R12 Oracle E-Business Tax Fundamentals
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Student Guide
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D49306GC30 Edition 3.0 February 2009 D58449
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Copyright © 2009, Oracle. All rights reserved. This documentation contains proprietary information of Oracle Corporation. It is provided under a license agreement containing restrictions on use and disclosure and is also protected by copyright law. Reverse engineering of the software is prohibited. If this documentation is delivered to a U.S. Government Agency of the Department of Defense, then it is delivered with Restricted Rights and the following legend is applicable: Restricted Rights Legend Use, duplication or disclosure by the Government is subject to restrictions for commercial computer software and shall be deemed to be Restricted Rights software under Federal law, as set forth in subparagraph (c)(1)(ii) of DFARS 252.227-7013, Rights in Technical Data and Computer Software (October 1988). This material or any portion of it may not be copied in any form or by any means without the express prior written permission of the Education Products group of Oracle Corporation. Any other copying is a violation of copyright law and may result in civil and/or criminal penalties. If this documentation is delivered to a U.S. Government Agency not within the Department of Defense, then it is delivered with “Restricted Rights,” as defined in FAR 52.227-14, Rights in Data-General, including Alternate III (June 1987). The information in this document is subject to change without notice. If you find any problems in the documentation, please report them in writing to Worldwide Education Services, Oracle Corporation, 500 Oracle Parkway, Box SB-6, Redwood Shores, CA 94065. Oracle Corporation does not warrant that this document is error-free. Oracle and all references to Oracle Products are trademarks or registered trademarks of Oracle Corporation. All other products or company names are used for identification purposes only, and may be trademarks of their respective owners.
Author
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Mary Kalway, Robert MacIssac Technical Contributors and Reviewers
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Ramasubramanian Balasundaram, Rajesh Bhatt, Nigel Chapman, Kevan Davies, Julianna Dodick, Nirajita Mitra, Anand Naik, Pamela Rietz, Christine Rudd, Harsh Takle, Brijesh Thakkar, Amit Vohra, Kathryn Wohnoutka, Andrea Auld, Christine Rudd
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This book was published using:
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Table of Contents Oracle E-Business Tax Overview ...................................................................................................................1-1 Oracle E-Business Tax Overview..................................................................................................................1-2 Objectives ......................................................................................................................................................1-3 Agenda...........................................................................................................................................................1-4 E-Business Tax – New Product .....................................................................................................................1-5 E-Business Tax – Benefits.............................................................................................................................1-7 E-Business Tax Solutions for Business Needs ..............................................................................................1-8 Integration Within Oracle E-Business Suite ..................................................................................................1-12 Agenda...........................................................................................................................................................1-15 E-Business Tax Architecture .........................................................................................................................1-16 E-Business Tax Home Page...........................................................................................................................1-18 Agenda...........................................................................................................................................................1-19 E-Business Tax Key Concepts – Tax Definition ...........................................................................................1-20 Key Concepts: Tax Authority........................................................................................................................1-22 Key Concepts: Tax Regime ...........................................................................................................................1-23 Key Concepts: Tax ........................................................................................................................................1-24 Key Concepts: Tax Jurisdiction.....................................................................................................................1-25 E-Business Tax Key Concepts – Configuration Components .......................................................................1-26 E-Business Tax Key Concepts – Tax Rules Engine ......................................................................................1-29 Tax Determination Management ...................................................................................................................1-32 Agenda...........................................................................................................................................................1-34 E-Business Tax Processing............................................................................................................................1-35 Receivables Transaction Example .................................................................................................................1-36 Summary........................................................................................................................................................1-40
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Part 1: Oracle E-Business Tax Basic Tax Configuration.............................................................................2-1 Part 1: Oracle E-Business Tax Basic Tax Configuration...............................................................................2-2 Objectives ......................................................................................................................................................2-3 Agenda...........................................................................................................................................................2-4 E-Business Tax Architecture .........................................................................................................................2-5 E-Business Tax Home Page – External Dependencies & Tax Configuration ...............................................2-6 E-Business Tax Configuration Flow – External Dependencies.....................................................................2-7 E-Business Tax Configuration Flow – Tax Configuration ............................................................................2-8 Tax Users.......................................................................................................................................................2-9 Profile Option Values ....................................................................................................................................2-10 Legal Entity ...................................................................................................................................................2-12 Lookup Codes................................................................................................................................................2-14 Regime-to-Rate Flow for US Sales Tax ........................................................................................................2-16 Regime-to-Rate Flow for UK VAT ...............................................................................................................2-18 Agenda...........................................................................................................................................................2-20 Tax Regimes ..................................................................................................................................................2-21 Tax Regime Setup .........................................................................................................................................2-22 Agenda...........................................................................................................................................................2-24 Taxes .............................................................................................................................................................2-25 Tax Setup.......................................................................................................................................................2-26 Agenda...........................................................................................................................................................2-27 Tax Statuses...................................................................................................................................................2-28 Tax Status Setup ............................................................................................................................................2-29 Agenda...........................................................................................................................................................2-30 Tax Rates .......................................................................................................................................................2-31 Tax Rate Setup ..............................................................................................................................................2-32 Agenda...........................................................................................................................................................2-34 Tax Jurisdictions............................................................................................................................................2-35
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Tax Jurisdiction Setup ...................................................................................................................................2-36 Summary........................................................................................................................................................2-37 Part 2: Oracle E-Business Tax Basic Tax Configuration.............................................................................3-1 Part 2: Oracle E-Business Tax Basic Tax Configuration...............................................................................3-2 Objectives ......................................................................................................................................................3-3 Agenda...........................................................................................................................................................3-4 E-Business Tax Architecture .........................................................................................................................3-5 E-Business Tax Home Page – External Dependencies & Tax Configuration ...............................................3-6 Basic Tax Configuration – Additional Setup Options ...................................................................................3-7 Agenda...........................................................................................................................................................3-9 Tax Zones ......................................................................................................................................................3-10 TCA Geography Hierarchy............................................................................................................................3-12 Tax Zone Setup..............................................................................................................................................3-13 Agenda...........................................................................................................................................................3-14 Define Tax Accounts .....................................................................................................................................3-15 Tax Account Setup ........................................................................................................................................3-17 Agenda...........................................................................................................................................................3-19 Tax Reporting Types .....................................................................................................................................3-20 Tax Reporting Type Setup.............................................................................................................................3-21 Agenda...........................................................................................................................................................3-22 Mass Create Tax Jurisdictions .......................................................................................................................3-23 Mass Create Tax Jurisdictions Setup .............................................................................................................3-24 Agenda...........................................................................................................................................................3-26 Tax Recovery Rates.......................................................................................................................................3-27 Summary........................................................................................................................................................3-28
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Managing Party Tax Profiles..........................................................................................................................4-1 Managing Party Tax Profiles .........................................................................................................................4-2 Objectives ......................................................................................................................................................4-3 Agenda...........................................................................................................................................................4-4 E-Business Tax Architecture .........................................................................................................................4-5 E-Business Tax Home Page – Party Tax Profiles..........................................................................................4-6 Using Party Tax Profiles................................................................................................................................4-7 Party Tax Profile............................................................................................................................................4-9 First Party Legal Entity Tax Profile...............................................................................................................4-12 First Party Legal Establishment Tax Profile..................................................................................................4-14 First Party Tax Profile Setup .........................................................................................................................4-16 Operating Unit Tax Profile ............................................................................................................................4-17 Tax Authority Tax Profile .............................................................................................................................4-18 Third Party Tax Profile..................................................................................................................................4-19 Third Party Tax Profile Setup........................................................................................................................4-21 Agenda...........................................................................................................................................................4-22 Self-Assessment Setup ..................................................................................................................................4-23 Agenda...........................................................................................................................................................4-25 Offset Taxes...................................................................................................................................................4-26 Offset Taxes Setup.........................................................................................................................................4-27 Agenda...........................................................................................................................................................4-28 Tax Exemptions.............................................................................................................................................4-29 Tax Exemptions Setup...................................................................................................................................4-31 Agenda...........................................................................................................................................................4-32 Tax Registrations...........................................................................................................................................4-33 Tax Registrations Setup.................................................................................................................................4-35 Summary........................................................................................................................................................4-36
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Configuration Owners and Service Providers ..............................................................................................5-1 Configuration Owners and Service Providers................................................................................................5-2 Objectives ......................................................................................................................................................5-3 Copyright © 2009, Oracle. All rights reserved.
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Agenda...........................................................................................................................................................5-4 E-Business Tax Architecture .........................................................................................................................5-5 E-Business Tax Home Page – Configuration Owner & Options...................................................................5-7 Tax Configuration Ownership .......................................................................................................................5-8 Tax Configuration Options ............................................................................................................................5-10 Configuration for Taxes and Rules................................................................................................................5-11 Configuration for Product Exceptions ...........................................................................................................5-12 Legal Entity and Operating Unit Configuration Options...............................................................................5-13 Agenda...........................................................................................................................................................5-14 Configuration Options ...................................................................................................................................5-15 Configuration Options Setup .........................................................................................................................5-16 Agenda...........................................................................................................................................................5-17 Service Subscriptions ....................................................................................................................................5-18 Service Subscriptions Setup ..........................................................................................................................5-20 Agenda...........................................................................................................................................................5-21 Event Classes.................................................................................................................................................5-22 Configuration Owner Tax Options ................................................................................................................5-24 Summary........................................................................................................................................................5-26 Fiscal Classifications........................................................................................................................................6-1 Fiscal Classifications .....................................................................................................................................6-2 Objectives ......................................................................................................................................................6-3 Agenda...........................................................................................................................................................6-4 E-Business Tax Architecture .........................................................................................................................6-5 E-Business Tax Home Page – Fiscal Classifications.....................................................................................6-7 Fiscal Classifications .....................................................................................................................................6-8 Agenda...........................................................................................................................................................6-10 Party Fiscal Classifications............................................................................................................................6-11 Party Fiscal Classifications Setup..................................................................................................................6-12 Legal Party Fiscal Classifications..................................................................................................................6-13 Agenda...........................................................................................................................................................6-14 Product Fiscal Classifications........................................................................................................................6-15 Product Fiscal Classifications Setup..............................................................................................................6-17 Agenda...........................................................................................................................................................6-19 Product Tax Exceptions.................................................................................................................................6-20 Product Tax Exceptions Setup.......................................................................................................................6-22 Agenda...........................................................................................................................................................6-24 Transaction Fiscal Classifications .................................................................................................................6-25 Summary........................................................................................................................................................6-27
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Part 1: Setting Up Tax Rules ..........................................................................................................................7-1 Part 1: Setting Up Tax Rules .........................................................................................................................7-2 Objectives ......................................................................................................................................................7-3 Agenda...........................................................................................................................................................7-4 E-Business Tax Architecture .........................................................................................................................7-5 E-Business Tax Homepage – Tax Rules........................................................................................................7-6 Rule Engine ...................................................................................................................................................7-7 Rule Engine – Rule Types .............................................................................................................................7-8 Rule Engine – Tax Regimes ..........................................................................................................................7-10 Rule Engine – Place of Supply / Taxation .....................................................................................................7-11 Rule Engine – Applicability & Registration..................................................................................................7-12 Rule Engine – Status & Rates........................................................................................................................7-14 Rule Engine – Taxable Basis.........................................................................................................................7-16 Rule Engine – Tax Calculation......................................................................................................................7-17 Rule Engine – Recovery Rate........................................................................................................................7-18 Agenda...........................................................................................................................................................7-19 Tax Rule Defaults..........................................................................................................................................7-20 Agenda...........................................................................................................................................................7-22
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Make Tax Available on Transactions ............................................................................................................7-23 Agenda...........................................................................................................................................................7-25 Oracle Tax Simulator.....................................................................................................................................7-26 Troubleshooting the Tax Configuration ........................................................................................................7-28 Agenda...........................................................................................................................................................7-30 Tax Rules Entry .............................................................................................................................................7-31 Tax Rules – Guided Rule Entry.....................................................................................................................7-32 Tax Rules – Guided Rule Entry Setup...........................................................................................................7-35 Summary........................................................................................................................................................7-37 Part 2: Setting Up Tax Rules ..........................................................................................................................8-1 Part 2: Setting Up Tax Rules .........................................................................................................................8-2 Objectives ......................................................................................................................................................8-3 Agenda...........................................................................................................................................................8-4 E-Business Tax Architecture .........................................................................................................................8-5 E-Business Tax Homepage – Tax Rules........................................................................................................8-6 Determining Factors ......................................................................................................................................8-7 Determining Factor – Party ...........................................................................................................................8-9 Determining Factor – Product .......................................................................................................................8-11 Determining Factor – Place ...........................................................................................................................8-12 Determining Factor – Process........................................................................................................................8-14 Agenda...........................................................................................................................................................8-16 Tax Determining Factor Set...........................................................................................................................8-17 Tax Determination Set Setup for Tax Rules ..................................................................................................8-19 Regime Determination Set Setup...................................................................................................................8-21 Agenda...........................................................................................................................................................8-22 Tax Formulas.................................................................................................................................................8-23 Tax Formula Setup ........................................................................................................................................8-25 Agenda...........................................................................................................................................................8-26 Tax Condition Sets ........................................................................................................................................8-27 Tax Condition Sets Setup ..............................................................................................................................8-28 Summary........................................................................................................................................................8-29
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Part 3: Setting Up Tax Rules ..........................................................................................................................9-1 Part 3: Setting Up Tax Rules .........................................................................................................................9-2 Objectives ......................................................................................................................................................9-3 Agenda...........................................................................................................................................................9-4 E-Business Tax Architecture .........................................................................................................................9-5 E-Business Tax Homepage – Tax Rules........................................................................................................9-6 Rules in Detail Example UK Rules Setup (Intra EU Sales) ..........................................................................9-7 UK Rules Setup - Intra EU Sales...................................................................................................................9-8 Agenda...........................................................................................................................................................9-15 Rules in Detail Example Summary UK Rules Setup (Intra EU Sales) ..........................................................9-16 Agenda...........................................................................................................................................................9-18 Tax Rules.......................................................................................................................................................9-19 Tax Rules – Expert Rule Entry......................................................................................................................9-20 Summary........................................................................................................................................................9-21
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Tax Recovery ...................................................................................................................................................10-1 Tax Recovery.................................................................................................................................................10-2 Objectives ......................................................................................................................................................10-3 Agenda...........................................................................................................................................................10-4 E-Business Tax Architecture .........................................................................................................................10-5 E-Business Tax Homepage – Tax Recovery .................................................................................................10-6 Tax Recovery.................................................................................................................................................10-7 Value Added Tax Overview ..........................................................................................................................10-8 Regime-to-Rate Flow with UK VAT.............................................................................................................10-9 Agenda...........................................................................................................................................................10-10
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Tax Recovery Rates.......................................................................................................................................10-11 Agenda...........................................................................................................................................................10-13 Rule Engine – Recovery Rate........................................................................................................................10-14 Agenda...........................................................................................................................................................10-15 Tax Recovery Processing ..............................................................................................................................10-16 Summary........................................................................................................................................................10-18 Managing Taxes on Transactions...................................................................................................................11-1 Managing Taxes on Transactions ..................................................................................................................11-2 Objectives ......................................................................................................................................................11-3 Agenda...........................................................................................................................................................11-4 E-Business Tax Architecture .........................................................................................................................11-5 E-Business Tax Homepage – Oracle Tax Simulator .....................................................................................11-6 Services .........................................................................................................................................................11-7 Payables Transactions....................................................................................................................................11-10 Payables Transactions – Invoices Matched to POs.......................................................................................11-12 Payables Transactions – Prepayment Invoices ..............................................................................................11-14 Payables Transactions – Price Corrections....................................................................................................11-16 Receivables Transactions...............................................................................................................................11-17 Receivables Transactions – Debit and Credit Memos ...................................................................................11-18 Intercompany Transactions............................................................................................................................11-20 Agenda...........................................................................................................................................................11-22 Managing Detail Tax Lines ...........................................................................................................................11-23 Agenda...........................................................................................................................................................11-25 Managing Summary Tax Lines .....................................................................................................................11-26 Agenda...........................................................................................................................................................11-28 Managing Tax Distributions ..........................................................................................................................11-29 Agenda...........................................................................................................................................................11-31 Managing Tax Exemptions............................................................................................................................11-32 Agenda...........................................................................................................................................................11-34 Using the Oracle Tax Simulator to Enter Transactions .................................................................................11-35 Summary........................................................................................................................................................11-37
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Tax Reporting Ledger .....................................................................................................................................12-1 Tax Reporting Ledger....................................................................................................................................12-2 Objectives ......................................................................................................................................................12-3 Agenda...........................................................................................................................................................12-4 E-Business Tax Architecture .........................................................................................................................12-5 E-Business Tax Home Page – Requests ........................................................................................................12-6 Tax Reporting................................................................................................................................................12-7 Tax Reporting Ledger....................................................................................................................................12-9 XML Publisher ..............................................................................................................................................12-11 Agenda...........................................................................................................................................................12-13 E-Business Tax Reports.................................................................................................................................12-14 Agenda...........................................................................................................................................................12-16 EMEA VAT Reports .....................................................................................................................................12-17 Latin American Tax Reports .........................................................................................................................12-18 Asia/Pacific Tax Reports ...............................................................................................................................12-20 Summary........................................................................................................................................................12-22
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Appendix A: Managing Migrated Tax Data .................................................................................................13-1 Appendix A: Managing Migrated Tax Data ..................................................................................................13-2 Objectives ......................................................................................................................................................13-3 Agenda...........................................................................................................................................................13-4 Commitment To Continuity Direct Path From 11i ........................................................................................13-5 Tax Definition Upgrade Flow........................................................................................................................13-6 Release 11i Architecture................................................................................................................................13-7 Tax Code Migration.......................................................................................................................................13-8
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Data Ownership .............................................................................................................................................13-10 Operating Unit Tax Profiles...........................................................................................................................13-11 Agenda...........................................................................................................................................................13-13 Tax Classification Codes ...............................................................................................................................13-14 Agenda...........................................................................................................................................................13-16 Application Tax Options ...............................................................................................................................13-17 Tax Defaulting Hierarchy Upgrade Flow ......................................................................................................13-19 Agenda...........................................................................................................................................................13-21 Configuration Owner Tax Options ................................................................................................................13-22 Agenda...........................................................................................................................................................13-24 Tax Account Information ..............................................................................................................................13-25 Agenda...........................................................................................................................................................13-26 Direct Tax Rate Determination Rule .............................................................................................................13-27 Agenda...........................................................................................................................................................13-29 Stages of Implementation - From 11i to R12.................................................................................................13-30 Tax Configuration Migration Path.................................................................................................................13-31 Point A Scenario – VAT Upgrade Mapping..................................................................................................13-33 Point B Scenario – VAT Upgrade Mapping ..................................................................................................13-34 Summary........................................................................................................................................................13-36
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Preface Profile Before You Begin This Course Before you begin this course, you should have the following qualifications: •
Basic knowledge of business accounting concepts.
•
Working experience with business tax requirements.
•
Thorough knowledge of Oracle Applications.
Prerequisites •
R12 Navigate Oracle Applications
•
R12 eBusiness Suite Essentials for Implementers
How This Course Is Organized
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R12 Oracle E-Business Tax Fundamentals Ed 3 is an instructor-led course featuring lecture and
hands-on exercises. Online demonstrations and written practice sessions reinforce the concepts and skills introduced.
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Related Publications Oracle Publications Title
Part Number
Oracle E-Business Tax Implementation Guide
B25960-01
Oracle E-Business Tax User Guide
B25959-01
Oracle E-Business Tax Reporting Guide
B31346-01
Oracle Inventory User's Guide
B31547-01
Oracle Financials for Europe User Guide
B31520-01
Oracle Financials for the Americas User Guide
B31525-01
Oracle Financials for Asia/Pacific User Guide
B31519-01
Additional Publications •
System release bulletins
•
Installation and user’s guides
•
Read-me files
•
International Oracle User’s Group (IOUG) articles
•
Oracle Magazine
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Typographic Conventions Typographic Conventions in Text Convention Bold italic Caps and lowercase Courier new, case sensitive (default is lowercase)
Initial cap
Element Glossary term (if there is a glossary) Buttons, check boxes, triggers, windows Code output, directory names, filenames, passwords, pathnames, URLs, user input, usernames
Arrow Brackets Commas
Graphics labels (unless the term is a proper noun) Emphasized words and phrases, titles of books and courses, variables Interface elements with long names that have only initial caps; lesson and chapter titles in crossreferences SQL column names, commands, functions, schemas, table names Menu paths Key names Key sequences
Plus signs
Key combinations
Italic
Quotation marks
Uppercase
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Example The algorithm inserts the new key. Click the Executable button. Select the Can’t Delete Card check box. Assign a When-Validate-Item trigger to the ORD block. Open the Master Schedule window. Code output: debug.set (‘I”, 300); Directory: bin (DOS), $FMHOME (UNIX) Filename: Locate the init.ora file. Password: User tiger as your password. Pathname: Open c:\my_docs\projects URL: Go to http://www.oracle.com User input: Enter 300 Username: Log on as scott Customer address (but Oracle Payables)
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Do not save changes to the database. For further information, see Oracle7 Server SQL Language Reference Manual. Enter
[email protected], where user_id is the name of the user. Select “Include a reusable module component” and click Finish.
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This subject is covered in Unit II, Lesson 3, “Working with Objects.”
Use the SELECT command to view information stored in the LAST_NAME column of the EMP table.
