Understanding Tax Amount Rounding Method Options in Japan

In Japan, you can use the Setup Rounding Options program (P75J504) to associate a rounding method to a tax rate area that the system uses for tax calculations. You set up a record for each of the tax rate areas for which you want to specify the rounding method. You set up a record for each tax rate area by company. You can also set up records for company 00000. The system saves the associations between the company and the tax rate area in the Setup Rounding Options table (F75J504).

When you enter a transaction in a program that includes the tax rate area and that calculates taxes, the system:

Uses the tax rate area of the transaction to determine the tax rate to apply.

The tax rate area might be associated with a customer, supplier, or item, or might be manually entered.
Using the company and tax rate area from the transaction, accesses the setup from the F75J504 table when the Localization Country Code field in the User Profile Revisions program (P0092) is set to JP (Japan).

If no record exists for the tax rate area and company of the transaction, the system looks for a record for the tax rate area for company 00000. If no record exists for the tax rate area for company 00000, the system writes an error message to the Work Center describing the document number, document type, company, and tax rate area of the transaction for which it was unable to complete the tax calculation.
Applies the rounding method specified for the tax rate area.

This table shows the rounding methods that you can associate with a tax rate area:

Rounding Method	Description	Example 1	Example 2
Rounding	The system calculates the tax, then uses the decimal places of the unrounded tax amount to produce the final tax amount. If the next decimal place of the unrounded tax amount is less than or equal to 4, then the decimal places after the specified decimal place are ignored. If the next decimal place of the unrounded tax amount is greater than or equal to 5, then the system adds 1 to the digit preceding the decimal and ignores the decimal numbers. You specify the decimal places when you set up the currency. Note: This is the rounding method that the system uses if you do not associate a different rounding method to the tax rate area.	Example 1: Taxable amount = 1904 Tax rate = 3.8% Decimal places for currency = 0 Unrounded tax = 72.352 Amount after rounding = 72 In example 1, the system: Does not increase the amount before the decimal point because the first decimal place (3) is less than 4. Ignores all of the decimal places because the currency is set up for no decimal places.	Example 2: Taxable amount = 1912 Tax rate = 3.8% Decimal places for currency = 0 Unrounded tax = 72.656 Amount after rounding = 73 In example 2, the system: Increases the amount before the decimal point because the first decimal place (6) is greater than 5. Ignores all of the decimal places because the currency is set up for no decimal places.
Rounding up	The system calculates the tax, then uses the decimal places of the unrounded tax amount to produce the final tax amount. If any digits exist after the specified decimal place, the system adds 1 to the digit preceding the specified decimal and ignores the decimal numbers. You specify the decimal places when you set up the currency.	Example 1: Taxable amount = 1904 Tax rate = 3.8% Decimal places for currency = 0 Unrounded tax = 72.352 Amount after rounding = 73 In example 1, the system: Increases the amount before the decimal point by 1 because the first decimal place (3) is greater than 0. Ignores all of the decimal places because the currency is set up for no decimal places.	Example 2: Taxable amount = 1897 Tax rate = 3.8% Decimal places for currency = 0 Unrounded tax = 72.086 Amount after rounding = 73 In example 2, the system: Increases the amount before the decimal point by 1 because decimal numbers exist after the specified decimal place of 0. Ignores all of the decimal places because the currency is set up for no decimal places.
Rounding off	The system calculates the tax, then ignores all of the decimal places of the unrounded tax amount after the specified decimal. You specify the decimal places when you set up the currency. The system does not consider the values of the decimal places.	Example 1: Taxable amount = 1904 Tax rate = 3.8% Unrounded tax = 72.352 Decimal places for currency = 0 Amount after rounding = 72 In example 1, the system ignores all of the decimal places because: The currency is set up for no decimal places. This method does not consider the values of the decimal places.	Example 2: Taxable amount = 1912 Tax rate = 3.8% Unrounded tax = 72.656 Decimal places for currency = 0 Amount after rounding = 72 In example 2, the system ignores all of the decimal places because: The currency is set up for no decimal places. This method does not consider the values of the decimal places.

Rounding Method

Description

Example 1

Example 2

Rounding

The system calculates the tax, then uses the decimal places of the unrounded tax amount to produce the final tax amount.

If the next decimal place of the unrounded tax amount is less than or equal to 4, then the decimal places after the specified decimal place are ignored. If the next decimal place of the unrounded tax amount is greater than or equal to 5, then the system adds 1 to the digit preceding the decimal and ignores the decimal numbers. You specify the decimal places when you set up the currency.

Note: This is the rounding method that the system uses if you do not associate a different rounding method to the tax rate area.

Example 1:

Taxable amount = 1904
Tax rate = 3.8%
Decimal places for currency = 0
Unrounded tax = 72.352
Amount after rounding = 72

In example 1, the system:

Does not increase the amount before the decimal point because the first decimal place (3) is less than 4.
Ignores all of the decimal places because the currency is set up for no decimal places.

Example 2:

Taxable amount = 1912
Tax rate = 3.8%
Decimal places for currency = 0
Unrounded tax = 72.656
Amount after rounding = 73

In example 2, the system:

Increases the amount before the decimal point because the first decimal place (6) is greater than 5.
Ignores all of the decimal places because the currency is set up for no decimal places.

Rounding up

The system calculates the tax, then uses the decimal places of the unrounded tax amount to produce the final tax amount.

If any digits exist after the specified decimal place, the system adds 1 to the digit preceding the specified decimal and ignores the decimal numbers. You specify the decimal places when you set up the currency.

Example 1:

Taxable amount = 1904
Tax rate = 3.8%
Decimal places for currency = 0
Unrounded tax = 72.352
Amount after rounding = 73

In example 1, the system:

Increases the amount before the decimal point by 1 because the first decimal place (3) is greater than 0.
Ignores all of the decimal places because the currency is set up for no decimal places.

Example 2:

Taxable amount = 1897
Tax rate = 3.8%
Decimal places for currency = 0
Unrounded tax = 72.086
Amount after rounding = 73

In example 2, the system:

Increases the amount before the decimal point by 1 because decimal numbers exist after the specified decimal place of 0.
Ignores all of the decimal places because the currency is set up for no decimal places.

Rounding off

The system calculates the tax, then ignores all of the decimal places of the unrounded tax amount after the specified decimal. You specify the decimal places when you set up the currency.

The system does not consider the values of the decimal places.

Example 1:

Taxable amount = 1904
Tax rate = 3.8%
Unrounded tax = 72.352
Decimal places for currency = 0
Amount after rounding = 72

In example 1, the system ignores all of the decimal places because:

The currency is set up for no decimal places.
This method does not consider the values of the decimal places.

Example 2:

Taxable amount = 1912
Tax rate = 3.8%
Unrounded tax = 72.656
Decimal places for currency = 0
Amount after rounding = 72

In example 2, the system ignores all of the decimal places because:

The currency is set up for no decimal places.
This method does not consider the values of the decimal places.

The setup in the Setup Rounding Options program does not change the tax rate areas or tax rates that you associate with customers, suppliers, or items. The setup changes only the method that the system uses to round the calculated tax amount.