Employees in an organization undertake business travels for work or business purposes. It is important for the organizations to keep track of those business related expenses incurred by their employees during business travel and to calculate any tax liability arises out of those expense spending for employees. Taxability and deductibility service calculate the ‘taxable amount’ on these allowances and expenses and report the same.

Also, some amount of few business travel expenses can be deducted by the companies from their corporate tax. Taxability and deductibility service calculate the amounts that are deemed as deductible for such expenses and report the same.

In this blog, I would like to introduce you to taxability and deductibility service delivered in SAP Concur Expense Professional Edition.

Important features of taxability and deductibility service are

1. Configuration of expense types relevant for taxability and deductibility
2. Calculation of taxable and non-taxable amount and deductible and non-deductible amount for relevant expenses based on the configuration
3. Integration to SAP Payroll system

1. Taxability and deductibility configuration

New administration configuration UI provides option to configure expenses or allowances relevant for taxability and expenses relevant for deductibility per country. It is highly configurable.

For taxability, it’s possible to configure policies, validity period, domestic/foreign expense, taxability calculation based on Limit type – Threshold, Percentage, Fix amount and Fully taxable threshold, and taxable or deductible limit based on Limit By – per receipt and daily for expense types.

For deductibility, it’s possible to configure policies, validity period, domestic/foreign expense, deductibility calculation based on Limit type – Threshold or Percentage and taxable or deductible limit based on Limit By – receipt, per receipt/per person and daily for expense types.

For travel allowance taxability, it’s possible to configure policies, validity period, domestic/foreign expense, Flat Rate Taxable Calculation for expense types.

Following country specific requirements are supported with taxability and deductibility configuration in addition to general taxability and deductibility requirements.

Corporate Deductibility

Germany

Corporate Deductibility – Percentage of expense (Limit type Percentage and Limit by Per Receipt)

In Germany, domestic client entertainment expenses to be split into 70% Tax Deductible and 30% Non-Tax Deductible. It is supported using limit type Percentage and Limit by Per Receipt option.

Mexico

Corporate Deductibility – Fixed Daily Limit (Limit type Threshold and Limit by Daily)

In Mexico, expenses such as foreign hotel/lodging, both foreign and domestic car rental and foreign meals are subject to a Fixed Daily Limit for deductible calculation. It is supported using limit type Threshold and Limit by Daily option.

Sweden

Corporate Deductibility – Limit Per Attendee/Per Receipt (Limit type Threshold and Limit by Per Person/Per Receipt)

In Sweden, entertainment meals expense is subjected to threshold limit per attendee and receipt. It is supported using limit type Threshold and Limit by Per person/Per receipt option.

Employee Taxability

Italy

Employee Taxability – Fixed Daily Limit (Limit type Threshold and Limit by Daily)

In Italy, incidental expenses without receipts can be reimbursed up to a daily limit. Any amount the company reimburses above the daily limits is taxable to the user. It is supported using limit type Threshold and Limit by Daily option.

Travel Allowance Taxability

Germany

Travel allowance Taxability – 3 way split (Flat rate taxable calculation)

In Germany, travel allowances paid above the government tax free limit to be split into 3 values for employee income tax reporting. It is supported using Flat Rate Taxable Calculation option.

Same expense type cannot be configured for both employee taxability and corporate deductibility. For example, in Italy individual meal expenses within the user’s home municipality are both taxable and deductible. In this case individual meal can be configured either as taxable or deductible based on customer preference and not both.

Below picture shows a basic flow of taxability and deductibility configuration.

1. Taxability and deductibility calculation

In number of countries, certain allowances or expenses are deemed to be tax free up to certain amount. Any payment over and above certain amount is subject to income tax for an employee.

Taxability and deductibility service calculates the ‘taxable amount’ and ‘non-taxable amount’ on these allowances and expenses. It does not identify the actual tax payable by the employee as that information is part of the payroll system. Employee can choose on-demand taxation summary screen to check the taxable and non-taxable amount split for relevant expenses when creating expense report.

In number of countries, certain expenses are deductible from corporate tax.

Taxability and deductibility service also calculate the amounts that are deemed as deductible for these expenses. The deductible amount is used to reclaim the VAT correctly. Expense approver and/or expense processor can choose on-demand taxation summary screen to check deductible and non-deductible amount split for relevant expenses while approving expense report.

Prepayment validation step posts taxability/deductibility and non-taxability/non-deductibility amount and also posts amounts to the custom fields required for journal splitting for customers with a Standard Account Extract(SAE).

Below picture shows a common expense report flow with taxability and deductibility calculation.

1. SAP Payroll integration for taxability

SAP Payroll Integration for taxability allows customers to transfer taxable and non-taxable amount along with to be reimbursed by payroll from SAP Concur to their SAP Payroll system for approved expense report. Based on that payroll can reimburse their employees for approved business expenses. If customer chooses not to reimburse using payroll, then payroll would be used for reporting purpose only. Customers must use the SAP ICS (Integration with Concur Solutions) to use the Payroll Integration feature.

The Payroll Integration supports customers who have integrated SAP Concur Expense Professional Edition with one of the following SAP financial systems:

• SAP ECC 6.0 or higher: On-Premise
• S/4 HANA: On-Premise
• S/4 HANA: Cloud

Below picture shows SAP Concur integration with SAP Payroll system to reimburse business travel expenses to employee.

Customer can also choose standalone SAP ICS (Integration with Concur Solutions) without payroll integration.

The Taxability and Deductibility service helps our SAP Concur Expense customers to calculate and report accurately the taxable amount of relevant business travel expenses and allowances for their employees. With integration to SAP Payroll system, customers can choose to reimburse the business travel expense to their employees. Also, Taxability and Deductibility service calculate and report accurately the deductible amount of relevant business travel expenses. Customer can use the calculated amount to deduct from corporate tax.

For additional details please refer the below links:

Taxability and Deductibility Service: Taxability and deductibility product reference
SAP Globalization Services: Overview
SAP Concur Support: FAQs
SAP Concur Developer Center: API Reference
SAP Concur Developer Support: Support Options

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