Select File > Save. Press [Enter]. Press and release keys one at a time: [Alternate], [F], [D] Press and hold these keys simultaneously: [Ctrl]+[Alt]+[Del]
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Typographic Conventions in Code Convention Caps and lowercase Lowercase
Element Oracle Forms triggers Column names, table names
Example When-Validate-Item
Passwords
DROP USER scott IDENTIFIED BY tiger; OG_ACTIVATE_LAYER (OG_GET_LAYER (‘prod_pie_layer’))
SELECT last_name FROM s_emp;
PL/SQL objects
Lowercase italic Uppercase
Syntax variables
CREATE ROLE role
SQL commands and SELECT userid FROM emp; functions
Typographic Conventions in Oracle Application Navigation Paths This course uses simplified navigation paths, such as the following example, to direct you through Oracle Applications. (N) Invoice > Entry > Invoice Batches Summary (M) Query > Find (B) Approve This simplified path translates to the following:
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1.
(N) From the Navigator window, select Invoice then Entry then Invoice Batches Summary.
2.
(M) From the menu, select Query then Find.
3.
(B) Click the Approve button.
Notations:
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(N) = Navigator (M) = Menu (T) = Tab (B) = Button
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(I) = Icon
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(H) = Hyperlink (ST) = Sub Tab Copyright © 2009, Oracle. All rights reserved.
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Typographical Conventions in Oracle Application Help System Paths This course uses a “navigation path” convention to represent actions you perform to find pertinent information in the Oracle Applications Help System. The following help navigation path, for example— (Help) General Ledger > Journals > Enter Journals —represents the following sequence of actions: 1.
In the navigation frame of the help system window, expand the General Ledger entry.
2.
Under the General Ledger entry, expand Journals.
3.
Under Journals, select Enter Journals.
4.
Review the Enter Journals topic that appears in the document frame of the help system window.
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Oracle E-Business Tax Overview
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Chapter 1
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Oracle E-Business Tax Overview
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Objectives
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Agenda
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E-Business Tax – New Product
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E-Business Tax – New Product Oracle E-Business Tax: • Is a new product in this release. • Provides the infrastructure for transaction tax knowledge management and delivery using a global system architecture that is configurable and scalable for adding country-specific tax content. • Is a single point solution for managing transaction-based tax. • Uniformly delivers tax services to all E-Business Suite business flows through one application interface. • Consists of a tax knowledge base, a variety of tax services that respond to specific tax events, a set of repositories (for tax content and tax recording) that allows customers to manage their local tax compliance needs in a proactive manner, as well as the ability to integrate with external tax content providers through a single integration point.
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Features Features of E-Business Tax include: • Date affectivity on your tax configuration. • Tax simulator which enables you to test your tax configuration. • Classify your tax exceptions: - Item. - Intended use. - Place of supply. • Look for commonalities: - Define a classification rule to apply to many suppliers. - Group geography facts using TCA Geography model.
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E-Business Tax – Benefits
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E-Business Tax – Benefits E-Business Tax delivers the following benefits: • Migration to Release 12 from Release 11i. • Minimize the need for detailed regional tax knowledge. • Simplified setup. • Minimize the risk associated with tax compliance. • Tax data modeling tool. • Automatic tax handling for: - Sales and use tax. - Compound tax and surcharges. - Deferred tax. - Multiple tax registrations.
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E-Business Tax Solutions for Business Needs
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E-Business Tax Solutions for Business Needs
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E-Business Tax Solutions for Business Needs
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E-Business Tax Solutions for Business Needs
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Integration Within Oracle E-Business Suite
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Integration Within Oracle E-Business Suite Oracle E-Business Tax provides transaction tax services for these products: • Purchasing • iProcurement • Receivables • Payables • Project Accounting • Trade Management • General Ledger Upstream/downstream products incorporating Oracle E-Business Tax are: • Consigned Inventory • Cash Management • Collections • Property Management • iSupplier Portal
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• Internet Expense • Service Contracts • Order Capture • Order Management • iStore • Inventory Management (also Intercompany) E-Business Tax does not provide tax services for these transactions: • Payables withholding taxes. • Latin American Receivables transactions. • India transaction taxes. You can continue to set up and maintain these taxes in the Oracle E-Business Suite using the functionality available within the corresponding application. Payables Integration E-Business Tax integration points with Payables include: • Product event classes: - Standard invoices. - Prepayment invoices. - Expense reports. • Tax calculation at line and distribution level. • Additional tax attributes. • Backward compatible (11i) tax calculation support: - Capture tax classification code (same behavior as 11i tax code). • Tax user interfaces (UIs) integrated for viewing and modifying tax lines. • Self assess tax handling. Purchasing Integration E-Business Tax integration points with Purchasing include: • Product event classes: - Requisition. - Release. - Purchase order and agreement. • Tax calculation at shipment line and distribution level. • Additional tax attributes - captured using common UIs. • Tax UIs integrated for viewing tax lines. • Backward compatible (11i) tax calculation support. Receivables Integration E-Business Tax integration points with Receivables include: • Product event classes: - Invoice. - Debit memo.
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- Credit memo. - Adjustment. • Additional tax attributes – captured using common UIs. • Backward compatible (11i) tax calculation support. • Tax UIs integrated for viewing and modifying tax lines. • Non recoverable adjustments handled by Receivables (same as in 11i). General Ledger Integration E-Business Tax integration points with General Ledger include: • Supports only backward compatible tax calculation. • Uses tax rate code for tax calculation. • Similar to release 11i, for a journal entry line only one tax line is calculated using tax rate defined for the selected tax rate code on the journal entry line.
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Agenda
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E-Business Tax Architecture
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E-Business Tax Architecture The E-Business Tax architecture consists of five tiers: 1. The Tax Definition tier is the tax data that you set up for each tax regime and tax that your company or institution is subject to (also called the regime-to-rate flow). A tax authority administers the taxes of a tax regime. Each tax within a tax regime comprises a certain number of tax statuses, tax rates (and recovery rates, if applicable), and tax jurisdictions. 2. The Configuration tier identifies the factors that participate in determining the tax on an individual transaction. These “taxability” factors are: a. Party - The parties involved in the transaction. This can include first party legal entities; ship from/ship to parties; bill from/bill to parties; tax registrations and registration statuses of each party; type or classification of a party. b. Product – The products transacted. This includes the designation of physical goods or services, and in some cases the type or classification of the good or service.
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c. Place - The places involved in the transaction, including the ship from and ship to locations, and the bill from and bill to locations. Other places—such as point of origin or point of acceptance—may also be factors, depending on the applicable tax regulations. d. Process - The kind of transaction that takes place. This can include: Procure to Pay transactions, such as purchases, prepayments, and requisitions; Order to Cash transactions, such as sales, credit memos, and debit memos; the type of sale or purchase, for example, retail goods, manufactured goods, intellectual property, resales. Each of these factors can become determining factors in the creation of tax rules. 3. The Rule Engine tier comprises of the set of tax rules that are used to determine and calculate tax on a transaction. You define tax rules for each combination of tax regime, tax and configuration owner. You create tax rules by translating the tax regulations of a tax authority into determining factors and tax conditions that the E-Business Tax tax rules engine uses to evaluate the applicability of a tax on each transaction line. Tax rules determine: the applicability of a tax; the place of supply and tax jurisdiction of the transaction; the tax registration; the tax status and tax rate; the recovery rate (if applicable); and the taxable basis and tax formula to use in calculation. 4. The Services tier manages the calculation of the tax amounts, and tax recovery amounts (if applicable). 5. The Tax Management tier maintains all of the tax information pertaining to each transaction, for use in tax reporting. These tiers are discussed in further details throughout this course. For complete details on setting up and using Oracle E-Business Tax, see: Oracle E-Business Tax Implementation Guide and Oracle E-Business Tax User Guide.
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E-Business Tax Home Page
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E-Business Tax Home Page The E-Business Tax home page lets you manage the navigation to each of the E-Business Suite applications and E-Business Tax components involved in setting up and maintaining your tax configuration. The Page Hierarchy Personalization user interface displays the entire layout of a configurable page in a hierarchy table, or HGRID. The Setup Tasks region uses the HGRID to organize the required and optional setup tasks that you need to complete your tax configuration. Certain setup tasks are conditionally required, depending upon the details of your tax configuration. You can navigate to each setup page or setup flow from the from the Setup Tasks region. Complete the setup tasks in the order indicated to create a tax configuration. Note. You must ensure that you complete all prerequisite implementation tasks in all applicable E-Business Suite applications before you use the Setup Tasks region.
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Agenda
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E-Business Tax Key Concepts – Tax Definition
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E-Business Tax Key Concepts – Tax Definition The basic tax configuration includes the regime-to-rate flow for each tax regime. Tax Authority A government entity that regulates tax law, administers, or audits one or more taxes. Tax Regime The set of tax regulations that determine the treatment of one or more taxes administered by a tax authority. Examples of a tax regime include: • A sales and use tax in the United States includes rules for state, county, and city sales and use taxes. • An excise tax regime in India includes rules for excise tax and additional excise tax. • A VAT tax regime in Argentina includes rules for standard VAT, additional VAT, and perception VAT. Tax A distinct charge imposed through a fiscal or tax authority. Examples of a tax include VAT for the United Kingdom and TVA for France.
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Tax Jurisdiction A geographical area where a tax is levied by a specific tax authority or where a specific tax rate applies. Examples of tax jurisdictions include: • The tax jurisdiction for VAT in Germany is the country of Germany. • The tax jurisdiction for a San Jose city tax is the City of San Jose, California. • The tax jurisdiction for Provincial Goods and Services tax (PST) in Canada is a particular Province, such as Ontario or British Columbia. Tax Status The taxable nature of a product or service in the context of a transaction for a tax type. Examples of a tax status include taxable standard rate, zero rated, exempt, and non-taxable. A tax status is similar to the concept of the tax type definition used within Payables and Receivables in releases prior to Release 12. Tax Rate The rate specified for a tax status in effect for a period of time. You can express the tax rate as a percentage or as a value per unit quantity. An example of a tax rate is 7.5% for a state sales and use tax. Recovery Rate The rate of input tax that is allowed to be recovered or offset against output tax. The recovery rate is applicable to VAT taxes. For example, organizations that only produce VAT applicable goods and services can use 100% recovery rate on most purchases. Organizations that produce VAT exempt goods and services, for example, financial institutions, have a 0% recovery rate. Operating Unit Tax Accounts The tax accounts that the system uses to post the tax amounts derived from your transactions. The tax accounts you define serve as default accounting information for taxes, tax rates, tax jurisdictions, and tax recovery rates.
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Key Concepts: Tax Authority
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Key Concepts: Tax Authority Tax Authority is a government entity that regulates tax law, administers, and/or audits one or more taxes. Some examples of tax authorities are: • Brazil - Secretaria da Fazenda Estadual (State Revenue Office) • Brazil - Secretaria da Receita Federal (Federal Revenue Office) • California, USA - California State Board of Equalization • Canada -Canadian Customs and Revenue Agency • France - Ministry of Economy, Finance and Industry • Germany - Federal Ministry of Finance • India - Central Board of Customs and Excise • Singapore -Inland Revenue Authority of Singapore • United Kingdom - HM Customs and Excise
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Key Concepts: Tax Regime
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Key Concepts: Tax Regime Tax Regime is the set of tax rules that determine the treatment of one or more taxes administered by a tax authority. Some examples of tax regimes are: • Brazil - RICMS -> ICMS Regulation • Brazil - RIPI -> IPI Regulation • California, USA - California Sales Tax • Canada - Canadian Goods and Services Tax • India - Excise Tax • Singapore - Singapore Goods and Services Tax • United Kingdom - UK VAT
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Key Concepts: Tax
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Key Concepts: Tax We can define Tax by a classification of a charge imposed by a government through a fiscal or tax authority. Some examples of taxes are: Tax Regime: Taxes: ------------------------------------------------ ---------------------------------------------------RICMS - Regulamento do ICMS ICMS, ICMS-ST (Tributary Substitution) RIPI - Regulamento do IPI IPI California Sales Tax State Sales Tax California Sales Tax District Sales tax Canadian Goods and Services Tax GST Canadian Sales Tax PST India Excise and Customs Excise Tax Singapore Goods and Services Tax GST UK VAT UK VAT
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Key Concepts: Tax Jurisdiction
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Key Concepts: Tax Jurisdiction Tax Jurisdiction is a geographic area where a tax is levied by a specific tax authority. Some examples of tax jurisdictions are: Tax Geographic Zone Jurisdiction ------------------------------------ -------------------------------ICMS São Paulo Sao Paulo ICMS IPI Brazil Brazil IPI State Sales Tax California (State) California State Sales Tax County Sales tax San Francisco (County) SFO County Sales Tax GST Canada Canada GST PST Ontario Ontario PST Excise Tax India India Excise Tax GST Singapore Singapore GST UK VAT UK UK VAT
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E-Business Tax Key Concepts – Configuration Components
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E-Business Tax Key Concepts – Configuration Components Along with the basic tax configuration data of the regime-to-rate flow for each tax regime and tax, your tax setup includes a number of other configuration components. Some of these components are mandatory, some are optional, and some are conditionally mandatory, depending on your tax requirements. Party Tax Profiles (mandatory) The party tax profile is the body of information that relates to a party’s transaction tax activities. Set up and maintain a party tax profile for each party involved in your taxable transactions. Parties can include: • Legal entities, legal establishments, and operating units in your organization that have a transaction tax requirement. • Your customers and suppliers and their locations (conditionally mandatory). • Tax authorities that administer tax regulations and rates. Customer Tax Exemptions (conditionally mandatory) A tax exemption applies either to a specific customer or to a combination of customer and specific product. You define tax exemptions as part of the third party tax profile of the
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applicable customers and customer sites. The details of tax exemptions are normally supported by tax exemption certificates from the relevant tax authority. Product Tax Exceptions (conditionally mandatory) Set up tax exceptions to define special rates for specific products, as determined by the tax authority. This lets you define general rules for a wide classification of products, while applying a separate rule to a subset of products. At transaction time, E-Business Tax determines whether the tax exception applies to the transaction line for the product and, if so, uses the applicable exception rate. Tax Registrations (mandatory) Set up tax registrations for your first party legal establishments and your third party customers/customer sites and suppliers/supplier sites. A tax registration contains information related to a party’s transaction tax obligation with a tax authority for a tax jurisdiction where it conducts business. E-Business Tax uses tax registrations in tax determination and tax reporting. For each tax that you create, you must define either a default tax registration or a tax rule for the rule type Determine Tax Registration. Configuration Owners (mandatory) The legal entities and operating units in your company are each subject to specific sets of tax regulations as designated by the tax authorities where you do business. The configuration owner determines, for each legal entity and operating unit, the ownership and use of each of your tax setups. E-Business Tax provides the concept of the Global Configuration Owner. The global configuration owner represents ownership of all of your tax setups at the company level. In most cases, legal entities and operating units can subscribe to the global configuration owner and therefore share the tax content that is maintained at the company level. Where necessary, an individual legal entity or operating unit can either override part of a tax setup or own its own tax content. Configuration Options (mandatory) The regime-to-rate flows that you create identify the taxes and the set of regulations that make up each tax requirement. Configuration options identify the relationships between the first parties in your company and tax regimes to reflect the tax requirements of each party. You use configuration options to associate legal entities and operating units with their applicable tax regimes. You must set up a configuration option for each combination of first party and tax regime, where the party is subject to any tax regulations belonging to a tax regime. Service Provider (optional) E-Business Tax lets you use the tax services of external service providers for tax calculation of US Sales and Use Tax on Receivables transactions. E-Business Tax provides transparent integration between the external provider tax service and Oracle Receivables. In the first release of E-Business Tax, the third-party service providers for US Sales and Use Tax calculation are Vertex Q-Series and Taxware Sales/Use Tax System. Fiscal Classifications (conditionally mandatory) E-Business Tax provides fiscal classifications to classify the parties, products, places, and processes involved in your tax transactions. You use fiscal classifications as determining factors in the creation of tax rules for tax determination. In some cases, fiscal classifications are
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necessary to identify specific tax regulations. In other cases, you can use fiscal classifications as a flexible tool for building a set of tax rules for a specific tax regime and tax. Country Default Controls (optional) Use country default controls to maintain tax setup information at the country level that you can default to the applicable E-Business Tax and legal entity pages. Country default controls let you designate transaction tax-related values in the countries where you do business. You can update any default values that you enter on the applicable pages.
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E-Business Tax Key Concepts – Tax Rules Engine
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E-Business Tax Key Concepts – Tax Rules Engine The tax rules engine uses your tax configuration setup and the details on the transaction to determine which taxes apply to the transaction and how to calculate the tax amount for each tax that applies to the transaction. You use the tax rule engine to create rules that reflect the regulations of a tax authority for the taxes of a particular tax regime. Tax Rules Define a tax rule for a combination of a tax and rule type. Each tax rule applies to one tax within a tax regime and belongs to one configuration owner. Tax rules let you create a tax determination model to reflect the tax regulations of different tax regimes and the tax requirements of your business. Tax Determination Process The tax determination process identifies the steps that the tax rules engine uses to determine which taxes apply to a transaction and the tax amounts to calculate. Each step of the tax determination process is represented by a rule type. You define one or more tax rules for each rule type that you need.
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The steps in the tax determination process are: • Determine Place of Supply. • Determine Tax Applicability. • Determine Tax Registration. • Determine Tax Status. • Determine Tax Rate. • Determine Taxable Basis. • Calculate Tax Amounts. • Determine Recovery Rate (for applicable taxes). Tax Rule Defaults You can assign default values to each rule type in the tax determination process. E-Business Tax uses the default values in tax determination when no rule provides a value that applies to the transaction. Tax Determining Factors A tax determining factor is an attribute that contributes to the outcome of a tax determination process. Tax determining factors include geographical locations, tax registration status, or one or more fiscal classifications. E-Business Tax provides the tax determining factors that you use to build tax rules. Tax Determining Factor Sets You use tax determining factor sets to group together related tax determining factors. You create tax determining factor sets to reflect the kinds of determining factors that go into the determination of a particular tax. For example, geographical location is often a determining factor in assessing VAT, while a specific product type may be a determining factor in assessing an excise duty. You must associate one tax determining factor set with each tax rule. Tax Condition Sets A tax condition is a determining factor plus the operator and value that you define for the determining factor in order to specify a particular result. For example, you may create a tax condition using the geography determining factor to identify sales within a state by specifying that the Ship From state equals the Ship To state. A tax condition set groups together all of the tax conditions that constitute a particular tax rule. In this sense, the tax condition set is the logic of the tax rule. It specifies the factors to consider, and the resulting value that must exist for each factor, in order for the result of the tax rule to be true. Tax Rules Engine Components The components of the tax rules engine work together in the following way: • Each Tax Rule applies to one tax within a tax regime and belongs to one configuration owner. You define a tax rule for a combination of a tax and a Rule Type. • The Determining Factor Set contains the list of determining factors to consider in evaluating a tax rule. • You create Tax Condition Sets for the tax rule, using the determining factors of the determining factor set assigned to the tax rule. Each tax condition of the tax condition set contains a determining factor, an operator, and a value.
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• Each tax condition set is assigned a priority within the tax rule. Each tax rule is assigned a priority within a rule type. • At transaction time, the rule engine examines each tax condition until it finds a result that makes the rule true and applicable to the transaction. If no tax condition is found, then the tax rule does not apply to the transaction. The rule engine looks to the tax rule with the next highest priority and repeats the process until a tax rule is found. If no tax rule is found that evaluates as true, then either the tax rule uses the default value (if applicable) or the tax does not apply to the transaction.
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Tax Determination Management
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Tax Determination Management Tax Determination Management is responsible for calculating the tax on transactions according to the hierarchy of rule types in the tax determination process. The tax determination process functions in this sequence: • Determine Place of Supply: Determines the location where a transaction is considered to have taken place for a specific tax. • Determine Tax Applicability: Determines the taxes that apply to a given transaction. • Determine Tax Registration: Determines the tax registration status for the applicable taxes of the parties involved in the transaction. • Determine Tax Status: Determines the tax status of each applicable tax to use on the transaction. • Determine Tax Rate: Determines the tax rate for each applicable tax to use on the transaction. • Determine Taxable Basis: Determines the amount to use upon which to calculate the tax rate.
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• Calculate Tax Amounts: Calculates the tax and displays the calculation results. • Determine Recovery Rate: Where applicable, determines the recovery rate to apply to each applicable tax on the transaction. Determine Place of Supply For example, in Europe the default for place of supply of goods is often Ship From. In the United States, the default for place of supply of goods is often Ship To. Determine Tax Applicability You can include or exclude specific taxes if there are conditions which control when the tax is applicable. Determine Tax Registration Normally, the default is Bill From Party, but there are cases, such as reverse charge or self assessment, where the default is Bill To Party for specific transactions. Determine Tax Status and Determine Tax Rate For example, you can apply a zero rate to the sale of children’s clothes for United Kingdom VAT. The system also looks for customer-specific tax exemptions and general exceptions that may apply. Determine Taxable Basis In many cases, the taxable basis is the line amount, but this may or may not include certain types of discounts. For example, in Brazil, there may be reductions in the taxable basis that apply. Calculate Tax Amounts The normal calculation is taxable basis * rate. Defaults for both Taxable Basis and Tax Calculation Formulae are delivered as part of seeded data. Determine Recovery Rate For example, for manufacturing companies, VAT on regular purchases used for company business is 100% recoverable. However, if you are a financial institution which only makes VAT exempt sales, you are not allowed to recover any taxes and the recovery rate would therefore be 0% on all purchases.
