tax amount)

•Journal Entry for Purchase

DR.Expense or Asset Account $100 (Purchase amount excluding tax)


DR.Input Tax $20 (Sales tax amount)
CR.Accounts Payable $ 120
CLASSES OF TAX:

Direct taxes: taxes that are paid directly to the


government by the individual or organization on whom
the tax is imposed.

•Examples: Income Tax

indirect taxes: taxes collected by an intermediary (such as


a retailer) from the person who bears the ultimate
economic burden of the tax (such as the consumer). These
taxes are usually included in the price of goods and
services.

•Example: Sales Tax, Value-Added Tax (VAT):


TAX IN SAP S/4HANA
• Tax Configuration

• Tax Determination

• Integration with Financial Modules


Tax Configuration
• Tax Codes: These are used to define tax rates for different types of transactions.
Tax codes are assigned to transaction types and determine how tax is calculated and posted.

Tax Procedures: Tax procedures define how tax is calculated for different transactions. They include a series
of steps and rules that determine how tax amounts are derived
Tax Determination Input and Output Tax

Input tax refers to the tax paid on purchases, while output tax is the tax collected on sales.

SAP S/4HANA manages both types to ensure accurate tax reporting and compliance.
Integration with Financial Modules
•General Ledger (GL): Tax postings are integrated with the GL to ensure accurate financial reporting.
•
•Accounts Payable (AP) and Accounts Receivable (AR): Tax amounts are automatically calculated and
posted during invoice processing in AP and AR.
Thank you
very much!

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