How To Fix 3G435 - The value added tax indicator &1 contains non-deductible input tax

SAP Error Message - Details

• Message type: E = Error

• Message class: 3G - Payroll: International

• Message number: 435

• Message text: The value added tax indicator &1 contains non-deductible input tax

What causes this issue?

The value-added tax indicator &v1& contains NAV or NVV. It is not
possible to post NAV or NVV via posting to Accounting.

System Response

Postings with a value-added tax indicator that contain NAV or NVV are
forbidden.

How to fix this error?

If it is a case of posting travel expenses, you should post these
expenses using the travel expenses module. If it is not a case of
travel expenses, contact the SAP hotline with an exact description of
the operation.

Procedure for System Administrators

The system issues an error message and will not allow you to continue with this transaction until the error is resolved.

Error message extract from SAP system. Copyright SAP SE.

Smart SAP Assistant

• What is the cause and solution for SAP error message 3G435 - The value added tax indicator &1 contains non-deductible input tax ?

  The SAP error message 3G435 indicates that there is an issue with the value-added tax (VAT) indicator in your transaction. Specifically, it means that the VAT indicator you are using is associated with non-deductible input tax, which cannot be claimed back by the business.
  Cause:
  
  Incorrect VAT Indicator: The VAT indicator assigned to the transaction or the material may be set to a type that does not allow for input tax deduction.
  Configuration Issues: The VAT settings in the SAP system may not be configured correctly, leading to the assignment of non-deductible VAT indicators.
  Transaction Type: The nature of the transaction (e.g., certain types of expenses or purchases) may inherently involve non-deductible VAT according to local tax laws.
  
  Solution:
  
  Check VAT Indicator: Review the VAT indicator assigned to the transaction. Ensure that it is appropriate for the type of transaction you are processing. You may need to change it to a deductible VAT indicator.
  Review Configuration: Consult with your SAP configuration team to ensure that the VAT indicators are set up correctly in the system. This includes checking the tax codes and their associated settings.
  Consult Tax Regulations: Verify the local tax regulations to understand which VAT indicators are applicable for your transactions. This may involve consulting with a tax advisor or accountant.
  Adjust Transaction: If the transaction is indeed non-deductible, you may need to adjust your accounting entries or the way the transaction is recorded to comply with tax regulations.
  
  Related Information:
  
  SAP Documentation: Refer to SAP Help documentation for detailed information on VAT configuration and indicators.
  Transaction Codes: Use transaction codes like OB40 (for maintaining tax codes) or OBYZ (for maintaining tax determination) to review and adjust settings.
  User Exits and BAdIs: If necessary, consider implementing user exits or Business Add-Ins (BAdIs) to customize VAT handling in specific scenarios.
  Testing: After making changes, conduct thorough testing to ensure that the VAT calculations and indicators are functioning as expected.
  
  If the issue persists after following these steps, it may be beneficial to engage with SAP support or a consultant who specializes in SAP tax configurations.