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E-Business Tax Processing
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E-Business Tax Processing E-Business Tax, making use of its tax content repository, follows a series of tax determination steps. Most of these steps behave according to their underlying tax rules. Once all rule conditions and results are evaluated, the system calculates taxes and stores them in the tax lines repository. The tax line repository has all necessary information needed for tax reporting. You can extract tax report information from the repository. You can display this data in several formats such as PDF, HTML and RTF. Oracle eBusiness Tax provides a single solution for tax for all Oracle eBusiness Suite applications.
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Receivables Transaction Example
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Receivables Transaction Example This Receivables transaction example shows how E-Business Tax answers some basic business questions during its Tax Determination process. • Tax regimes are identified based on the countries of the parties involved. • A default value or a Place of Supply rule indicates the place of supply. This example illustrates the Tax Determination process. See: Oracle E-Business Tax: Part 1: Setting Up Tax Rules for a detailed discussion on the Tax Determination process.
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Receivables Transaction Example
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Receivables Transaction Example A default party type value or a tax registration rule determines from which party (first party or third party) to evaluate tax registration status. The party classification is derived from the parties available in the transaction (first and third parties). That classification can be compared to the ones used as a tax determining factor in any rule type.
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Receivables Transaction Example
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Receivables Transaction Example In the Transaction Lines window, other types of information are relevant for tax calculation: • Quantity times Unit Price is the default seeded Taxable Basis formula, but other formulas can be defined. • The item available in a given transaction line can potentially have one or more product classifications, and these classifications can be used as a tax determining factor in any rule type. The item itself or its classifications can also be used as part of Tax Exceptions definition.
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Receivables Transaction Example
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Receivables Transaction Example In the Detail Tax Lines window, the Tax Rate times Taxable Basis is the default seeded Tax Amount formula, but other formulas can be defined.
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Summary
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Part 1: Oracle E-Business Tax Basic Tax Configuration
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Part 1: Oracle E-Business Tax Basic Tax Configuration
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Objectives
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E-Business Tax Architecture
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E-Business Tax Architecture The Tax Definition tier of the E-Business Tax Architecture comprises the tax data that you set up for each tax regime and tax that your company or institution is subject to. The tax authority designates the regulations and rates that apply to the tax regime. The main components of the regime-to-rate flow provide the basic tax configuration for the tax regime and the taxes, rates, and jurisdictions that it contains. These main components are: • Tax regime • Tax • Tax Status • Tax Rate • Tax Jurisdiction This module discusses these components in detail.
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E-Business Tax Home Page – External Dependencies & Tax Configuration
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E-Business Tax Configuration Flow – External Dependencies
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E-Business Tax Configuration Flow – External Dependencies Responsibility: E-Business Tax Manager (N) Tax Managers > Tax Managers > Home Complete the setup tasks in the E-Business Suite applications that E-Business Tax uses for the Regime-to-Rate tax-related processes. These setup tasks include: • Legal Entities and Establishments • Reporting and Collecting Tax Authorities • Lookup Codes • Party Class Categories and Codes
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E-Business Tax Configuration Flow – Tax Configuration
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E-Business Tax Configuration Flow – Tax Configuration Responsibility: E-Business Tax Manager (N) Tax Managers > Tax Managers > Home Tax Configuration Complete the E-Business Tax setup tasks to create a basic tax configuration for each of your tax regimes. The tax configuration setup tasks include: • Tax Authority Party Tax Profiles • First Party Legal Entity Party Tax Profiles • Tax Regimes • Taxes • Tax Status • Tax Jurisdictions • Tax Rates
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Tax Users
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Tax Users Responsibility: System Administrator (N) System Administrator > Security : User > Define (N) System Administrator > Security : Responsibility > Define Prior to creating a basic tax configuration, you need to set up your tax users and assign each user a tax-related responsibility. E-Business Tax provides the following tax responsibilities: • Tax Manager • Tax Administrator • Oracle Tax Simulator The Tax Manager responsibility is the responsibility with the highest level of access to EBusiness Tax functionality. Assign the Tax Administrator responsibility to users who provide E-Business Tax technical setup and support services. Assign the Oracle Tax Simulator responsibility to users who test tax setups with the Oracle Tax Simulator. You can set up additional responsibilities according to your requirements.
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Profile Option Values
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Profile Option Values Responsibility: System Administrator (N) System Administrator > Profile > System An optional implementation prerequisite task is to set values for E-Business Tax profile options to control the availability of certain tax options and to maintain your Vertex or Taxware installation. You can specify default values for E-Business Tax profile options. Tax profile options include: • The eBTax: Allow Ad Hoc Tax Changes profile option controls which users can make ad hoc tax changes on the transaction line, such as selecting a different tax status or tax rate. The changes that a user can make also depend upon the details of the applicable tax setups. • The eBTax: Allow Manual Tax Lines profile option controls which users can enter manual tax lines on the transaction for the tax setups that allow this update.
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• The eBTax: Allow Override of Customer Exemptions profile option controls the display of the Tax Handling field on the transaction line. You use the Tax Handling field to apply and update customer tax exemptions to transactions. • The eBTax: Allow Override of Tax Classification Code profile option controls whether users can update the tax classification code that is defaulted to the transaction line. • The eBTax: Allow Override of Tax Recovery Rate profile option controls which users can enter or update the calculated tax recovery rates on the transaction for the tax recovery rate setups that allow this update. • The eBTax: Inventory Item for Freight profile option lets Order Management use an Inventory item defined as Freight on Receivables transaction lines. You can use the freight Inventory item to control the tax rate on taxable freight amounts. • The eBTax: Invoice Freight as Revenue profile option controls whether to consider freight amounts as taxable line items (Oracle Order Management only) . • The eBTax: Read/Write Access to GCO Data profile option controls whether users can set up tax configuration data for the global configuration owner. • The eBTax Taxware: Service Indicator profile option indicates whether taxes are calculated on service or a rental transactions. • The eBTax Taxware: Tax Selection profile option indicates whether Taxware uses jurisdiction-level jurisdiction codes to calculate taxes. • The eBTax Taxware: Use Nexpro profile option indicates whether Taxware uses the Nexpro functionality. If you enable this option, additional configuration is required on the Taxware side of the integration to achieve nexus-based taxation. • The eBTax Vertex: Case Sensitive profile option enables case-sensitive searches of Vertex tax calculation data. The default value is Yes.
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Legal Entity
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Legal Entity Responsibility: Legal Entity Manager (N) Legal Entity Manager > Legal Entities > (B) Create Legal Entity Setting up the legal entities that represent your company is a mandatory implementation prerequisite task. Use the Legal Entity Configurator to set up the following entities: • First Party Legal Entity • First Party Legal Establishment • Legal Authorities When you set up a legal entity or establishment, you can also set up party tax profile details, including general information, rounding rule, and tax registrations. Steps include: • Setting up the legal entities that represent your company. • Setting up a legal establishment record for each office, service center, warehouse and any other location within the company that requires a registration with a tax authority for one or more taxes. You set up legal establishments under a parent legal entity.
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• Set up associations between each legal establishment and a business entity. E-Business Tax uses associated business entities to derive the correct legal establishment for the transaction. • Setting up a legal authority record for each tax authority that administers taxes in a tax regime where you do business.
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Lookup Codes
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Lookup Codes Responsibility: System Administration (N) System Administration > System Administration > Lookup Types In addition to the other implementation prerequisite tasks, you can maintain existing lookup codes and define additional lookup codes for E-Business Tax lookup types using the Application Object Library Lookups window. Tax lookup types include: • ZX_INPUT_CLASSIFICATIONS • ZX_OUTPUT_CLASSICATIONS • ZX_WEB_EXP_TAX_CLASSIFICATIONS • ZX_EXEMPTION_REASON_CODE • ZX_JEBE_VAT_TRANS_TYPE • ZX_REGISTRATIONS_REASON • ZX_REGISTRATIONS_TYPE • ZX_REGISTRATIONS_STATUS • ZX_TAX_TYPE_CATEGORY
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Seeded Lookup Types E-Business Tax provides these seeded ZX_REGISTRATIONS_TYPE lookup types: CNPJ; CPF; CUIL; CUIT; DNI; NIT; OTHERS; VAT. The tax registration types CPF, CNPJ, and OTHERS are used in tax registration number validation for Brazil. All other seeded tax registration types, and the tax registration types that you define, are for tax reporting purposes only. E-Business Tax provides these seeded ZX_REGISTRATIONS_STATUS lookup types: Agent, Registered, and Not Registered. The ZX_TAX_TYPE_CATEGORY lookup type contained these seeded tax types: Sales, VAT, Excise, Customs Duty, and Environmental. 11i Migrated Data Release 11i tax codes and tax groups migrate to E-Business Tax as tax classification codes. Oracle Payables and Purchasing tax codes migrate as tax classification codes under ZX_INPUT_CLASSIFICATIONS. Oracle Receivables and Projects tax codes migrate as tax classification codes under ZX_OUTPUT_CLASSICATIONS.
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Regime-to-Rate Flow for US Sales Tax
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Regime-to-Rate Flow for US Sales Tax An example of the US Sales Tax illustrates the Regime-to-Rate setup flow. You can define: • The tax regime as US Sales Tax. • Taxes within the tax regime: State Sales Tax, County Sales Tax, City Sales Tax. • One or more tax jurisdictions for each tax. For example, you can define a tax jurisdiction for each county in California. • A default Standard tax status for each tax. • A tax rate for each tax status or tax jurisdiction. You identify the effective period for each tax rate. When the tax authority changes the rate, you can apply an end date to the last period record and create a new record. • If multiple taxes apply to a transaction line, the system adds the tax rates and applies the percentage to the transaction. For example, the sales tax rate for California State Sales Tax is 7.25%, and the rate for San Mateo County Sales Tax is 1%. In San Mateo, California, the system applies a total of 8.25% to transactions where both state and county sales tax apply. • A tax accounts for each tax rate.
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Note: The above data examples were introduced just to illustrate the business flow and do not represent the complete tax setup for the tax regime. Defining Tax Regimes, Taxes and Tax Jurisdictions E-Business Tax defines the term tax as a distinct charge imposed by a tax or legal authority with its own rates and with the requirement to appear separately on invoices and/or in tax reports. In terms of your actual tax configuration, E-Business Tax applies a still narrower definition to the term tax, and introduces the more inclusive term tax regime. The incidence of a tax on a specific geographical area is called a tax jurisdiction. A tax jurisdiction is limited by a geographical boundary that encloses a contiguous political or administrative area, most commonly the borders of a country or part of a country. Defining Tax Statuses and Tax Rates For each tax, a tax authority can specify one or more tax rates. In addition, tax authorities usually revise their tax rates periodically. Along with the change in tax rates, tax authorities typically divide the scope of what is taxed into categories, each of which carries a separate tax rate. The tax status is used to define and maintain these categories. You define tax statuses under the definition of a tax. For each of the tax statuses that you define, you define one or more tax rates. For each tax rate, you define one or more rate periods, which contain the actual percentage rates, based upon the date ranges of their applicability. For each tax rate that you define, you can also specify a tax jurisdiction, in which case the rate is only used if that tax jurisdiction applies to the transaction.
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Regime-to-Rate Flow for UK VAT
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Regime-to-Rate Flow for UK VAT An example of UK VAT also illustrates the Regime-to-Rate setup flow. You can define: • The tax regime as UK VAT. • A single tax as UK VAT. • A single tax jurisdiction for the United Kingdom (UK VAT). • Multiple tax statuses for UK VAT, including Standard, Reduced, Zero Rated, and Exempt. • A tax rate for each tax status. For example, 17.5% is the tax rate for the Standard tax status; 15% is the rate for Inter-EU transactions; 5% is the rate for Reduced tax status; and 0% is the rate applicable for Zero Rated and Exempt tax statuses. Note: The above data examples were introduced just to illustrate the business flow and do not represent the complete tax setup for the country. How you define your Regime-to-Rate configuration depends on your tax requirements. The flow of the configuration steps are essentially the same for defining a US Sales Tax and UK VAT, with the exception of VAT recovery rates.
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Defining Recovery Types and Recovery Rates In VAT tax regimes, a tax that is paid by a registered establishment can claim back all or part of taxes due from the tax authority. In E-Business Tax this is called tax recovery. There are usually many regulations surrounding the details of tax recovery. Typically, only a portion of the tax amount paid is recoverable. Tax authorities designate the tax recovery rates that indicate the extent of recovery for a specific tax.
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Agenda
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Tax Regimes
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Tax Regimes Responsibility: E-Business Tax Manager (N) Tax Managers > Tax Configuration > Tax Regime > (B) Create Use the Create Tax Regime page to set up tax regimes for the taxes in each country and geographic region where you do business and where a separate tax applies. A tax regime associates a common set of default information, regulations, fiscal classifications, and registrations to one or more taxes with the same tax requirement. The tax regime provides these functions: • Groups similar taxes together. • Designates the geography within which taxes apply. • Defaults the settings and values you define to each tax in the regime. • Contributes to the definition of configuration options and third party service subscriptions. • Optionally provides a single registration for all taxes associated with the regime. • Defines the use of fiscal classifications.
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Tax Regime Setup
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Tax Regime Setup Before you can set up tax regimes, you may need to complete one or more of these tasks: Prerequisites Mandatory prerequisite steps include: • Set up legal entities and operating units – Set up legal entities and operating units for all divisions of your company that will act as configuration owners of tax data. • Enable currencies – Enable the currencies that will be used in tax calculation. • Design TCA Geography Hierarchy Structures (if required by the country) – Ensure that the TCA geography hierarchy contains a representation of each geography where a tax regime applies. • Set up party tax profiles – Set up a party tax profile for each legal entity and operating unit that will act as a configuration owner.
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Optional prerequisite steps include: • Set up tax zones – Set up tax zones for geographical regions governed by a tax regime that do not conform to a standard geographical region. • Set up exchange rate types – Set up exchange rate types, if necessary, to convert transaction currencies to tax currencies. • Set up tax authorities – Set up a party tax profile for each tax authority. You may want to do this if you need to enter tax authorities in different tax configuration records.
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Taxes
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Taxes Responsibility: E-Business Tax Manager (N) Tax Managers > Tax Configuration > Taxes > (B) Create Use the Create Tax page to set up details of the taxes within a tax regime. Each separate tax in a tax regime includes: • Configuration owner, which determines the ownership and use of a tax and its associated setup. • Default values from the tax regime. • Values specific to the tax, such as geography, currency, and the display of tax amounts. • Settings for tax accounts, tax exemptions, tax exceptions (where applicable). • Settings for tax recovery, where applicable. E-Business Tax defaults tax information from the tax regime to each tax that you create under a regime. You can modify this information at the tax level according to your needs, as well as add additional defaults and overrides.
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Tax Setup
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Tax Setup Before you can set up taxes, you may need to complete one or more prerequisite tasks. Prerequisites You must set up a tax regime prior to setting up a tax. Optional prerequisite steps include: • Set up ledgers and accounts – Set up ledgers and accounts for your tax accounts. • Set up tax reporting codes – Set up tax reporting codes to report on specific taxes. • Set up tax types – Set up lookups for tax types.
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Agenda
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Tax Statuses
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Tax Statuses Responsibility: E-Business Tax Manager (N) Tax Managers > Tax Configuration > Tax Statuses > (B) Create Use the Create Tax Status page to set up the tax statuses that you need for each tax that you create for a combination of tax regime, tax, and configuration owner. You define a tax status under a tax and a configuration owner, and define all applicable tax rates and their effective periods under the tax status. The tax status controls the defaulting of values to its tax rates.
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Tax Status Setup
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Tax Status Setup Before you can set up tax Statuses, you may need to complete one or more prerequisite tasks. Prerequisites You must set up a tax prior to setting up a tax status. Optionally, you need to set up tax reporting codes to report on specific tax statuses.
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Agenda
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Tax Rates
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Tax Rates Responsibility: E-Business Tax Manager (N) Tax Managers > Tax Configuration > Tax Rates > (B) Create Use the Create Tax Rate and Tax Rate Details pages to set up tax rates for your tax statuses and tax jurisdictions. For tax statuses, set up a tax rate record for each applicable tax rate that a tax status identifies. For tax jurisdictions, set up tax rate records to identify the tax rate variations for a specific tax within different tax jurisdictions. For example, a city sales tax for a state or province may contain separate city tax jurisdictions, each with a specific rate for the same tax. You can also define tax recovery rates to claim full or partial recovery of taxes paid.
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Tax Rate Setup
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Tax Rate Setup Before you can set up tax rates, you may need to complete one or more prerequisite tasks. Prerequisites Mandatory prerequisite steps include: • Set up tax statuses. • Set up units of measure (for quantity rate types). Optional prerequisite steps include: • Set up tax transaction type lookup codes - Set up lookups for transaction types to define local tax authority codes both for reporting purposes and for controlling which rates appear on an invoice. • Set up an offset tax - If a tax has an associated offset tax, you must enter the offset rate code in the applicable tax rate record. At transaction time, this rate is used as the offset rate. • Set up tax recovery rates and recovery types – Set up the recovery rates, tax recovery types, and tax recovery rules that correspond to the tax rate record, if applicable for the tax.
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• Set up tax jurisdictions – Set up tax jurisdictions if you are setting up tax rates for a specific tax jurisdiction. • Set up tax reporting types – Set up tax reporting types to report on specific tax rates.
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Agenda
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Tax Jurisdictions
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Tax Jurisdictions Responsibility: E-Business Tax Manager (N) Tax Managers > Tax Configuration > Tax Jurisdictions > (B) Create Use the Tax Jurisdiction page to set up a geographic region or tax zone where a specific tax authority levies a tax. At transaction time E-Business Tax derives the jurisdiction or jurisdictions that apply to a transaction line based on the place of supply. E-Business Tax either uses a default place of supply or derives a place of supply based on tax rules.
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Tax Jurisdiction Setup
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Tax Jurisdiction Setup Before you can set up tax jurisdictions, you may need to complete one or more prerequisite tasks. Prerequisites Mandatory prerequisite steps include: • Set up taxes. • Set up tax statuses (for jurisdiction-based rates). • Verify or set up the TCA master geography (for jurisdictions below the country level). An optional prerequisite step includes setting up applicable tax zones that correspond to a tax jurisdiction.
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Summary
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Part 2: Oracle E-Business Tax Basic Tax Configuration
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Chapter 3
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Part 2: Oracle E-Business Tax Basic Tax Configuration Chapter 3 - Page 1
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Part 2: Oracle E-Business Tax Basic Tax Configuration
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Objectives
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Part 2: Oracle E-Business Tax Basic Tax Configuration Chapter 3 - Page 3
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Agenda
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E-Business Tax Architecture
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E-Business Tax Architecture The Tax Definition tier of the E-Business Tax Architecture comprises the tax data that you set up for each tax regime and tax that your company or institution is subject to. Along with setting up records for the core regime-to-rate flow for each tax regime and tax, there are additional records belonging to the Tax Definition tier. The use of these records is optional or conditionally mandatory, depending on the details of your configuration and the tax regulations of your tax regimes. These additional records are: • Tax zones. • Tax accounts. • Tax reporting types. • Mass creation of tax jurisdictions. • Tax recovery rates. This module discusses these additional records in detail.
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Part 2: Oracle E-Business Tax Basic Tax Configuration Chapter 3 - Page 5
E-Business Tax Home Page – External Dependencies & Tax Configuration
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Basic Tax Configuration – Additional Setup Options
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Basic Tax Configuration – Additional Setup Options Depending on you tax requirements, you can define additional records as part of your basic tax configuration setup. You use various pages to set up these additional options. You navigate to these pages from within another page or to the page directly from the E-Business Tax homepage. For example, you can access the Tax Accounts page from the Tax page to set up tax account defaults for the tax, or from the Tax Jurisdiction page to set up tax account defaults for the tax jurisdiction. You navigate directly to the Tax Recovery Rates page from the E-Business Tax homepage. Tax Zones Set up tax zones to represent geographical regions from the point of view of a tax requirement. Tax zones let you group together regions otherwise separated by geographical or political boundaries where the tax treatment is identical throughout these regions. Tax Accounts Set up default tax accounts for the taxes in a tax regime to post the tax amounts derived from your transactions. The tax accounts you define serve as default accounting information for taxes, tax rates, tax jurisdictions, and tax recovery rates.
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Tax Reporting Types Use tax reporting types to capture additional tax information on transactions for your tax reports. You can use tax reporting types for your internal reporting needs and to fulfill countryspecific reporting requirements. Mass Create Tax Jurisdictions You can create multiple tax jurisdictions at once using the mass create functionality, for taxes that relate to specific Trading Community Architecture (TCA) geographic hierarchies. EBusiness Tax uses the parent geography type or tax zone associated with the tax regime and tax to create a tax jurisdiction for each record within the parent geography or tax zone type. Tax Recovery Rates Set up tax recovery rate codes for the recovery types identified on the taxes within a tax regime. A tax recovery rate code identifies the percentage of recovery designated by the tax authority for a specific transaction.
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Agenda
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Tax Zones
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Tax Zones Responsibility: E-Business Tax Manager (N) Tax Managers > Advanced Setup Options > Tax Zone Types > (B) Create Use the Create Tax Zone Type and Create Tax Zone pages to define tax zones. Tax zones group existing geographical regions that share the same tax requirement. The use of tax zones is optional and depends on your overall tax setup planning. For example, if a separate economic community exists in part of a country only, you can set up a tax zone and corresponding tax regime for the applicable geographic area. The tax zone setup makes use of the Trading Community Architecture (TCA) master reference geography hierarchy. The master reference geography hierarchy identifies the hierarchical structure of a country. For example, the geography hierarchy in the United States is: • Country • State • County • City • Postal Code
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The master reference geography hierarchy also identifies which levels are mandatory for the tax zone. A tax zone type references a specific part of a master reference geography hierarchy. You create tax zones within a tax zone type to uniquely identify tax requirements within the area defined by the tax zone type.
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TCA Geography Hierarchy
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TCA Geography Hierarchy Responsibility: Trading Community Architecture (N) Trading Community > Administration > Geography Hierarchy Set up and maintain the TCA geography hierarchy for each country where you have a tax requirement. Use the TCA geography hierarchy in these cases: • Taxes that are levied at a level lower than the country level, for example, state or provincial taxes. • Tax characteristics, such as the tax rate, vary at a lower level than the country level.
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Tax Zone Setup
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Tax Zone Setup Prerequisites Before you can set up tax zones, verify that the TCA master geography contains the geographic information that you need. TCA provides seeded geography types for many countries. If necessary, you can update an existing geography type, or set up new a geography type in accordance with the structure of a country that you need. For example, for Canada, Provinces are validated as part of the Geography Hierarchy whenever a tax address is created or maintained.
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Agenda
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Define Tax Accounts
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Define Tax Accounts Responsibility: E-Business Tax Manager (N) Tax Managers > Tax Configuration > Taxes > (B) Tax Accounts (N) Tax Managers > Tax Configuration > Tax Rates > (B) Tax Accounts (N) Tax Managers > Tax Configuration > Tax Jurisdictions > (B) Tax Accounts Use the Create Tax Accounts page to set up tax accounts under a primary ledger and operating unit. The system posts calculated tax amounts to the specified operating unit accounts at transaction time. The actual account information that the system uses depends upon subledger accounting rules. You can define tax accounts for: • Taxes • Tax rates • Tax jurisdictions Note: All tax accounts defined at the tax level default to the tax rates level for the same tax and operating unit. You can update these default tax accounts in the tax rate setup.
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See: Setting Up Tax Accounts, Oracle E-Business Tax User Guide for a description of each account.
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Tax Account Setup
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Tax Account Setup Before you can set up tax accounts, you may need to complete one or more prerequisite tasks. Prerequisites Mandatory prerequisite steps include: • Set up primary ledgers and subledgers. • Set up operating units and assign them to primary ledgers. • Set up taxes. You must set up and maintain accounting information before you can set up tax accounts for the applicable primary ledgers and operating units. Optional prerequisite steps include setting up records for the default accounts that you want to create: • Set up tax rates. • Set up tax recovery rates. • Set up tax jurisdictions.
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Accounts and Accounting Information Responsibility: General Ledger (N) General Ledger > Setup : Financials : Accounting Setup Manager > Accounting Setups (N) General Ledger > Setup : Accounts > Chart of Accounts Mapping Review and complete these accounting setup tasks according to your requirements: • Set up the chart of accounts, accounting calendar and currency for the primary ledger of your legal entities and, if applicable, any secondary ledgers. • Define balancing segment values for the legal entities involved in tax transactions. • Create an accounting setup for each legal entity with the ledger or ledgers that you created, and assign the applicable operating units to the primary ledger. • Complete the details of the accounting setups.
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Tax Reporting Types
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Tax Reporting Types Responsibility: E-Business Tax Manager (N) Tax Managers > Defaults and Controls > Tax Reporting Types > (B) Create Use the Create Tax Reporting Type page to define tax reporting types. Tax reporting types capture additional tax information on transactions. A tax reporting type identifies a specific unit of information, such as a date or a text comment, to associate with a specific tax usage, such as a fiscal classification or tax jurisdiction. You can also create a group of tax reporting codes for a tax reporting type, to provide additional granularity for tax reporting. You can add tax reporting codes to a tax reporting type at any time.
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Tax Reporting Type Setup
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Tax Reporting Type Setup Before you can set up tax reporting types, you may need to complete one or more prerequisite tasks. Prerequisites Conditionally mandatory prerequisite steps include: • Set up tax regimes (for regime-specific reporting). • Set up taxes (for tax-specific reporting). If you associate a tax regime or tax with a tax reporting type, then this tax reporting type and its associated tax reporting codes are only available to the tax regime or tax. You must associate a tax regime with tax reporting types except for tax reporting types associated with fiscal classifications, tax registrations, and party tax profiles.
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Agenda
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Mass Create Tax Jurisdictions
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Mass Create Tax Jurisdictions Responsibility: E-Business Tax Manager (N) Tax Managers > Tax Configuration > Tax Jurisdictions > (B) Mass Create Use the Mass Create Tax Jurisdictions page to create a tax jurisdiction for each record within a parent geography or tax zone type. Use the Update Mass Created Tax Jurisdictions page to review the jurisdictions created and to modify information for individual tax jurisdictions. For example, you can create a county jurisdiction for every county in the parent geography type of State and parent geography name of California.
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Mass Create Tax Jurisdictions Setup
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Mass Create Tax Jurisdictions Setup Before you can mass create tax jurisdictions, you may need to complete one or more prerequisite tasks. Prerequisites Mandatory prerequisite steps include: • Set up taxes. • Set the Allow Mass Creation of Jurisdictions option for the tax – You must set this option in the tax record in order to set up mass jurisdictions for a tax jurisdiction related to this tax. • Set up tax statuses and tax rates (for jurisdiction-based rates) – You must set up tax rate records if you are using jurisdiction-based rates for the jurisdictions that you will create in mass. • Enable multiple jurisdictions for the tax – You set the Allow Multiple Jurisdictions option in the tax record to be able to define tax jurisdictions for this tax in more than one geographic region. • Set up TCA master geography for the applicable parent geography and child records.
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An optional prerequisite step includes the set up of tax zones, if the tax jurisdictions relate to a specific tax zone.
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Tax Recovery Rates
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Tax Recovery Rates Responsibility: E-Business Tax Manager (N) Tax Managers > Tax Configuration > Tax Recovery Rates > (B) Create Use the Create Tax Recovery Rate page to set up recovery rates for a tax. You must set up tax recovery rates for all of your recoverable taxes. A recoverable tax is a tax that allows full or partial recovery of taxes paid on purchases, either as a recoverable payment or as an offset against taxes owed. For example, most VAT-type taxes allow for full recovery of taxes paid on goods and services that relate to taxable business supplies. In cases where an organization purchases both taxable and exempt supplies, the tax authority can designate a partial recovery rate to reflect the combination of taxable and exempt statuses.
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Summary
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Managing Party Tax Profiles Chapter 4
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Managing Party Tax Profiles
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Managing Party Tax Profiles
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Objectives
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E-Business Tax Architecture
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E-Business Tax Architecture The Configuration tier identifies the factors that participate in determining the tax on an individual transaction. These “taxability” factors are: • Party - The parties involved in the transaction. • Product – The products transacted. • Place - The places involved in the transaction, including the ship from and ship to • locations, and the bill from and bill to locations. • Process - The kind of transaction that takes place. This module discusses the associations between the parties of a transaction and party-related variables, such as party fiscal classifications, tax registrations, and tax exemptions. Note: The setup of party fiscal classifications is discussed in detail in a subsequent module, Oracle E-Business Tax: Fiscal Classifications.
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E-Business Tax Home Page – Party Tax Profiles
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Using Party Tax Profiles
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Using Party Tax Profiles The Party Tax Profile is the central repository of tax-related information for all parties that participate in your tax-related transactions. This includes first party legal entities and establishments, operating units, tax authorities, and third party customers and suppliers. Party Tax Profile A party tax profile record is the body of information that relates to a party’s transaction tax activities. A tax profile can include tax registrations, tax exemptions, configuration options, main and default information, party fiscal classifications, tax reporting codes, and account tax details (for migrated data). You must set up a tax profile for each first and third party involved in your tax transactions. Party Tax Profile can be accessed uniformly within standard party flows or directly from the EBusiness Tax menu. Party Tax Profile and Tax Registration components are supported in three flows: • Legal entity/establishment flows. • Supplier/supplier site flows. • Customer and customer account sites flows.
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Configuration Options Configuration options identify the relationship between each first party legal entity and operating unit in your company and the tax regimes that each first party and legal entity is subject to. You must set up a configuration option for each combination of configuration owner (first party legal entity/operating unit) and tax regime, where the party or operating unit is subject to any tax regulations belonging to a tax regime. The configuration options determine which configuration owners can own and maintain the tax content of specific tax regimes. Tax Registrations A tax registration contains information related to a party’s transaction tax obligation with a tax authority for a tax jurisdiction where it conducts business. Set up tax registrations for your first party legal establishments and your third party customers/customer sites and suppliers/supplier sites. Customer Tax Exemptions A customer tax exemption is a discount/surcharge or replacement percentage from the base tax rate that reduces the applicable tax on a Receivables transaction. Set up tax exemptions for your third party customers and customer sites to reflect the eligibility of customers for tax exemptions according to the tax authority. Party Fiscal Classifications A party fiscal classification determines, for example, when taxes apply to a party, how much tax applies, and what percentage of the tax is recoverable. These tax requirements are usually defined by the tax authority for the taxes of a given tax regime. Set up party fiscal classifications for your first parties, customers and customer sites, and suppliers and supplier sites. Note: Party fiscal classifications are discussed in further detail in Oracle E-Business Tax: Fiscal Classifications.
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Party Tax Profile
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Party Tax Profile Responsibility: E-Business Tax Manager (N) Tax Managers > Parties > Party Tax Profiles Depending on the party type of the tax profile that you are creating, the system displays various tabs on the Create Party Tax Profile page. Main Information Enter main information for all party types, according to your requirements. This information controls certain default values and settings on invoices associated with the party. Note: You can set some of these values at the tax registration level. If you do, then tax registration settings override the values you set at the main information level. For third party tax profiles, invoice controls defined at the tax registration level override invoice controls at the account tax details level, if defined. Party tax profile main information includes: • Self-assessment option. – Set this option to self-assess taxes on Payables invoices belonging to the party.
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• Tax classification code – If applicable, enter a tax classification code to use as determining factor in tax rules for this party or party site. You only enter a tax classification code if you intend to use the Direct Tax Rate Determination tax rule on transactions belonging to this party. • Rounding level/rounding rule – Set the rounding level and rounding rule to use on invoices belonging to this party. The rounding level indicates whether to apply rounding to calculated tax amounts once for each tax rate per invoice (header level) or to the calculated tax amount on each invoice line (line level). The rounding rule is the method to use to round off calculates tax amounts to the minimum accountable unit (Up, Down, Nearest). Note: If you updated the rounding precedence hierarchy for a specific configuration owner and event class, then the related transactions look instead for rounding level information according to the configuration owner and event class settings. • Tax inclusive option – Select the Set Invoice Values as Tax Inclusive check box if the party intends to send or receive invoices with invoice line amounts inclusive of tax. • Use Subscription of the Legal Entity (operating unit) – Release 11i tax data in Payables, Receivables, and other applications migrates to E-Business Tax as operating units containing their own tax content. Set this option if you want the operating unit to use the tax content of the associated legal entity at transaction time. Note: This is an irreversible setting. Once you associate the operating unit with its legal entity, you cannot update the operating unit tax profile or maintain separate tax content for this operating unit. • Allow Tax Applicability (third party) - Set this option to automatically calculate taxes for this party whenever the party acts as a supplier. You can set this option, for example, for customers that also act as suppliers on transactions. Note: For third parties without a tax profile record, the default is to allow tax applicability. • Allow Offset Taxes (third party) - Set this option to define whether the system considers offset taxes for transactions from this party. Tax Registrations The tax registration contains information related to a party’s transaction tax obligation with a tax authority for a tax jurisdiction where it conducts business. The Tax Registrations page is available to first party legal establishments and third parties. Classifications There are two types of classifications: • Party fiscal classification • Legal classification. The party fiscal classifications optionally assigned to a party are used as determining factors in tax rules. The Classifications page is available to the: • First Party Legal Entity. • First Party Legal Establishment. • Third Party. • Third Party Site.
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Legal classifications are assigned to legal entities. You assign these classifications using the Legal Entity module. Tax Reporting Codes The tax reporting codes optionally assigned to a party capture tax information from party transactions for both internal and tax authority reporting requirements. The Tax Reporting Codes page is available to the: • First Party Legal Entity. • First Party Legal Establishment. • Third Party. • Third Party Site. Configuration Options The configuration options identify the tax regimes associated with a first party legal entity/operating unit acting as a configuration owner of tax content. The Configuration Options page is available to the: • First Party Legal Entity. • Operating Unit owning Tax Content. Account Tax Details The account tax details maintain Release 11i migrated tax information for customer and supplier accounts. The Account Tax Details page is available to the: • Third Party. • Third Party Site. The account details overrides the details at the third party and third party site level, if applicable.
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First Party Legal Entity Tax Profile
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First Party Legal Entity Tax Profile Responsibility: E-Business Tax Manager (N) Tax Managers > Parties > Party Tax Profiles Once you select a first party legal entity on the Party Tax Profiles page, navigate to the Create Tax Profile page to set up tax profiles for your first party legal entities and legal establishments. You set up legal entities and establishments using the Oracle Legal Entity Manager. You can also enter party tax profile and tax jurisdiction information when you create and update legal entities, as well as tax-related information for associated business entities. Legal classifications appear as read-only data in the party tax profile. First Party Legal Entity First party legal entities identify your organization to the relevant legal authorities, for example, a national or international headquarters. When you create a legal entity, the system automatically creates a legal entity establishment.
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To set up a party tax profile for a first party legal entity: • Enter main and default information, such as set for self assessment / reverse charge, tax classification, and rounding levels and rules. • Optionally enter the party fiscal classifications, such as associated legal and fiscal classifications. • Optionally enter tax reporting codes. • Enter tax configuration options to associate tax regimes with the party. Note: You can set up this tax information as part of the Legal Entity maintenance flow.
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First Party Legal Establishment Tax Profile
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First Party Legal Establishment Tax Profile Responsibility: E-Business Tax Manager (N) Tax Managers > Parties > Party Tax Profiles Select a first party legal establishment as a party type on the Party Tax Profiles page to create and update the tax profile. First Party Legal Establishments First party legal establishments identify each office, service center, warehouse and any other location within the organization that has a tax requirement. The system automatically creates a legal entity establishment when you create a legal entity. However, you can create additional legal establishments according to your needs. For each legal establishment there are one or more tax registrations, depending upon the tax requirements of the applicable tax authority. To set up a party tax profile for a first party legal establishment: • Enter main and default information. • Enter the tax registrations required for this party. • Optionally enter the party fiscal classifications. • Optionally enter tax reporting codes.
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Note: You can set up this tax information as part of the Legal Entity Establishment maintenance flow.
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First Party Tax Profile Setup
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First Party Tax Profile Setup Before you can set up first party tax profiles, you may need to complete one or more prerequisite tasks. Prerequisites Mandatory prerequisite steps include: • Set up legal entities and legal establishments. • Set up tax regimes. Optional prerequisite steps include: • Set up legal entity secondary establishments. • Set up taxes. • Set up tax jurisdictions. • Set up lookup codes. • Set up party fiscal classifications. • Set up tax reporting types.
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Operating Unit Tax Profile
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Operating Unit Tax Profile Responsibility: E-Business Tax Manager (N) Tax Managers > Parties > Party Tax Profiles Once you select an operating unit owing tax data on the Party Tax Profiles page, navigate to the Update Party Tax Profile page to modify the tax profile for your operating unit. Release 11i tax data in Oracle Payables, Receivables, and other applications migrates to EBusiness Tax as operating units containing their own tax content. To help you manage the tax content of operating units, you can use the operating unit tax profile in either of two ways: • Indicate that tax setup is used and maintained by a specific operating unit. • Indicate that operating unit tax setup is used and maintained based on the configuration of the associated legal entity at transaction time. The tax setup of the associated legal entity setup is either specific to the legal entity or shared across legal entities using the Global Configuration Owner setup. This concept is also discussed in Oracle E-Business Tax: Appendix A: Managing Migrated Tax Data.
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Tax Authority Tax Profile
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Tax Authority Tax Profile Responsibility: Legal Entity Manager (N) Legal Entity Manager > (T) Legal Entities > (B) Create Legal Entity Use the Oracle Legal Entity Manager to set up each tax authority as a legal authority for transaction tax. After you create the tax authority, you can select a Tax Authority as a party type and update the tax profile on the Party Tax Profiles page. The tax authority party tax profile identifies a tax authority party as a collecting authority and/or a reporting authority. A collecting tax authority manages the administration of tax remittances. A reporting tax authority receives and processes all company transaction tax reports. To set up a party tax profile for a tax authority: • If applicable, designate the tax authority as a collecting and/or reporting authority. • Enter any applicable tax reporting codes. Tax registration is not available for a tax authority, they utilize tax reporting codes.
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Third Party Tax Profile
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Third Party Tax Profile Responsibility: E-Business Tax Manager (N) Tax Managers > Parties > Party Tax Profiles Once you select a third party or third party site on the Party Tax Profiles page, navigate to the Create Tax Profile page to set up tax profiles for your customers, customer sites, suppliers, and supplier sites. To set up a party tax profile for a third party or third party site: • Enter main and default information, such as allow for tax applicability, allow offset taxes, set for self assessment / reverse charge, and rounding levels and rules. • Enter the tax registrations required for this party. • Optionally enter the party fiscal classifications, such as associated legal and fiscal classifications. • Optionally enter tax reporting codes. • Update migrated account tax details. Note: You can set up this tax information as part of the relevant third party maintenance flow (for example, customer and supplier maintenance).
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Account Tax Details Use the Account Tax Details region to maintain migrated account tax information. Use the third party site Supplier Site Tax Details region to maintain operating unit supplier site tax information. Use the third party site Customer Account Site Business Purpose Tax Details region to maintain operating unit customer account ship-to site and bill-to site tax information. This concept is discussed in detail in Oracle E-Business Tax: Appendix A: Managing Migrated Tax Data.
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Third Party Tax Profile Setup
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Third Party Tax Profile Setup Before you can set up third party tax profiles, you may need to complete one or more prerequisite tasks. Prerequisites A mandatory prerequisite step includes set up parties. Optional prerequisite steps include: • Set up tax regimes. • Set up taxes. • Set up tax jurisdictions. • Set up lookup codes. • Set up party fiscal classifications. • Set up tax reporting types. • Set up customer and supplier accounts.
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Agenda
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Self-Assessment Setup
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Self-Assessment Setup A self-assessed tax is a tax calculated and remitted for a transaction, where tax was not levied by the supplier but is deemed as due (and therefore needs to be paid by the purchaser). In such cases the purchaser is responsible for calculating and remitting the tax. Self-assessment is also known as reverse charge or use tax in certain tax regimes. You can let a first party self-assess the taxes calculated on the Payables invoices it receives. Self-Assessment Options You can set the self-assessment option: • At the tax profile level to default to the tax registrations that you create for this party. • At the tax registration level. • On an individual tax line. E-Business Tax applies self-assessment to Payables invoices received by the first party according to the tax registration setting of the Set for Self Assessment/Reverse Charge option. The specific tax registration record that E-Business Tax uses is derived either from Determine Tax Registration rules or from the default tax registration.
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Self-Assessment Application Depending on the level at which this first party establishment tax registration is created, the self-assessment will apply to: • All taxes of the tax regime, if the tax registration is defined for the tax regime only. • All tax jurisdictions of the tax, if the tax registration is defined for the tax regime and tax. • A specific tax jurisdiction of the tax, if the tax registration is defined for the tax regime, tax, and tax jurisdiction.
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Offset Taxes
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Offset Taxes An offset tax calculates and records third party Payables tax liabilities for reverse charges, selfassessments, and Consumer's Use tax (US). An offset tax record is a matching, duplicate record with negative amounts that reduces or completely offsets the tax liability recorded in the tax transaction. Use offset taxes when the tax requirement includes creating offset general ledger postings. Tax Recovery You cannot update the recovery rate on an offset tax line. The recovery rate is always 100% in order to create credit entries that match the original tax amounts. When you create an offset tax, you enter a primary recovery type with a recoverable rate of 100% and a 100% recovery rate.
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Offset Taxes Setup
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Offset Taxes Setup To set up for offset taxes, you must perform these tasks; • Enable offset tax calculations for each applicable transaction event and party. • Set up the offset tax, tax status, and tax rate. • Set up the original tax and assign the offset tax rate code to the original tax rate. Enable Offset Tax Calculations Perform these tasks to enable offset tax calculations: 1. Review the offset tax setting for Payables transaction events. a. Allow Offset Tax Calculation option enables the calculation of offset taxes for a transaction event. b. Offset Tax Basis indicates the party whose transactions are involved in offset tax creation. 2. Update the offset tax basis for the combinations of configuration owners and transaction events that you want, if applicable. 3. Set the Allow Offset Taxes option for the applicable third parties. Set this option for each third party involved in offset tax transactions.
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Tax Exemptions
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Tax Exemptions Responsibility: E-Business Tax Manager (N) Tax Managers > Parties > Party Tax Profiles Once you select a third party or third party site on the Party Tax Profiles page, navigate to the Create Tax Exemptions page to set up tax exemptions for your third party customers and customer sites. Tax exemptions can apply to a specific tax, tax status, tax jurisdiction, or product. You can set up a tax exemption at regime, tax, status, or rate level, for a specific jurisdiction or for all jurisdictions, for a specific product or for all products. Tax exemptions are defined as a discount/surcharge or a new rate. Exemption Setup Tasks Use the third party tax exemption record to maintain information about a customer or customer site tax exemption.
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In addition to the third party tax exemption record, you must also complete the appropriate setups in order for E-Business Tax to calculate tax exemptions. These setups are: • Set the eBTax: Allow Override of Customer Exemptions profile option to control the display of the Tax Handling field on the transaction line. You use the Tax Handling field to select the applicable tax exemption value for the transaction line. E-Business Tax processes tax exemptions in different ways depending upon the value you choose. • Set the Allow Tax Exemptions option at the levels that correspond to the tax exemption. • Indicate whether you are creating tax exemptions for the tax, or using tax exemptions previously created for an existing tax for each applicable tax. • Verify that the applicable event class allows tax exemptions. If it does not, then set up configuration owner tax options for the applicable configuration owner and event class to include tax exemptions.
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Tax Exemptions Setup
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Tax Exemptions Setup Before you can set up tax exemptions, you may need to complete one or more prerequisite tasks. Prerequisites Mandatory prerequisite steps include: • Set up customer third parties. • Set up tax regimes. • Set up taxes (for exemptions for a specific tax). • Set up tax statuses (for exemptions for a specific tax status). • Set up tax rates (for exemptions for a specific tax rate). • Set up tax jurisdictions (for exemptions for a specific tax jurisdiction). • Set up inventory organizations (for product exemptions). • Set up inventory items (for product exemptions). An optional prerequisite step includes set up exempt reason lookup codes.
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Tax Registrations
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Tax Registrations Responsibility: E-Business Tax Manager (N) Tax Managers > Parties > Party Tax Profiles Once you select a first party legal establishment, or a third party or third party site, on the Party Tax Profiles page, navigate to the Create Tax Registration Details page to set up tax registrations. In some cases you may need to create multiple tax registrations for a single location. E-Business Tax uses tax registrations in tax determination and tax reporting. For each tax that you create, you must define either a default tax registration or a tax rule for the rule type Determine Tax Registration. This rule determines which tax registration is stamped on a transaction. Tax Registration Setup Tasks You must set up a separate tax registration to represent each distinct registration requirement for a first party, including • Each legal establishment that is required to file tax documents. • Each tax regime, where the registration is used for all taxes within the regime.
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• Each tax within a tax regime that has a separate tax requirement, where the registration is used for all jurisdictions where the tax is applicable. • Each tax jurisdiction that has a separate tax requirement for a tax registration. • Each tax for which the party is not registered, if the not registered tax registration status is used as a tax condition in tax rules. If a party has more than one tax registration under the same tax regime, then E-Business Tax considers the tax registrations in the order: jurisdiction; tax; tax regime. You optionally set up tax registrations for your customers and suppliers, as necessary, to support specific tax regulations or reporting requirements.
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Tax Registrations Setup Before you can set up tax registrations, you may need to complete one or more of these tasks. Prerequisites Mandatory prerequisite steps include: • Set up tax regimes. • Set up parties. Optional prerequisite steps include: • Set up taxes. • Set up party tax accounts. • Set up bank accounts. • Set up lookup codes for registration type, status, and reason. • Set up tax jurisdictions. • Set up tax authorities.
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Summary
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Chapter 5
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E-Business Tax Architecture
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E-Business Tax Architecture The Configuration tier identifies the factors that participate in determining the tax on an individual transaction. These “taxability” factors are: • Party - The parties involved in the transaction. • Product – The products transacted. • Place - The places involved in the transaction, including the ship from and ship to locations, and the bill from and bill to locations. • Process - The kind of transaction that takes place. This module discusses how to manage the ownership of tax configuration data, or tax content, by the first parties of a transaction. First parties include both legal entities and operating units. You manage first party ownership of tax content by means of configuration options. The tax regimes that you create in the tax definition phase identify the taxes and the set of regulations that make up each tax requirement. Configuration options identify the relationships between first parties and tax regimes to reflect the tax requirements of each party.
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The first party legal entities in your organization can share the same tax content by using the seeded global configuration owner. An individual legal entity or operating unit can also own and maintain its own tax content. You can also assign a tax service provider to a configuration option to provide tax calculation services for transactions involving US Sales and Use tax.
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E-Business Tax Home Page – Configuration Owner & Options
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Tax Configuration Ownership
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Tax Configuration Ownership You can apply the tax content that you create to the entire organization using the global configuration owner, or you can let individual parties within the organization either create and maintain their own tax content, or override parts of the shared tax content of the global configuration owner to fulfill specific requirements. When a party overrides tax content, or creates and maintains tax content, it becomes a configuration owner of this tax content. Tax configuration ownership includes: • Legal entities and operating units (by independent party) owning their tax content. • Legal entities and operating units using the shared tax content of the global configuration owner. Note. Release 11i tax data in Payables, Receivables, and other applications migrates to EBusiness Tax as operating units containing their own tax content. For each operating unit, you can either continue to let the operating unit maintain its own tax content or set the operating unit to use the tax configuration of its associated legal entity at transaction time. To set the operating unit to use the tax configuration of its associated legal entity, you enable the Use
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Subscription of the Legal Entity option in the party tax profile of the operating unit. Note that this is an irreversible setting--once you associate the operating unit with its legal entity, you cannot update the operating unit tax profile or maintain separate tax content for this operating unit.
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Tax Configuration Options
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Tax Configuration Options Use configuration options to associate legal entities and operating units with their applicable tax regimes. The association between a party and a tax regime includes these definitions: • Configuration for Taxes and Rules - The setup that the party uses for taxes, tax statuses, tax rates, tax recovery rates, and tax rules. • Configuration for Product Exceptions - The setup that the party uses for product tax exceptions. • Service Subscriptions - The external service providers that the party uses in place of Oracle E-Business Tax to provide tax calculation services for US Sales and Use tax.
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Configuration for Taxes and Rules
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Configuration for Taxes and Rules E-Business Tax provides the global configuration owner to represent ownership of all tax setups at the company level. The configuration options that you set for each party/regime combination are in relation to the global configuration owner. These options are: • Common Configuration - The party uses the company tax setups for the applicable regimes. All parties with a Common Configuration option share the same tax setup. When setting up taxes, tax details, and configuration owner tax options, the global configuration owner represents any party with a Common Configuration. Authorized updates to the tax setup affect all users of the Common Configuration. • Common Configuration with Party Overrides - The party uses the company tax setups for the applicable regimes, but with the ability to override portions of the company tax setup with tax setup specific to the party's requirements. • Party-Specific Configuration - A legal entity or operating unit party does not share the company tax setup, but instead creates and maintains its own tax setup for the applicable regimes. In this case, only this party can use the tax setup it creates.
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Configuration for Product Exceptions
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Configuration for Product Exceptions The configuration option setting for product exceptions determines whether the product tax exceptions defined for this tax regime are shared with other parties or remain specific to one party: • If the configuration option for taxes and rules is Common Configuration or Party-Specific Configuration, then E-Business Tax assigns the same setting to the configuration option for product exceptions. • If the configuration option for taxes and rules is Common Configuration with Party Overrides, you can set the configuration option for product exceptions to Common Configuration to let the party use the product tax exceptions of the global configuration owner; or Party-Specific Configuration to let the party set up its own product tax exceptions that are not shared with any other party.
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Legal Entity and Operating Unit Configuration Options
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Legal Entity and Operating Unit Configuration Options You can define relationships between parties and tax requirements that reflect the specific taxation needs of your company and the way it is organized. These configuration options include: • One legal entity owns and maintains its tax configuration. • Multiple operating units of one legal entity share the legal entity tax configuration. • Multiple legal entities share the same tax configuration. • Multiple legal entities share the same tax configuration, with individual legal entities able to override the shared tax configuration for requirements specific to the legal entity, including tax, tax status, tax rate, and tax rules and formulas. • One or more operating units of one legal entity own and maintain a separate tax configuration. • A legal entity, or an operating unit that owns and maintains a separate tax configuration, uses third party tax services for specific transaction events.
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Agenda
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Configuration Options
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Configuration Options Responsibility: E-Business Tax Manager (N) Tax Managers > Tax Configuration > Tax Regimes > (B) Continue (N) Tax Managers > Parties > Party Tax Profile > (I) Create/Update Tax Profile > (T) Configuration Options Use the Configuration Options page to set up configuration options to associate tax regimes with the parties in your company that have a tax requirement under these tax regimes. You can set up tax configuration options when you create a tax regime or when you create a party tax profile for a first party legal entity or operating unit. Both setup flows display and maintain the same party/regime definitions. Configuration options only apply to tax regimes directly linked to taxes and not to tax regimes that are used to group other tax regimes. Any authorized user can maintain the common tax setup associated with the global configuration owner.
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Configuration Options Setup
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Configuration Options Setup Before you can set up configuration options, you may need to complete one or more of these tasks. Prerequisites • Set the eBTax: Read/Write Access to GCO Data profile option to identify users that can maintain tax configuration content for the Global Configuration Owner. • Set up tax regimes. • Set up party tax profiles.
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Agenda
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Service Subscriptions
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Service Subscriptions Responsibility: E-Business Tax Manager (N) Tax Managers > Parties > Party Tax Profile > (I) Create/Update Tax Profile > (T) Configuration Options > (I) Service Subscriptions The setup for provider services is called a service subscription. A service subscription applies to the transactions of one configuration option setup for a combination of tax regime and legal entity/operating unit. Use the Subscription Options page to assign an external service provider to a configuration option. When assigned, E-Business Tax uses the external service provider tax services to calculate US Sales and Use tax on Receivables transactions and the external service provider tax data for reporting. E-Business Tax provides transparent integration between the external service provider and Oracle Receivables. Both E-Business Tax and the external service provider execute and complete the tax services without any interruption to the application business flow.
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You can use the tax services of these external service providers: • Taxware, LP - A First Data Company • Vertex, Inc.
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Service Subscriptions Setup Before you can set up service subscriptions, you may need to complete one or more of these tasks. Prerequisites Mandatory prerequisite steps include: • Set up tax regimes. • Set up party tax profiles. • Set up configuration options.
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Event Classes
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Event Classes Responsibility: E-Business Tax Manager (N) Tax Managers > Transactions > Event Class Settings > (I) Event Class Mappings (N) Tax Managers > Transactions > Event Class Settings > (I) Event Class Options Use the Event Class Mapping page to review the mappings between event types and tax event types. You can use event class mapping information when setting up tax rules. You can set up tax rules that refer to application event classes and/or tax event classes. Use the Event Class Options page to review the default tax settings for each application event class. E-Business Tax provides predefined event class settings for each combination of application and event class. Event class settings provide a means of standardizing the interaction between E-Business Tax and other applications. E-Business Tax responds to specific application transaction events, such as a Payables invoice or a Receivables credit memo, according to the predefined settings of each application event class. In this way, E-Business Tax can determine and calculate taxes without requiring access to each product. By default, the event class option settings of an event class apply to all configuration owners.
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You can update event class options belonging to an application event class for a selected configuration owner in this way: if the event class option is enabled, you can deselect the option to exclude it from tax calculation. If an event class option is not enabled for a particular application event class, you cannot enable this option. Event Classes Applicable to E-Business Tax These event classes are applicable to E-Business Tax: • Payables - Standard invoices - Prepaid invoices - Expense reports • Purchasing - Requisitions - Purchase orders and agreements - Releases • Receivables - Invoices - Credit memos - Debit memos • Trade Management (source application) - Tax Event for Claims Interfacing to AP - Tax Event for Claims Interfacing to AR
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Configuration Owner Tax Options Responsibility: E-Business Tax Manager (N) Tax Managers > Defaults and Controls > Configuration Owner Tax Options > (B) Create Use the Create Configuration Owner Tax Options page to set up configuration owner tax options for a combination of configuration owner and application event class. You can update some of the E-Business Tax predefined event class settings for a particular configuration owner. Configuration owner tax options let a configuration owner update default tax options on transactions that belong to a specific application event class. At transaction time, E-Business Tax uses the tax option settings of the configuration owner and application event class instead of the default settings. These are the tax options you can update for each application and its event classes: Payables – Standard Invoice, Prepaid Invoice, Expense Report • Rounding Precedence Hierarchy • Regime Determination Set • Perform Additional Applicability for Imported Documents
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• Offset Tax Basis • Allow Tax Applicability • Allow Entry of Manual Tax Lines • Allow Recalculation for Manual Tax Lines • Allow Override for Calculated Tax Lines • Tax Tolerance Purchasing - Requisition, Purchase Order and Agreement, Release • Rounding Precedence Hierarchy • Offset Tax Basis • Allow Tax Applicability Receivables – Invoice, Credit Memo, Debit Memo • Rounding Precedence Hierarchy • Allow Exemptions • Regime Determination Set • Offset Tax Basis • Allow Tax Applicability • Allow Entry of Manual Tax Lines • Allow Recalculation for Manual Tax Lines • Allow Override for Calculated Tax Lines
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E-Business Tax Architecture
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E-Business Tax Architecture The Configuration tier identifies the factors that participate in determining the tax on an individual transaction. These “taxability” factors are: • Party - The parties involved in the transaction. This can include first party legal entities; ship from/ship to parties; bill from/bill to parties; tax registrations and registration statuses of each party; type or classification of a party. • Product – The products transacted. This includes the designation of physical goods or services, and in some cases the type or classification of the good or service. • Place - The places involved in the transaction, including the ship from and ship to locations, and the bill from and bill to locations. Other places—such as point of origin or point of acceptance—may also be factors, depending on the applicable tax regulations. • Process - The kind of transaction that takes place. This can include: Procure to Pay transactions, such as purchases, prepayments, and requisitions; Order to Cash transactions, such as sales, credit memos, and debit memos; the type of sale or purchase, for example, retail goods, manufactured goods, intellectual property, resales.
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Each of these factors can become determining factors in the creation of tax rules. This module discusses the setup and usage of fiscal classifications. You use fiscal classifications in tax rules to classify the taxability factors of a transaction for use in tax determination. This includes the parties and locations involved in your transactions, the products you buy and sell, and the nature of your transactions.
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E-Business Tax Home Page – Fiscal Classifications
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Fiscal Classifications Fiscal classifications provide tax determination values for situations where the party, product, or transaction are factors in tax determination. You set up a fiscal classification type to identify a category of fiscal classification that has a potential tax implication; you assign fiscal classification types to tax regimes and taxation countries. You set up fiscal classification codes under a fiscal classification type to provide additional granularity to a particular fiscal classification category. When creating tax rules, you use fiscal classification types as determining factors and fiscal classification codes as condition set values. See: Oracle EBusiness Tax: Part 2: Setting Up Tax Rules for information about determining factors and tax conditions. The use of fiscal classifications is optional, and depends upon your overall scheme for managing tax determination and tax calculation requirements. At transaction time E-Business Tax determines, according to the tax rules you create, which fiscal classifications apply to the transaction line. You set up fiscal classifications under these general categories: Party fiscal classifications - Classify your first parties—the various parts of your organization—and your third parties—your customers and suppliers and their locations—for
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use in tax determination. In some countries, the tax authority provides the specific party fiscal classification to use. For example, set up different party fiscal classifications for wholesale suppliers and retail suppliers. Product fiscal classifications - Classify the products and services that you buy and sell for use in defining rules for tax determination. In some countries, the tax authority provides the specific product fiscal classification to use. For example, set up a product fiscal classification type in the United Kingdom for supplies that are zero-rated for VAT, and then set up fiscal classification codes for specific supplies, such as food, cleaning supplies, and printed matter. Transaction fiscal classifications - Classify the nature of a transaction itself, and the details that must accompany a transaction, according to its tax requirements. For example, set up a transaction fiscal classification for retail sales, then set up fiscal classification codes for sales of manufactured goods, sales of imported items, and sales giveaways.
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Party Fiscal Classifications Responsibility: E-Business Tax Manager (N) Tax Managers > Parties > Party Classification > (B) Create Use the Create Party Fiscal Classification Type page to create party fiscal classification types and codes. The party fiscal classifications that you create are used as tax determining factors in tax rules. A party fiscal classification determines, for example, when taxes apply to a party, how much tax applies, and what percentage of the tax is recoverable. Set up party fiscal classifications for: • First parties. • Customers and customer sites. • Suppliers and supplier sites. Once you set up your party fiscal classifications types and codes, you can associate a party fiscal classification with a party tax profile for each party that requires a party fiscal classifications for tax determination and/or tax reporting purposes. For example, you may want to classify parties according to tax handling requirements, such as End Consumer, Distributor, Non-Profit Organization, Government Agency, and so on.
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Party Fiscal Classifications Setup
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Party Fiscal Classification Setup Before you can set up party fiscal classifications, you may need to complete one or more prerequisite tasks. Prerequisites • Set up TCA class categories and class codes. • Set up tax regimes. • Set up tax reporting types (optional). TCA Class Category You create a party fiscal classification by assigning a Trading Community Architecture (TCA) class category and its related class codes to party fiscal classification types and codes. Existing TCA class categories include, for example, SIC (Standard Industry Classification) and NAICS (North American Industry Classification System). You can also create TCA class categories and codes according to your requirements in order to classify parties and other business entities into user-definable categories. If you plan to assign tax reporting types to party fiscal classifications, then set up the tax reporting types and codes that you need.
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Legal Party Fiscal Classifications
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Legal Party Fiscal Classifications Responsibility: E-Business Tax Manager (N) Tax Managers > Parties > Legal Classification Tax Usage Some countries use a set of codes to identify legal classifications that have a tax requirement. E-Business Tax provides seeded fiscal classification type codes for each set of country-specific legal activity codes. Use the Legal Classification Tax Usage page to use legal activity codes in tax determination and tax reporting. You can assign these legal activity codes to the tax regimes within the applicable country.
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Product Fiscal Classifications
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Product Fiscal Classifications Responsibility: E-Business Tax Manager (N) Tax Managers > Products > Product Classifications > (B) Create (N) Tax Managers > Products > Intended Use Classifications Use the Product Fiscal Classification Type pages and Product Intended Use Fiscal Classification Type page to classify goods and services for tax purposes. You use product fiscal classifications as tax determining factors in tax rules. You can set up product fiscal classifications for: • Inventory-based products and services – Product fiscal classifications that correspond to Oracle Inventory items. • Non-Inventory based products and services – An E-Business Tax generic product category for non-Inventory based items. • Product intended use fiscal classification - One classification for either Inventory-based or non-Inventory based products and services to identify situations where the intended use of the product is a factor in tax determination.
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You associate the product fiscal classification type codes that you create with the corresponding tax regimes that require product fiscal classifications. These product fiscal classification type codes become available to transactions belonging to the tax regime for use in tax determination. An Inventory-based product fiscal classification corresponds to the related setup for items belonging to Oracle Inventory. The Inventory category set corresponds to the product fiscal classification type, and the Inventory category segment values correspond to the product fiscal classification codes. When an item belonging to the Inventory category set is entered on the transaction line, the corresponding product fiscal classification code defaults to the transaction. A non-Inventory based product fiscal classification lets you define product fiscal classification codes for goods and services that are not associated with Oracle Inventory items. The non-Inventory based product fiscal classification uses a generic product fiscal classification type called PRODUCT_CATEGORY. You create product fiscal classification codes under PRODUCT_CATEGORY according to categories that you define. You can create both individual codes and a hierarchy of codes to represent lines of goods and services that have a tax requirement. You can also optionally assign non-Inventory based product fiscal classifications to a particular country. You can use non-Inventory based product fiscal classifications to: • Classify products for taxes if you do not use Oracle Inventory. • Create country-specific product fiscal classifications. • Create product fiscal classifications for items that are not a good. • Create ad hoc product fiscal classifications without reference to an inventory item, for example, if you are making product purchases that are not a part of your standard business processes. A product intended use fiscal classification is used to classify goods and services where the intended use of the product is a factor either in tax determination or the tax recovery rate. For example, a company may purchase promotional items that it intends to give away free, or offer special services at a reduced charge. You can only set up product intended use fiscal classifications for either an Inventory category set or the non-Inventory based PRODUCT_CATEGORY, but not both. When you first set up product intended use fiscal classifications, you decide which one becomes the basis for this classification (this is an irreversible setting). If applicable, the data migration process may also create either Inventory-based or non-Inventory based product intended use fiscal classifications. Note. Because non-Inventory based and product intended use fiscal classification codes are not assigned to a particular Inventory item or tax regime, E-Business Tax makes these fiscal classification codes available to all transactions (except for non-Inventory based product fiscal classification codes assigned to a particular country).
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Product Fiscal Classifications Setup
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Product Fiscal Classifications Setup Before you can set up product fiscal classifications, you may need to complete one or more prerequisite tasks. Prerequisites • Set up Inventory items and categories for product fiscal classifications (for Oracle Inventory). • Set up tax regimes. • Set up tax reporting types (optional). Oracle Inventory Setup The Inventory setup tasks to model product fiscal classifications are: • Define Inventory Value Set • Define Inventory Item Category Structure • Define Category Set • Define Inventory Categories • Associate Inventory Items to Category Sets
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You complete this setup task flow for each Inventory-based product fiscal classification type that you plan to define. See: Setting Up Oracle Inventory, Oracle E-Business Tax Implementation Guide and Defining Categories, Oracle Inventory User’s Guide for more information. If you plan to assign tax reporting types to product fiscal classifications, then set up the tax reporting types and codes that you need.
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Product Tax Exceptions
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Product Tax Exceptions Responsibility: E-Business Tax Manager (N) Tax Managers > Products > Tax Exceptions > (B) Create Use the Create Tax Exceptions page to set up tax exceptions to apply special tax rates to products. To set up tax exceptions, you must enable the Allow Tax Exceptions option at all applicable levels in the regime-to-rate flow, including tax regime, tax, tax status, and tax rate. At transaction time, E-Business Tax determines whether the tax exception applies to the transaction line for the product and, if so, uses the applicable exception rate. Only one product tax exception can apply to a transaction line for a specific tax. You can set up these product tax exceptions: • Discount - A reduction of the base tax rate. • Surcharge - An increase to the base tax rate. • Special Rate - A rate that replaces the base tax rate. You must assign a product tax exception to a combination of tax regime, configuration owner, and tax. You can also optionally assign product tax exceptions to a tax status or tax rate belonging to the tax or to a tax jurisdiction.
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You can, for example, use product tax exceptions to determine the tax rate for a particular product, instead of using tax rules. You can also define Inventory organization tax exceptions for items, or you can define tax exceptions for Inventory-based or non-Inventory-based product fiscal classifications. The product fiscal classification must have the same tax regime assignment as the tax exception.
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Product Tax Exceptions Setup
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Product Tax Exceptions Setup Before you can set up product tax exceptions, you may need to complete one or more prerequisite tasks. Prerequisites • Set up taxes. • Set up tax jurisdictions (for jurisdiction-specific exceptions). • Set up Inventory organizations (for item exception types). • Set up Inventory items (for item exception types). • Set up product fiscal classification types (for product fiscal classification exception types). • Set up product fiscal classification codes (for product fiscal classification exception types). • Set up exception reason lookup codes (optional). • Set up tax statuses (optional). • Set up tax rates (optional).
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Note. Setting up Inventory and product fiscal classifications are conditionally mandatory. For example, you can create an exception for Inventory items, in which case product fiscal classification types are not mandatory.
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Transaction Fiscal Classifications
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Transaction Fiscal Classifications Responsibility: E-Business Tax Manager (N) Tax Managers > Transactions > Transaction Business Categories (N) Tax Managers > Transactions > Transaction Fiscal Classifications > (B) Create (N) Tax Managers > Transactions > Document Classifications (N) Tax Managers > Transactions > User Defined Transaction Classifications Use the Transaction Business Category Codes, Create Transaction Fiscal Classification Type, Update Document Fiscal Classification, and Update User Defined Fiscal Classification pages to create transaction fiscal classifications. E-Business Tax uses transaction fiscal classifications as tax determining factors in tax rules. You use transaction fiscal classifications when the tax authority requires you to classify the nature of the transaction itself for tax purposes in order to determine the tax rate. You can set up these types of transaction fiscal classifications: • Transaction business categories. • Transaction fiscal classification codes.
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• Document fiscal classifications. • User defined fiscal classifications. Transaction Business Categories E-Business Tax provides the following transaction business categories that you can use to identify and classify your business transactions: • Expense report. • Purchase pre-payment transaction. • Purchase transaction. • Sales transaction. • Sales transaction adjustment. • Intercompany transaction. Transaction Fiscal Classification Codes You can create a hierarchy of transaction fiscal classification codes for use with a transaction business category to identify specific transaction events, such as employee expense reports vs. contractor expense reports or retail sales vs. product demonstrations, and, if applicable, designate codes for specific countries. Document Fiscal Classifications Set up document fiscal classifications to classify transactions that require special documentation to accompany the transaction. For example, international transactions often require proof of export documentation to support the sale or transfer of goods; you can create a document fiscal classification code to confirm receipt of export documents. User Defined Fiscal Classifications Set up user defined transaction fiscal classification codes to classify any tax requirement that you cannot define using existing fiscal classification types.
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Part 1: Setting Up Tax Rules Chapter 7
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Copyright © 2009, Oracle. All rights reserved.
Part 1: Setting Up Tax Rules
Chapter 7 - Page 1
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Part 1: Setting Up Tax Rules
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Part 1: Setting Up Tax Rules
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Objectives
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E-Business Tax Architecture
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E-Business Tax Architecture The Rule Engine tier comprises the set of tax rules that are used to determine and calculate tax on a transaction. You define tax rules for each combination of tax regime, tax and configuration owner. You create tax rules by translating the tax regulations of a tax authority into determining factors and tax conditions that the E-Business Tax tax rules engine uses to evaluate the applicability of a tax on each transaction line. Tax rules determine: the applicability of a tax; the place of supply and tax jurisdiction of the transaction; the tax registration; the tax status and tax rate; the recovery rate (if applicable); and the taxable basis and tax formula to use in calculation. This module discusses basic principles concerning tax rules and tax calculations, and how to set up a tax rule using default values and the guided rule entry.
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E-Business Tax Homepage – Tax Rules
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Rule Engine
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Rule Engine Oracle E-Business applications pass the necessary information to E-Business Tax about the transaction regarding Party, Product, Place, and Process (4Ps). The E-Business Tax tax determination process then uses the tax configuration setup and the details on the transaction to determine: • Which taxes apply to the transaction. • How to calculate the tax amount for each tax that applies to the transaction.
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Rule Engine – Rule Types
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Rule Engine - Rule Types The E-Business Tax tax rules engine uses the Tax Determination process to identify the taxes that apply to a transaction and to calculate the tax. The E-Business Tax tax determination process is organized into rule types. Each rule type identifies a particular step in the determination and calculation of taxes on transactions. You must either set up tax rules or provide a default value for each rule type in order for the tax rules engine to determine and calculate taxes. The steps in the Tax Determination process are: 1 – Determine Applicable Tax Regimes and Candidate Taxes: This is a preliminary step used by E-Business Tax to determine tax regimes and candidate taxes within each tax regime. This step identifies the first party of the transaction and the countries associated with the transaction. For each country identified, the process selects the tax regimes that are associated with the first party and defined for the country as candidate tax regimes. The process then selects the taxes defined for each candidate tax regime as candidate taxes. 2 – Determine Place of Supply and Tax Jurisdiction: Determines the location where a transaction is considered to have taken place for a specific tax, and the associated tax jurisdiction for each candidate tax. This step uses the Determine Place of Supply rule type.
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Chapter 7 - Page 8
For example, in Europe the default place of supply of goods for VAT is often Ship From, meaning the place of supply of a sale or purchase within a European country is the country itself. In the US, the default place of supply for US Sales and Use is often Ship To, meaning the state that is purchasing/receiving the goods. 3 – Determine Tax Applicability: Determines the tax applicability of each candidate tax derived from the Determine Place of Supply and Tax Jurisdiction process, and eliminates taxes that are found to be not applicable. This step uses the Determine Tax Applicability rule type. 4 – Determine Tax Registration: Determines the party whose tax registration is used for each tax on the transaction, and, if available, derives the tax registration number. This step uses the Determine Tax Registration rule type. Generally, the registration default is Bill From Party, but there are cases, like Reverse Charge or Self Assessment, where the default becomes Bill To Party for specific transactions. 5 – Determine Tax Status: Determines the tax status of each applicable tax on the transaction. This step uses the Determine Tax Status rule type. 6 – Determine Tax Rate: Determines the tax rate for each tax and tax status derived from the previous process. This step uses the Determine Tax Rate rule type. If applicable, the tax rate is modified by any exception rate and/or tax exemption that applies. The result of this process is a tax rate for each applicable tax. The rate or rates are applied to the taxable basis in Step 8, Calculate Taxes. 7 – Determine Taxable Basis: Determines the taxable base amount or quantity upon which to apply the tax rate for each applicable tax. This step uses the Determine Taxable Basis rule type. The taxable basis is typically the transaction line amount. E-Business Tax provides the default taxable basis formula taxable basis = line amount. In some cases, the taxable basis either can include another tax or is based on the tax amount of another tax. You can set up special taxable basis formulas to manage these requirements. 8 – Calculate Taxes: Calculates the tax amount for each applicable tax on the transaction. This step uses the Calculate Tax Amounts rule type. The tax is typically determined by applying the tax rate to the line amount. E-Business Tax provides the default tax calculation formula tax amount = taxable basis * tax rate. In some exceptional cases, the tax amount is altered by adding or subtracting another tax. You can set up special tax calculation formulas to manage these requirements. Tax Recovery Rate: Determines the recovery rate on Procure to Pay transactions to apply to each recovery type for each applicable tax on the transaction (Determine Recovery Rate rule type). Tax recovery is a separate process with its own set of steps, for taxes that allow for full or partial recovery of the tax amount. See: Oracle E-Business Tax: Tax Recovery for more information. Direct Tax Rate Determination: This is a special tax rule type that lets you specify the results of tax applicability, tax status, and tax rate for a given tax. You use this rule type with migrated tax data and the Release 11i tax model in E-Business Tax. See: Oracle E-Business Tax: Appendix A: Managing Migrated Tax Data for more information.
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Rule Engine – Tax Regimes
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Rule Engine – Tax Regimes The Tax Regime process determines tax regimes and candidate taxes. The result of the process is a list of taxes that are eligible for consideration on the transaction. The activities include: • Determine the first party of the transaction. • Identify location types to derive candidate tax regimes. • Identify tax regimes. • Identify taxes using subscriber configuration option. The components used include: • Party Tax Profile. • Regime Determination Set. • Configuration Options.
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Chapter 7 - Page 10
Rule Engine – Place of Supply / Taxation
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Rule Engine – Place of Supply / Taxation The Place of Supply / Taxation process identifies the applicable place of supply and associated tax jurisdiction for each candidate tax. The place of supply, or sites in the United States, is the location type where the supply of goods or services is deemed to have taken place for a specific tax. If E-Business Tax cannot find a tax jurisdiction for the location that corresponds to the place of supply location type, then the tax does not apply and it is removed as a candidate tax for the transaction. The activities include: • Identify location type. • Identify jurisdiction. The components used and corresponding rule type include: • Tax Rule: Determine Place of Supply, or the default value for Place of Supply for the tax. • Tax Jurisdictions.
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Chapter 7 - Page 11
Rule Engine – Applicability & Registration
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Rule Engine – Applicability & Registration Applicability Process The Applicability process determines the tax applicability of each candidate tax derived from the Determine Place of Supply and Tax Jurisdiction process, and eliminates taxes that are found to be not applicable. The process first attempts to derive the applicability of each candidate tax based on the rule conditions of the Determine Tax Applicability rules for the tax. If no rule applies, the process uses the default value of Applicable or Not Applicable that was assigned to the rule type for the tax. If the tax does not apply, it is removed from the list of candidate taxes. The Applicability activities include: • Consider candidate taxes from the previous process. • Eliminate taxes based on tax applicability rule for each tax. The component used in these activities and corresponding rule type include Tax Rule: Determine Tax Applicability and the default value for applicability for the tax.
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Chapter 7 - Page 12
Registration Process The Registration process determines the party whose tax registration is used for each tax on the transaction, and, if available, derives the tax registration number. During the Registration process, E-Business Tax also considers these details of the derived tax registration for each tax: • Tax inclusive handling. • Self-assessment/reverse charge setting. • Rounding rule. The Registration activity includes determine the party type to use to derive the tax registration for each applicable tax. The component used in this activity and corresponding rule type includes: • Tax Rule: Determine Tax Registration, or the default value for the tax. • Party Tax Profile. • Tax Registration.
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Rule Engine – Status & Rates
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Rule Engine – Status & Rates Status Process The Status process determines the tax status of each applicable tax on the transaction. EBusiness Tax attempts to derive the tax status using either tax rules belonging to the Determine Tax Status rule type, or the default value assigned to this rule type. The Status activities include: • Consider tax statuses of applicable taxes. • Consider tax status rules or use default tax status. Rates Process The Rates process determines the tax rate of the tax status derived from the previous process to use on the transaction line for each applicable tax. If applicable, the tax rate is then modified by any exception rate and/or tax exemption that applies. The Rates activities include: • Determine the tax rate code to use for the tax status, for each applicable tax. • Determine the tax rate percentage or per-unit tax amount for a quantity based tax.
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Chapter 7 - Page 14
• If a tax exception applies, update the tax rate for each applicable tax. • If a tax exemption applies, update the tax rate. The components used in these activities and corresponding rule type include: • Tax Rule: Determine Tax Rate, or the default value defined for the tax status derived in the previous process. • Tax Rates. • Product Tax Exceptions. • Customer Tax Exemptions. Defaulting Logic If defined, E-Business Tax uses the tax rate assigned to the tax jurisdiction for the applicable tax and tax status; otherwise, E-Business Tax uses the default tax rate.
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Rule Engine – Taxable Basis
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Rule Engine – Taxable Basis The Taxable Basis process determines the taxable base amount or quantity for each tax. This is typically the transaction line amount. In some cases, the taxable basis either can include another tax or is based on the tax amount of another tax. E-Business lets you define taxable basis formulas to manage these requirements. The result of this process is the taxable basis on which the tax rate for each tax is applied. If the process cannot find a taxable basis formula for an applicable tax, then E-Business raises an error. The activities include: • Identify the taxable basis formula for each applicable tax. • Determine the taxable basis and compounding details based on the taxable basis formula. • Consider the Tax Inclusive settings of the applicable taxes. The components used and corresponding rule type include: • Tax Rule: Determine Taxable Basis, or the default value for the tax. • Taxable Basis formula. • Tax Inclusive settings at the tax rate level.
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Chapter 7 - Page 16
Rule Engine – Tax Calculation
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Rule Engine – Tax Calculation The Tax Calculation process calculates the tax amount on the transaction. In most cases, the tax amount is computed by applying the derived tax rate to the derived taxable basis. In some exceptional cases, the tax amount is altered by adding or subtracting another tax. E-Business lets you define tax calculation formulas to manage these requirements. The result of this process is the tax amount for each tax. If the process cannot find a tax calculation formula for an applicable tax, then E-Business raises an error. The activities include: • Identify the tax calculation formula. • Calculate taxes using the tax calculation formula. • Perform applicable tax rounding. The components used and corresponding rule type include: • Tax Rule: Calculate Tax Amounts. • Calculate Tax formula, if applicable. • Tax Rounding Rule from registration, account site, party tax profile, or tax. • Configuration Owner Tax Options.
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Chapter 7 - Page 17
Rule Engine – Recovery Rate
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Rule Engine – Recovery Rate A recoverable tax is a tax that allows full or partial recovery of taxes paid on purchases, either as a recoverable payment or as an offset against taxes owed. The Recovery Rate process is an optional process that determines the recovery rate to use on Procure to Pay transactions, when the tax allows for full or partial recovery of the tax amount. The activities include: • Allocate tax amount per item distributions. • Determine recovery types. • Determine recovery rates. • Determine the recoverable amounts. • Determine the non-recoverable amount. See: Oracle E-Business Tax: Tax Recovery for complete information about the tax recovery process.
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Chapter 7 - Page 18
Agenda
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Chapter 7 - Page 19
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Tax Rule Defaults
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Tax Rule Defaults You can set a default value for each rule type. E-Business Tax uses the default value if no rule belonging to the rule type provides a value that applies to the transaction. For certain tax regimes, you may be able to use default values exclusively, without the need to set up tax rules. As a general rule of thumb, if you find in setting up tax rules that the tax condition results and rule results always equal the default values, then you do not need a tax rule. You only need to define a tax rule for a result that is different from the default value. Default Values for Rule Types Determine Place of Supply • Bill From • Bill To • Point of Acceptance (Receivables transactions only) • Point of Origin (Receivables transactions only) • Point of Payment
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• Ship From • Ship To • Use Bill To as Ship To, if Ship To is not found In Europe, the default for place of supply of goods is usually Ship From. In the United States, the default for place of supply of goods is usually Ship To. Determine Tax Applicability • Applicable • Not Applicable Determine Tax Registration • Bill From Party • Bill To Party • Ship From Party • Ship To Party • Use Bill To, if Ship To is not available The default is usually Bill From Party, but there are cases, such as reverse charge and selfassessment, where the default is Bill To Party for specific transactions. Determine Tax Status – You specify the default value when you set up the tax status. This default can be overridden. Determine Tax Rate – You specify the default value when you set up the tax rate. This default can be overridden. Determine Taxable Basis – The seeded formula STANDARD_TB (Taxable Basis = Line Amount). Calculate Tax Amounts – The seeded formula STANDARD_TC (Tax Amount = (Taxable Basis) * (Tax Rate)).
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Part 1: Setting Up Tax Rules
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Make Tax Available on Transactions
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Make Tax Available on Transactions Responsibility: E-Business Tax Manager (N) Tax Managers > Tax Configuration > Taxes > (I) Update Use the Update Tax page to make each tax available on transactions. You must enable the Make Tax Available for Transactions option before E-Business Tax can use this tax setup to calculate taxes on transactions. When you enable the Make Tax Available for Transactions option, E-Business Tax runs a series of checks to ensure that all of the definitions related to the tax have been defined. E-Business Tax displays an error message if you have not set up the definitions properly. Prior to making a tax available on transactions, you must: • Define either a default place of supply or a tax rule for the rule type Determine Place of Supply. • Define either a default tax registration or a tax rule for the rule type Determine Tax Registration. • Define either a default tax status and default tax rate, or tax rules for the rule types Determine Tax Status and Determine Tax Rate, or the rule type Direct Tax Rate Determination.
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• • • • •
Define either a default tax formula or a tax rule for the rule type Determine Taxable Basis. Define either a default tax formula or a tax rule for the rule type Calculate Tax Amounts. Define a primary tax recovery rate, if you set the allow recovery option for the tax. Define at least one tax jurisdiction for the tax. Define an exchange rate type, if the tax is used in cross-border transactions.
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Oracle Tax Simulator
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Oracle Tax Simulator Responsibility: E-Business Oracle Tax Simulator (N) Oracle Tax Simulator > Tax Simulator Use the Oracle Tax Simulator to enter transactions in order to simulate the tax determination process without creating live data. With the Oracle Tax Simulator, you can: • Enter Payables and Receivables transactions to simulate tax calculation based on various scenarios. • View the tax rules that were applied to a tax calculation and the processed result for each rule type. • Simulate the characteristics of the Payables, Purchasing, and Receivables workbenches and create the tax line for each type of operation. • View the summarized tax lines for each transaction and the tax lines generated for each transaction line. • Use the associated tax windows to view and/or override tax lines.
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The Oracle Tax Simulator provides these verifications: • How the tax rules that you have defined for one or more taxes work in conjunction with the defaults you have set for them. • Whether a tax rule that you expected to have a successful evaluation for a given set of transaction conditions achieved the desired result. • How the options that you have set at various levels are reflected in the results of tax determination processing. If a certain transaction does not processes taxes as you predicted, then you can use the simulated result to troubleshoot the cause.
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Troubleshooting the Tax Configuration
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Troubleshooting the Tax Configuration Responsibility: Oracle Tax Simulator (N) Oracle Tax Simulator > Tax Simulator If a certain transaction does not process taxes as you predicted, then you can use the simulated result to troubleshoot the cause. For example: • You defined product tax exceptions, but they were not used on a transaction as expected. You then discover that the Allow Tax Exceptions option was not enabled on the applicable tax rate record. • Your supplier record has the option enabled to use offset taxes, but the offset taxes do not appear. You then discover that the tax rate record does not have an offset tax rate associated with it. Tax Simulator Tools Use the Tax Simulator tools to analyze the tax calculations for your transaction: • View Tax Log - Use the View Tax Log option on the Tools menu to generate a log file of transaction activity. The log file provides details of all processing done on a transaction, including a list of tax rules that were not evaluated successfully.
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• Detail Tax Lines window - Use the Detail Tax Lines window to view the calculated tax lines for the transaction. The window displays, for each transaction line, the applicable tax with the corresponding tax configuration details, including tax regime, tax, tax jurisdiction, tax status, tax rate code, tax rate, and tax amount. • Rules window - Use the Rules window to view the tax rules that were applied to each tax line for each tax calculation process. For each rule type, you can view the processed result and verify whether the result was determined by a tax rule or the default value. If a tax rule was applied, you can also determine the associated tax rule and tax condition set. • Summary Tax Lines window - Use the Summary Tax Lines window to view the summary tax lines for your Payables transactions. For each applicable tax, you can view the total tax amount across all transaction lines, with the corresponding tax configuration details, including tax regime, tax, tax jurisdiction, tax status, tax rate code, and tax rate. • Tax Distributions window - Use the Tax Distributions window to view the resulting distributions information and any associated recovery details for your Payables transactions.
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Tax Rules Entry
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Tax Rules Entry E-Business Tax provides two entry flows for setting up your tax rules: • Guided Tax Rule Entry - The guided tax rule entry provides a five-step flow that lets you build determining factors and tax conditions as you create the tax rule. Setting up tax rules using the Guided Tax Rule Entry is discussed in this module. • Expert Tax Rule Entry - The expert tax rule entry provides a concise, three-step entry flow that makes use of determining factor sets and tax condition sets that you have previously defined. Setting up tax rules using the Expert Tax Rule Entry is discussed in Oracle EBusiness Tax: Part 3: Setting Up Tax Rules.
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Tax Rules – Guided Rule Entry
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Tax Rules – Guided Rule Entry Responsibility: E-Business Tax Manager (N) Tax Managers > Tax Rules > (I) Guided Rule Entry Use the following page flow to set up tax rules using the guided rule entry: • Tax Rules • Create Tax Rule: General Information • Create Tax Rule: Determining Factors and Conditions • Create Tax Rule: Condition Results • Create Tax Rule: Rule Order • Create Tax Rule: Rule Templates
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Tax Rules – Guided Rule Entry
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Tax Rules – Guided Rule Entry A tax rule is defined by: Ownership information - Identifies the tax rule configuration owner. If the configuration owner is a legal entity or operating unit, then the rule only applies to the transactions of this legal entity or operating unit. If the configuration owner is the Global Configuration Owner, then the rule applies to the transactions of all legal entities and operating units with a configuration option setting for the tax regime of either Common Configuration or Common Configuration with Party Overrides. Context information - Identifies the tax regime, tax, and rule type for which a rule is defined. Rule order - Identifies the order in which a rule is evaluated. You cannot repeat a rule order for the same tax regime, tax, and rule type for the same configuration owner. If the configuration option setting is Common Configuration with Party Overrides, you cannot repeat a rule order for the same tax regime, tax, and rule type for either the same configuration owner or the Global Configuration Owner.
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Additional context information - Applies further restrictions to a rule: • Transactions belonging to a specific application event class. • Transactions belonging to a specific application tax event class. • Transactions belonging to a specific location. Determining factor set - Identifies the factors to consider when evaluating the tax rule. Tax condition set - Identifies the conditions (from one or more of the determining factors belonging to the determining factor set) to satisfy in order evaluate a tax condition set successfully. Result - The value that results when the tax conditions are satisfied. For the direct tax rate determination rule type, multiple results may apply to the successful evaluation of a tax condition set.
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Tax Rules – Guided Rule Entry Setup
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Tax Rules – Guided Rule Entry Setup Before you can set up a tax rule, you may need to complete one or more of these tasks. Prerequisites • Set up tax regimes. • Set up taxes. • Set up tax statuses. • Set up tax rates and enable the Allow Tax Rate Rules option. • Set up tax jurisdictions (to optionally use with the Determine Place of Supply rule). • Set up TCA geography hierarchy structures (if required by the tax rule). • Set up tax zones (if required by the tax rule). • Set up fiscal classifications (if required by the tax rule).
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• Set up taxable basis tax formulas (for the rule type Determine Taxable Basis, if you need a formula other than the default formula STANDARD_TB). • Set up tax calculation tax formulas (for the rule type Calculate Tax Amounts, if you need a formula other than the default formula STANDARD_TC). • Set up tax recovery rates (for the rule type Determine Recovery Rate).
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Part 2: Setting Up Tax Rules Chapter 8
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Part 2: Setting Up Tax Rules
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E-Business Tax Architecture
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E-Business Tax Architecture The Rule Engine tier comprises the set of tax rules that are used to determine and calculate tax on a transaction. You define tax rules for each combination of tax regime, tax and configuration owner. You create tax rules by translating the tax regulations of a tax authority into determining factors and tax conditions that the E-Business Tax tax rules engine uses to evaluate the applicability of a tax on each transaction line. Tax rules determine: the applicability of a tax; the place of supply and tax jurisdiction of the transaction; the tax registration; the tax status and tax rate; the recovery rate (if applicable); and the taxable basis and tax formula to use in calculation. This module discusses the major components of a tax rule—regime determination set, tax determining factor set, tax formula, tax condition set—and how to use these components to build tax rules.
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E-Business Tax Homepage – Tax Rules
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Determining Factors
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Determining Factors Determining factors are the key building blocks of your tax rules. They are the variables that are passed at transaction time or derived from information on the transaction. Determining factors fall into four groups, namely: • Party • Product • Place • Process A determining factor is an attribute that contributes to the outcome of a tax determination process, such as a geographical location (place) or tax registration status (party). Determining factors can be used in tax rules, taxable basis formula, and tax regime determination. Determining Factor Classes Tax determining factors are categorized into logical groupings called determining factor classes, such as Accounting or Geography. The grouping of determining factors into determining factor classes is done to simplify searches, by grouping similar determining factors together. A determining factor is automatically created under the appropriate determining
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factor class whenever you create a new element, such as a new fiscal product classification code. Class Qualifiers You use a class qualifier with a determining factor class when it is possible to associate a determining factor class with more than one value on the transaction. For example, for the determining factor class Geography and the determining factor Country, you need to specify which party location to use by means of a class qualifier such as ship from party or ship to party location.
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Determining Factor – Party
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Determining Factor - Party The Party determining factor includes the following determining factor classes and their class qualifiers: • Legal party fiscal classification - First party • Registration - Bill From Party - Bill To Party - Ship From Party - Ship To Party • Party fiscal classification - Bill From Party - Bill To Party - Point of Acceptance Party (AR transactions) - Point of Origin Party (AR transactions)
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- Ship From Party - Ship To Party • Transaction input factor - Not applicable The transaction input factor determining factor class groups together additional factors entered on the transaction line that can influence tax determination. Transaction input factors can apply to the parties, products, or processes involved in a transaction. See: Oracle E-Business Tax: Fiscal Classifications for a discussion of legal party and party fiscal classifications. See: Oracle E-Business Tax: Tax Profiles and Registrations for a discussion of registration information.
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Determining Factor – Product
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Determining Factor – Product The Product determining factor includes the following determining factor classes and their class qualifiers: • Product – Inventory linked - Not applicable • Product – Non-Inventory linked - Product fiscal classification level (Levels 1-5) • Transaction input factor (intended use, product override) - Not applicable See: Oracle E-Business Tax: Fiscal Classifications for a discussion of Product – Inventory linked and Product – Non-Inventory linked product fiscal classifications.
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Determining Factor – Place
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Determining Factor - Place The Place determining factor includes the following determining factor classes and their class qualifiers: • Geography - Bill From - Bill To - Point of Acceptance (AR transactions) - Point of Origin (AR transactions) - Ship From - Ship To • Tax Zones - Bill From - Bill To - Point of Acceptance - Point of Origin
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- Ship From - Ship To See: Oracle E-Business Tax: Part 1: Oracle E-Business Tax Basic Tax Configuration for a discussion of geography types and tax zones.
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Determining Factor – Process
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Determining Factor - Process The Process determining factor includes the following determining factor classes and their class qualifiers: • Document - Document fiscal classification level (Levels 1-5) • Transaction fiscal classification - Not applicable • Transaction generic classification - Classification level (Levels 1-5) • Accounting event - Accounting segments of the selected ledger • Transaction input factor - Not applicable The transaction generic classification determining factor class references fiscal classification codes belonging to the designated level in the corresponding fiscal classification type.
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See: Oracle E-Business Tax: Fiscal Classifications for a discussion of document and transaction fiscal classifications. See: Oracle E-Business Tax: Part 2: Oracle E-Business Tax Basic Tax Configuration for a discussion of tax accounts.
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Tax Determining Factor Set
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Tax Determining Factor Set Responsibility: E-Business Tax Manager (N) Tax Managers > Advanced Setup Options > Tax Determining Factor Sets > (B) Create Use the Create Tax Determining Factor Set page to set up a tax determining factor set. The tax determining factor set groups together related tax determining factors for use in tax rules determination and tax regime determination. Tax Rules Associate a tax determining factor set with a rule type to use in the creation of tax rules for the rule type. Tax determining factors are the building blocks in the creation of tax conditions for each tax rule. You associate one determining factor set with each tax rule to create the tax condition sets for the tax rule. You can maintain and reuse a tax determining factor set that you create for one rule with another rule for a different tax or a different rule type, where requirements are identical. You can also reuse a tax determining factor set within the same rule type for a different condition set. You can set up determining factor sets in advance to use with tax rules, or set up a determining factor set during the creation of a tax rule.
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Chapter 8 - Page 17
Regime Determination Associate a regime determination set with a combination of configuration owner and application event class to identify tax regimes and candidate taxes on transactions belong to this configuration owner and application event class. Tax regime determination is the first step in the tax determination process. A regime determination set differs from tax rule determining factor sets in that the determining factors are location types only. E-Business Tax compares the location types in the active regime determination set to the locations specified on the transaction to identify the countries associated with each location and the tax regimes associated with each country. Note: By default, E-Business Tax provides a seeded regime determination set for all Payables and Receivables transactions for all configuration owners. This regime determination set considers all location types (except Paying Location) to look for applicable tax regimes on a transaction. In most cases, you create alternative regime determination sets for specific configuration owners and application event class combinations in order to narrow the number of location types that E-Business Tax evaluates to derive eligible tax regimes. This increases regime determination efficiency for the related transactions.
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Tax Determination Set Setup for Tax Rules
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Tax Determination Set Setup for Tax Rules Before you can set up determining factor sets for tax rules, you may need to complete one or more of these tasks. Prerequisites • Set up tax regimes, if you intend to create a determining factor set for use with a specific tax regime, or if you intend to use a fiscal classification determining factor class that requires a tax regime assignment. • Set up ledgers, if you intend to use the Accounting determining factor class. The ledger accounting segments become available for use as tax condition values. • Set up TCA geography hierarchy structures, if you intend to use the Geography determining factor class. • Set up TCA party classifications, if you intend to use the Party Fiscal Classification or Legal Party Fiscal Classification determining factor class. • Set up party tax profiles, if you intend to use the Registration determining factor class. • Set up fiscal classifications, if you intend to use a determining factor class related to fiscal classifications.
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• Set up tax classification codes, if you intend to use the Transaction Input Factor determining factor class for tax classification codes. • Set up tax zones types and tax zones, if you intend to use the User Defined Geography determining factor class.
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Regime Determination Set Setup
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Regime Determination Set Setup Before you can set up determining factor sets for regime determination, you may need to complete one or more of these tasks. Prerequisites • Set up tax regimes. • Optionally set up tax zone types and tax zones, if you want regime determination to take place at the tax zone level for a location type.
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Agenda
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Tax Formulas
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Tax Formulas Responsibility: E-Business Tax Manager (N) Tax Managers > Advanced Setup Options > Tax Formulas > (B) Create Use the Create Tax Formula page to set up tax formulas for use in the tax rules Determine Taxable Basis and Calculate Tax Amounts. Determine Taxable Basis The Determine Taxable Basis tax rule derives the amount or quantity on the transaction line that E-Business Tax uses to apply the tax rate. The standard taxable basis formulas are: • Taxable Basis = Line Amount. • Taxable Basis = Quantity. If the tax requires the calculation of a taxable basis other than the line amount or line quantity (for example, assessable value or prior tax), then create a taxable basis tax formula and either associate it with a Determine Taxable Basis tax rule for the applicable tax regime and tax or set it as the default taxable basis for a tax.
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Chapter 8 - Page 23
Calculate Tax Amounts The Calculate Tax Amounts tax rule determines the formula that E-Business Tax uses to calculate the tax amount on the transaction line. The standard tax calculation formula is Tax Amount = (Taxable Basis) * (Tax Rate). If the tax amount is to be altered by adding or subtracting the tax amount of another tax , then create a tax calculation tax formula and either associate it with a Calculate Tax Amounts tax rule for the applicable tax regime and tax or set it as the default tax calculation formula for a tax.
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Tax Formula Setup
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Tax Formula Setup Before you can set up tax formulas, you must set up tax regimes and taxes for taxable basis tax formulas and for tax calculation tax formulas that you intend to assign to specific tax regimes and taxes. If you do not assign a tax calculation tax formula to a specific tax regime, then it becomes available to all tax regimes. You must also enable cross-regime compounding and compounding precedence for the tax regimes and taxes that will use tax formulas with compounding details.
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Agenda
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Tax Condition Sets
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Tax Condition Sets Responsibility: E-Business Tax Manager (N) Tax Managers > Advanced Setup Options > Tax Condition Sets > (B) Create Use the Create Tax Condition Set and Create Tax Conditions pages to set up tax condition sets. The tax conditions belonging to an individual tax condition set constitute the conditions to consider in order to determine if the result of the condition is true for the applicable transaction. The tax condition set or sets belonging to an individual tax rule constitute the logic of the tax rule—if any tax condition set belonging to a tax rule arrives at a true result, then the tax rule applies to the transaction. You can set up tax condition sets in advance and apply them to a tax rule, or you can set up tax condition sets during tax rule creation. The tax condition set specifies the factors to consider, and the resulting value that must exist for each factor, in order for the result of the tax rule to be true. Each tax condition in a tax condition set consists of a tax determining factor (determining factor class/class qualifier/determining factor name), an operator, and a value. When the elements of the transaction meet all of the tax regulations, then the rule result is true and the rule applies to the transaction.
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Tax Condition Sets Setup
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Tax Condition Sets Setup Before you can set up tax condition sets, you may need to complete one or more of these tasks. Prerequisites Mandatory prerequisite steps include: • Set up determining factor sets. • Set up values for the applicable determining factor classes. You should ensure that all of the values that you need have been defined for the determining factor classes that you intend to use in a tax condition set. For example, define all of the fiscal classification codes that you need for each applicable fiscal classification determining factor class.
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Summary
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Part 3: Setting Up Tax Rules Chapter 9
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Part 3: Setting Up Tax Rules
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E-Business Tax Architecture
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E-Business Tax Architecture The Rule Engine tier comprises the set of tax rules that are used to determine and calculate tax on a transaction. You define tax rules for each combination of tax regime, tax and configuration owner. You create tax rules by translating the tax regulations of a tax authority into determining factors and tax conditions that the E-Business Tax tax rules engine uses to evaluate the applicability of a tax on each transaction line. Tax rules determine: the applicability of a tax; the place of supply and tax jurisdiction of the transaction; the tax registration; the tax status and tax rate; the recovery rate (if applicable); and the taxable basis and tax formula to use in calculation. This module discusses how to create a tax rule using the Expert Rule Entry.
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Chapter 9 - Page 5
E-Business Tax Homepage – Tax Rules
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Rules in Detail Example UK Rules Setup (Intra EU Sales)
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Rules in Detail Example – UK Rules Setup (Intra EU Sales) An example of how tax rules can be modeled in E-Business Tax includes the following scenario: • You purchase goods from a VAT-registered business in another EU country. • The goods are moved to the UK. • You are required to account for VAT in the UK on the acquisition of the goods.
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Chapter 9 - Page 7
UK Rules Setup - Intra EU Sales
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UK Rules Setup – Intra EU Sales You determine the tax rule components based on the applicable tax regulations. As indicated in this example, you set up your determining factor and tax condition sets as follows: • Process – The tax rule is limited to purchases. • Party – The supplier must be registered in another EC country. • Place – The goods must be delivered from an EC country into the UK. • Product – The product type must be goods. Your tax rule attributes are: • Determine Place of Supply - The place of supply is the Ship To location. • Determine Tax Registration - The ship to party must self-assess the tax. • Determine Recovery Rate - The recovery rate rule is the default rate. The source of the tax regulations for this example is the HM Revenue and Customs – VAT Guide – All Sections.
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UK Rules Setup - Intra EU Sales
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UK Rules Setup – Intra EU Sales Note that the tax regulation that limits this tax requirement to Purchases is modelled as a rule restriction rather than a determining factor, to increase efficiency during tax processing. However, the same principle applies.
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UK Rules Setup - Intra EU Sales
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UK Rules Setup – Intra EU Sales The assumption in this example is that regular intra EU suppliers have already been validated to ensure that they have a registration in another EU country. The exception should be that they do not have a registration and you set up this exception, if needed, as a registration status, party classification, or as a specific tax classification and additional rule to prevent intra-EU processing. Note. This is a condition that requires additional supplier/supplier site setup. The assumption used is that most suppliers/supplier sites have been validated as part of the manual setup procedure.
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UK Rules Setup - Intra EU Sales
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UK Rules Setup – Intra EU Sales This tax regulation applies to goods only. Therefore, set up the product type equal to goods.
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UK Rules Setup - Intra EU Sales
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UK Rules Setup – Intra EU Sales In order to indicate that this tax regulation refers to goods shipped from another EU country to the UK, you set up your determining factor and tax condition sets as: • Country of Ship To equal to UK. • Economic region of Ship From equal to EEC. • Country of Ship From is not equal to UK.
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UK Rules Setup – Intra EU Sales Bringing these concepts together, if the conditions are true, then the result of the Tax Registration rule is Bill To Party (for example, the customer must self-assess the tax and charge themselves VAT based against their own registration number).
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UK Rules Setup - Intra EU Sales
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UK Rules Setup – Intra EU Sales Bringing these concepts together, if the conditions are true, then the result of the Place of Supply rule is Ship To Location (for example, the customer must self-assess the tax and charge themselves VAT using the tax of the country where the goods have been sent to).
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Agenda
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Rules in Detail Example Summary UK Rules Setup (Intra EU Sales)
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Rules in Detail Example Summary – UK Rules Setup (Intra EU Sales) Based on the example, you set up determining factor and tax condition sets as follows: • Process – The tax rule is limited to purchases. • Party – The supplier must be registered in another EU country. • Place – The goods must be delivered from an EU country into the UK. • Product – The product type must be goods. Results associated with the tax condition set: • Determine Applicable Tax Regimes and Candidate Taxes - The tax is UK VAT in the tax regime UK VAT. • Determine Place of Supply - The place of supply is the Ship To party and the tax jurisdiction is the UK. • Determine Tax Registration - The registration party type is the Ship To party, and the ship to party must self-assess the tax. • Determine Tax Status and Tax Rate - The applicable status and rate for UK VAT.
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Chapter 9 - Page 16
Note. The first three columns (Determining Factor, Determining Factor Class, and Class Qualifier) represent tax determining factors and the elements of a tax determining factor set. Each line represents a tax condition (Determining Factor + Operator + Resulting Condition). One or more tax conditions comprise a tax condition set, with the determining factors of the tax conditions drawn from the one determining factor set assigned to the tax rule.
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Tax Rules
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Tax Rules E-Business Tax provides two entry flows for setting up your tax rules: • Guided Tax Rule Entry - The guided tax rule entry provides a five-step flow that lets you build determining factors and tax conditions as you create the tax rule. See: E-Business Tax: Part 1: Setting Up Tax Rules for a description of the guided tax rule entry. • Expert Tax Rule Entry - The expert tax rule entry provides a concise, three-step entry flow that makes use of determining factor sets and tax condition sets that you have previously defined. Setting up tax rules using the Expert Tax Rule Entry is discussed in this module.
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Tax Rules – Expert Rule Entry
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Tax Rules – Expert Rule Entry Responsibility: E-Business Tax Manager (N) Tax Managers > Tax Rules > (I) Expert Rule Entry Set up tax rules using the expert rule entry when you are more familiar with the concepts of tax rules and tax determination. To use the expert rule entry, you must set up tax determining factor sets and tax condition sets for use with the rules that you intend to create. You can optionally set up a tax determining factor set during tax rule entry. Use the following pages to set up tax rules: • Tax Rules • Create Tax Rule: General Information • Create Tax Rule: Condition Results • Create Tax Rule: Rule Order See: Oracle E-Business Tax: Part 1: Setting Up Tax Rules for general information about setting up tax rules. See: Oracle E-Business Tax: Part 2: Setting Up Tax Rules for an explanation of tax determining factor sets and tax condition sets.
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Summary
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Tax Recovery
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Tax Recovery
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E-Business Tax Architecture
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E-Business Tax Architecture Tax recovery processing makes use of the five tiers of the E-Business Tax architecture in this way: • The Tax Definition tier maintains the recovery rate details of the basic tax configuration. • The Configuration tier identifies the factors that participate in determining the recovery rate on an individual transaction, such as product intended use. • The Rule Engine tier maintains the tax rules defined for the Determine Recovery Rate rule type. • The Services tier manages the calculation of the tax recovery amounts. • The Tax Management tier maintains all of the tax information pertaining to tax recovery for each transaction, for use in tax reporting This module discusses tax recovery in detail.
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Tax Recovery
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E-Business Tax Homepage – Tax Recovery
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Tax Recovery
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Tax Recovery In many parts of the world, some or all of the taxes on Procure-to-Pay business transactions for registered companies are recoverable taxes. A recoverable tax is a tax that allows full or partial recovery of taxes paid on purchases, either as a recoverable payment or as an offset against taxes owed. For example, most VAT-type taxes allow for full recovery of taxes paid on goods and services that relate to taxable business supplies. In some cases, partial recovery can be used for specific purchases. For example, in Belgium the Input VAT on the leasing of company cars for company use can only be 50% recoverable. In some cases, where a taxpayer has taxable and exempt sales (for example, Output Tax), the ratio of these two values may be used to set an estimated Input Tax Recovery Rate for normal purchases for the subsequent year. You make any necessary adjustments at the tax year end. You can implement this by setting up a default recovery rate as this partial recovery rate.
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Value Added Tax Overview
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Value Added Tax Overview Value Added Tax (VAT) is imposed on the supply of goods and services paid for by the consumer, but collected at each stage of the production and distribution chain (for example, original manufacturer, wholesaler, retailer, and final consumer). The VAT charged on a customer invoice is called Output Tax. Any VAT paid on a vender invoice is called Input Tax. The amount due each period can be described as follows: Amount Due = Output Tax – Input Tax. At each stage, the organization purchasing supplies can recover all or part of the tax from their purchases. For example, organizations that only produce VAT applicable goods and services can use 100% recovery rate on most purchases. Organizations that produce VAT exempt goods and services, for example, financial institutions, have a 0% recovery rate.
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Tax Recovery
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Regime-to-Rate Flow with UK VAT
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Regime-to-Rate Flow with UK VAT An example of UK VAT illustrates a tax configuration with a full recovery of the tax (100% recovery rate) defined. In most tax regimes, a tax that is paid by a registered establishment can claim back 100% of taxes due from the tax authority, except for specific designated purchases. Depending upon the details of a company’s business purchases and tax authority regulations, a number of exception regulations may accompany the details of tax recovery.
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Agenda
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Tax Recovery Rates
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Tax Recovery Rates Responsibility: E-Business Tax Manager (N) Tax Managers > Tax Configuration > Tax Recovery Rates > (B) Create Use the Create Tax Recovery Rate page to set up tax recovery rate codes for the recovery types identified on the taxes within a tax regime. A tax recovery rate code identifies the percentage of recovery designated by the tax authority for a specific transaction. In Canada, where more than one type of recovery is possible for a given tax, you must set up the applicable tax recovery rate codes for both the primary and secondary recovery types that can apply to a transaction. If you set the Allow Tax Recovery option for the tax regime and tax, then you must set up at least one recovery rate for the tax in order to make the tax available on transactions. If the recovery rate can vary based on one or more factors, including the parties, locations, product or product purpose, then set up tax rules to determine the appropriate recovery rate to use on specific transactions.
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Tax Recovery
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At transaction time: • E-Business Tax first determines if there is an applicable Tax Recovery Rate rule. • If no applicable Tax Recovery Rate rule is found, the system determines if there is a default recovery rate code defined for the applicable rate. • If no recovery rate is found, then the system uses the default recovery rate defined on the tax. In many cases, E-Business Tax uses either the recovery rate associated with the tax rate or the default recovery rate defined for the tax. Prerequisite Before you can set up tax recovery rates, you must set up taxes.
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Rule Engine – Recovery Rate
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Rule Engine – Recovery Rate The Recovery Rate process determines the recovery rate to use on Procure-to-Pay transactions, when the tax allows for full or partial recovery of the tax amount. In many cases, E-Business Tax uses either the recovery rate associated with the tax rate or the default recovery rate defined for the tax. However, if the tax recovery rate can vary according to determining factors, such as intended use, then use a Determine Recovery Rate tax rule to derive the recovery rate. You can only set up a Determine Recovery Rate tax rule for taxes that have the Allow Primary Recovery Rate Determination Rules option and, if applicable, the Allow Secondary Recovery Rate Determination Rules option enabled. E-Business Tax creates one recoverable distribution for the primary recovery type and secondary recovery type for each tax line, for each of the item distributions into which the item or expense line is distributed.
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Tax Recovery Processing
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Tax Recovery Processing After E-Business Tax determines the recovery rate for each recovery type, it then determines the recoverable amounts against each recovery type for each tax line. The remaining tax amount becomes the non-recoverable tax amount for the tax line. E-Business Tax stores both the recoverable and non-recoverable amounts of reportable documents, such as Payables invoices, to include in your tax reporting. Activity Steps The activity steps include: 1. Allocate tax amount per item distributions – E-Business Tax apportions the tax amount to each item distribution. While taxes are determined at the transaction line level, tax recovery is determined at the transaction line distribution, or item distribution, level. 2. Determine recovery types – E-Business Tax determines, for each tax and item distribution, whether the primary and, if defined, secondary recovery types apply. The result of this process is a tax distribution for each recovery type for each tax and item distribution. If recovery types are not defined, the system goes to step 5.
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Tax Recovery
Chapter 10 - Page 16
3. Determine recovery rates – E-Business Tax determines the recovery rate for each tax distribution: a. E-Business Tax considers the Determine Recovery Rate tax rule for the first recoverable tax distribution. b. E-Business Tax uses the tax recovery rate derived from the tax rule. c. If E-Business Tax cannot derive a tax rule based on the transaction values, then it uses the tax recovery rate associated with the tax rate for the tax line. d. If there is no tax recovery rate associated with the tax rate, E-Business Tax uses the default tax recovery rate defined for the tax. e. Repeat steps 1 to 4 for each recoverable tax distribution. 4. Determine the recoverable amounts – E-Business Tax applies the recovery rates to the apportioned tax amounts to determine the recoverable tax amounts. The result of this process is a recoverable tax amount for each recoverable tax distribution. 5. Determine the non-recoverable amount – E-Business Tax calculates the difference between the apportioned tax amount of every tax line per item distribution and the sum of the recoverable tax distribution to arrive at the non-recoverable tax amount, and then creates a non-recoverable tax distribution for this amount. If a primary recovery type was not defined for a tax, E-Business Tax designates the entire apportioned amount for the item distribution as the non-recoverable tax amount. In each case, E-Business Tax creates two distribution lines: one for the recoverable amount and one for the non-recoverable amount. If the tax is fully recoverable, then the recoverable distribution amount is equal to the tax amount and the non-recoverable distribution amount is equal to zero. If the tax is recoverable and the recovery rate is zero, then the non-recoverable distribution amount is equal to the tax amount and the recoverable distribution amount is equal to zero. Users with the appropriate authorization can update these distributions.
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Managing Taxes on Transactions
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Chapter 11
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Managing Taxes on Transactions
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Managing Taxes on Transactions
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Managing Taxes on Transactions
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E-Business Tax Architecture
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E-Business Tax Architecture The Services tier manages the calculation of the tax amounts, and tax recovery amounts (if applicable). E-Business Tax calculates the tax on a transaction based on the legal entity/operating unit setup, the tax configuration, and tax rules setup. The entire calculation process is transparent to the user. This module discusses tax handling on transactions in detail.
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E-Business Tax Homepage – Oracle Tax Simulator
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Services
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Services E-Business Tax calculates tax on Procure to Pay transactions from Purchasing and Payables. Oracle E-Business Suite Applications • Procure to Pay Applications - Purchasing - iProcurement - Consigned Inventory - Internet Expenses - Payables
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Services
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Services E-Business Tax calculates tax on Order to Cash transactions from Receivables, and on Project invoices created in Receivables. For intercompany transactions, E-Business Tax accounts for tax on both the Receivables (sale) side and Payables (purchase) side. For General Ledger, you can use E-Business Tax to set up automatic tax calculation on taxable journal entry lines. You can define a tax rate code at the ledger level to default to all taxable journal lines entered in the ledger, or you can define a tax rate code for a natural account segment to default to related taxable journal entry lines. E-Business Tax also calculates tax on transactions from applications that feed data into Payables or Receivables. These applications are called source applications. The tax determination process only takes place after these applications interface data into Payables or Receivables. • Example 1: A source application can feed a Receivables invoice into Payables to use as the source document for an intercompany Payables transaction.
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Managing Taxes on Transactions
Chapter 11 - Page 8
• Example 2: A source application can feed Trade Management transaction information into Receivables to ensure consistency in the tax calculation between the Trade Management source and Receivables and Payables transactions.
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Payables Transactions
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Payables Transactions E-Business Tax provides tax services for the following Payables event classes: • Standard invoices. • Prepayment invoices. • Expense reports. With the invoice line introduction by Payables in Release 12, tax calculation is now also supported at both invoice lines and distribution level. Additional attributes are captured by Payables for tax purposes as displayed on the Payables Invoice Workbench. Additional attributes include: • Taxation country. • Document subtype. • Transaction business category. • Product fiscal classification. • Product category. • Product type.
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Managing Taxes on Transactions
Chapter 11 - Page 10
• Line intended use. • User defined fiscal classification. • Assessable value. You can enter and update detail and summary tax lines according to the requirements of your transactions. You can perform these operations on tax lines: • Enter a manual tax line. • Change existing tax line information. • Cancel a tax line. Self-assessed taxes are also handled in Payables transactions. Examples of tax handling on Payables transactions are discussed in the following slides: • Invoices matched to purchase orders. • Prepayment invoices. • Payables price corrections.
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Payables Transactions – Invoices Matched to POs
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Payables Transactions - Invoices Matched to POs When you create an invoice in Payables by matching it to a purchase order, Payables copies the purchase order tax lines and tax-related information to the invoice and recalculates the tax. The tax rate that is used in tax calculation is always derived from the invoice date. If the tax rate has not changed between the purchase order date and the invoice date, then the tax calculation results in the same tax lines on the invoice as on the purchase order shipment line. If the tax rate has changed between the purchase order date and the invoice date, then the tax calculation results in the same tax lines but using the tax rate that corresponds to the invoice date. E-Business Tax manages the updates to tax-related information in this way: 1. Tax applies to the purchase order but not to the invoice - The tax line appears with a zero amount. 2. Tax applies to both the purchase order and the invoice but with different tax rate codes and tax rates - The tax line appears with the tax amount as calculated by the invoice. The tax line is created with the tax rate code and tax rate effective on the invoice date. Payables displays the tax rate variance at the distribution level. If the Enforce Tax From Reference Document tax option is enabled for the applicable
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Managing Taxes on Transactions
Chapter 11 - Page 12
configuration owner and event class, the tax line for the invoice inherits the corresponding tax rate code and recovery rate code (if applicable) from the purchase order, but the actual tax rate and recovery rate used in the tax calculation are the rates defined for the rate period that corresponds to the invoice date.
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Payables Transactions – Prepayment Invoices
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Payables Transactions - Prepayment Invoices When you apply a prepayment to an invoice, the tax rate at the time of prepayment may differ from the tax rate at the time the prepayment is applied to an invoice. E-Business Tax considers the tax calculated on the prepayment according to the value assigned to the Applied Amount Handling option in the tax record. The values are Recalculated and Prorated. For example, you apply a prepayment amount of $5000 to an invoice with a total amount of $10,000. At the time of prepayment the applicable tax rate was 5% ($250 tax on the prepayment); at the time of invoice creation the applicable tax rate is 10%. E-Business Tax calculates the tax in this way: • Recalculated - E-Business Tax recalculates the tax on the prepayment using the invoice tax rate, and applies the same tax rate to the invoice line amount. The tax calculation creates two tax lines, one for the invoice line amount and one for the prepayment with a negative amount. In the invoice example, the calculation creates an invoice line amount tax line of $1000 (10% * $10,000) and a prepayment tax line of -$500 (10% * -$5000). The total tax is $500.
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Managing Taxes on Transactions
Chapter 11 - Page 14
• Prorated - E-Business Tax retains the original tax rate on the prepayment and applies the new tax rate to the invoice line amount. The tax calculation creates two tax lines, one for the invoice line amount and one for the prepayment with a negative amount. In the invoice example, the calculation creates an invoice line amount tax line of $1000 (10% * $10,000) and a prepayment tax line of -$250 (5% * -$5000). The total tax is $750.
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Payables Transactions – Price Corrections
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Payables Transactions - Price Corrections In Payables, you can create a new invoice to correct the quantity or amount of an existing invoice. The correction results in a change in line amount, either positive or negative. EBusiness Tax calculates the tax on the new invoice created as a result of the price correction in proportion to the taxes on the original corrected invoice. For example, an original invoice has a line amount of $100, and two tax lines one of $5 and $10. If the price correction reduces the line amount by $20, then the new invoice creates two tax lines of -$1 and -$2.
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Managing Taxes on Transactions
Chapter 11 - Page 16
Receivables Transactions
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Receivables Transactions E-Business Tax provides tax services for the following Receivables event classes: • Invoices • Debit memos • Credit memos Receivables has integrated with Oracle E-Business Tax windows to capture additional attributes and also to enter, view, or modify tax lines. You can set up Receivables tax accounts to record tax amounts that you can and cannot claim as deductions against overall tax liability. Credit memo processing no longer allows different percentage of line amount and tax amount crediting. Examples of tax handling on Receivables debit and credit memo transactions are discussed in the following slide.
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Receivables Transactions – Debit and Credit Memos
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Receivables Transactions – Debit and Credit Memos There are two types of debit/credit memos: On Account and Applied. E-Business Tax uses a different tax calculation method for each type: • On Account Credit Memos - E-Business Tax calculates tax on On Account credit memos in a similar way to normal invoices. The only difference is that if the line amount is negative, the tax calculated is also negative. • Applied Debit/Credit Memos - E-Business Tax calculates tax on Applied debit/credit memos in direct proportion to the line amounts on the invoice to which the debit/credit memo is applied. For example, if you create an invoice with one line item of $100 and tax of $10, then if the line item is credited $10 with an Applied credit memo the tax line is credited $1. Receivables Credit Transactions You can create Applied credit memos at the header level or the line level. • Header level - There are three options available for credit allocation: - Line Only - Tax is not credited.
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- Line and Tax - You enter the amount or percentage to be credited on the line amount. The amount you enter is credited proportionately to each line in the invoice. Each tax line is credited by the same percentage as the corresponding line amount. - Tax Only - You enter the amount or percentage to be credited on the tax amount. Each tax line is credited by the same percentage in proportion to the tax amount for the line. • Line level - You can credit individual lines. The tax line is credited in proportion to the line amount credit.
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Intercompany Transactions
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Intercompany Transactions Intercompany transactions must account for tax on both the Receivables (sale) side and Payables (purchase) side. If the transaction is between legal entities in different tax regimes, then you may need to account for the tax charged on the sale in a different manner from the purchase. E-Business Tax accounts for intercompany transactions in this way: • If a tax is charged on the Receivables sale with a tax amount greater than zero, then EBusiness Tax charges the same amount of tax on the Payables purchase side. E-Business Tax looks for and applies a Payables tax rate code to match the Receivables tax rate code in order to reconcile the transaction tax. If you are using migrated tax data, then E-Business Tax uses the matching Receivables and Payables tax rate codes. If you are using an E-Business Tax configuration with the legal entities sharing the tax configuration of the Global Configuration Owner, then EBusiness Tax applies the same tax rate to the Receivables and Payables transactions.
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• If a zero tax amount is charged on the Receivables sale, then E-Business Tax reconciles the Payables purchase in one of two ways: - If the Payables side also uses a zero-rated tax rate for goods and services, then EBusiness Tax applies the zero-rated tax rate code. - If there is no zero-rated tax rate, then E-Business Tax self-assesses the tax using the applicable self-assessment setup: offset taxes; self-assessment/reverse charge; or reporting purposes only tax. This applies, for example, to intercompany Intra-EU sales, where the sale is to another legal entity of the same company in a different EU country. If any special implications apply to intercompany transactions, you can use the transaction business category Intercompany Transaction to identify these transactions.
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Managing Detail Tax Lines
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Managing Detail Tax Lines Responsibility: Payables and Receivables (N) Payables > Invoices : Entry > Invoices > (B) Tax Details > (B) Detail Tax Lines (N) Receivables > Transactions > Transactions > (B) Tax Use the Detail Tax Lines window in the applicable application to review and manage Payables and Receivables detail tax lines. Depending on the available settings, you can: • View tax line information. • Enter a manual detail tax line. • Enter tax-only invoices and tax only tax lines. • Change existing detail tax line information. • Cancel a Payables detail tax line. The operations that you can perform depend upon the related application and tax settings. Entering Additional Determining Factor Information on Receivables Tax Lines Responsibility: Receivables (N) Receivables > Transactions > Transactions > (B) Tax Information
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Use the Additional Tax Determining Factors window to review and enter additional tax information on Receivables transaction lines. E-Business Tax calculates tax on the transaction based on the tax configuration and tax rules setup, as well as any additional tax information that you enter. You can only enter additional tax information for imported lines. You cannot enter and apply additional tax information to manually entered lines. Updates apply to the transaction of the legal entity and taxation country displayed in the header region. If you enter or update any fields in the Additional Tax Determining Factors window, you must update the Receivables transaction in order to recalculate the tax.
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Managing Summary Tax Lines
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Managing Summary Tax Lines Responsibility: Payables (N) Payables > Invoices : Entry > Invoices > (B) Tax Details Use the Tax Lines Summary window to review and manage Payables summary tax lines. Depending on the available settings, you can: • View summary tax lines. • Enter a manual summary tax line. • Allocate a manual summary tax line to specific transaction lines. • Change existing summary tax line information. • Cancel a summary tax line. The operations that you can perform depend upon the tax settings. If you enter or change a summary tax line, you cannot update detail tax lines. Viewing Inclusive Tax Lines If an invoice is inclusive of tax, the Inclusive option is enabled on both the detail and summary tax lines. If an invoice with multiple tax lines has a mixture of both inclusive and exclusive taxes with the same rate, then the Tax Lines Summary window displays two tax lines, one with
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the Inclusive option enabled and one with the option disabled. If the Allow Override and Entry of Inclusive Tax Lines at the tax or tax rate level, you can update the applicable Inclusive option. Viewing Self-Assessed Tax Lines Because self-assessed taxes are not present on a supplier invoice, Payables does not include self-assessed tax lines on the Tax Lines Summary window. After the tax on the invoice is calculated, you can navigate to the Tax Details windows to view your self-assessed/reverse charges, or in the United States the calculation of Use tax. Allocating Summary Tax Lines Responsibility: Payables (N) Payables > Invoices : Entry > Invoices > (B) Tax Details > (B) Allocate After you create summary tax lines, you can use the Allocate Summary Tax Lines page to review and allocate your manual summary tax lines to specific transaction lines. You can view the transaction line number, description, line amount, and transaction date of each transaction line. These conditions apply to allocating summary tax lines: • You must select at least one transaction line for allocation. • You cannot allocate a tax only summary tax line. • You cannot update or delete a transaction line that is to be allocated.
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Managing Tax Distributions
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Managing Tax Distributions Responsibility: Payables and Receivables (N) Payables > Invoices : Entry > Invoices > (B) All Distributions > (B) Tax Distributions (N) Receivables > Transactions > Transactions > (B) Distributions Use the Distributions window to review and update tax distributions. You can review tax distributions and, if applicable, update the tax recovery rate on a tax distribution. E-Business Tax creates recoverable distributions and calculates tax recovery rates when you save the line distribution, according to the Determine Recovery Rate tax rule process or the default recovery rate. If self-assessment is enabled for the applicable party, E-Business Tax creates two distributions for each tax, one with a positive amount and the other with a negative amount.
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E-Business Tax displays tax distributions as follows: • If the tax is non-recoverable, E-Business Tax displays one non-recoverable tax distribution line for the tax, with the non-recoverable amount equal to the tax amount. You cannot update a non-recoverable tax distribution nor create a manual recoverable distribution. • If the tax is recoverable, E-Business Tax displays two distribution lines, one for the recoverable amount and another for the non-recoverable amount.
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Managing Tax Exemptions
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Managing Tax Exemptions Responsibility: E-Business Tax Manager (N) Receivables > Transactions > Transactions > (T) Tax Exemption Use the Tax Exemption region of the Lines window to enter and update tax exemptions on Receivables transactions according to your requirements. A tax exemption applies a discount or a replacement percentage that reduces the tax on a transaction. Tax exemptions apply to a specific customer or to a combination of customer and specific product. Processing Tax Exemptions E-Business Tax processes tax exemptions in different ways depending upon the value you choose in the Tax Handling field on the Tax Exemption region of the Lines window: • Require - The customer is required to pay the tax. Tax exemptions do not apply to this transaction line, even if defined. • Exempt - Enter the exemption certificate number and the customer exemption reason. EBusiness Tax processes the tax exemption in this way: - Consider tax exemptions with a status of Primary, Manual or Unapproved. - Verify that the transaction date is within the tax exemption effective date range.
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- Verify that the transaction exemption reason and exemption certificate number match the tax exemption reason and certificate number. If you do not enter a certificate number, E-Business Tax still looks for a matching tax exemption. - If E-Business Tax does not find an exemption matching these conditions, it creates an exemption with the status Unapproved and a 100% discount. • Standard - This tax handling is for exemptions of the Primary status only (applies to all transactions of the customer or customer site). You do not have to enter the exemption certificate number or customer exemption reason. E-Business Tax looks for a tax exemption with the Primary status and an effective date range that includes the transaction date. If more than one tax exemption applies, E-Business Tax uses the most specific tax exemption. Calculating the Tax Rate After applying the tax exemption to the transaction line, E-Business Tax calculates the tax rate as follows: • If the exemption type is a discount/surcharge, then Tax Rate = Tax Rate * Discount/Surcharge percentage. • If the exemption type is a special rate, then Tax Rate = Special Rate. • If both a tax exemption and tax exception apply to the same transaction line, E-Business Tax calculates the tax rate in this way: - If the exemption type is a special rate, then E-Business Tax only applies the tax exemption special rate (Tax Rate = Special Rate). - If the exemption type is a discount/surcharge and the exception type is a special rate, then Tax Rate = Tax Exception Special Rate * Tax Exemption Discount/Surcharge percentage. - If both the exemption type and exception type are discount/surcharge, then Tax Rate = Tax Rate derived from tax rules * Tax Exception Discount/Surcharge percentage * Tax Exemption Discount/Surcharge percentage.
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Using the Oracle Tax Simulator to Enter Transactions
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Using the Oracle Tax Simulator to Enter Transactions Responsibility: Oracle Tax Simulator (N) Oracle Tax Simulator > Tax Simulator Use the Tax Simulator to enter transaction information for tax analysis purposes. Oracle Tax Simulator displays the Transaction Lines window for the entry of detailed transaction and tax information. The Transaction Lines window contains a Header region for entering application, party and general transaction information, and a Lines region for entering detailed information for each transaction line. The Tax Simulator: • Allows a standard interface for all applications, so you are not required to learn a lot of applications. • Does not create real transactions, so it is safe to use. • Provides a repository of transactions which can be reused to test a new tax setup. • Provides user access to detailed information about which rules and defaults have been used for each rule type.
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See: Oracle E-Business Tax: Part 1: Setting Up Tax Rules for additional information on the Tax Simulator.
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Tax Reporting Ledger Chapter 12
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Tax Reporting Ledger
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E-Business Tax Architecture
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E-Business Tax Architecture The Tax Management tier maintains all of the tax information pertaining to each transaction, for use in tax reporting. This module discusses tax reporting in detail.
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E-Business Tax Home Page – Requests
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Tax Reporting
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Tax Reporting E-Business Tax provides a single reporting solution for complex global tax requirements on sales and purchases. E-Business Tax lets you summarize tax information from Receivables, Payables, and General Ledger transactions. Features The reporting features for E-Business Tax include: • Tax Reporting Ledger - Most information for all tax reports come from the Tax Reporting Ledger, a common tax repository, which guarantees data consistency and reporting performance. • Extensible XML Publisher – You can design and control the report presentation using report templates. When you generate a report, XML Publisher merges report data with the report template to create a document that supports numerous formatting options, including color, images, font styles, headers, and footers. • Current reports – The vast majority of existing tax reports are preserved and converted into a corresponding XML Publisher, RXi, or Oracle Reports template. • Templates – XML and RXi tax reporting templates can be easily customized by you.
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Benefits The reporting benefits include: • Improved quality of tax information. • Extensibility of the tax reports. • Easy to integrate tax information with external tax returns.
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Tax Reporting Ledger
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Tax Reporting Ledger The Tax Reporting Ledger provides a single reporting solution for the complex global tax requirements on sales and purchases and enables you to summarize tax information from Receivables, Payables, and General Ledger transaction. Taxable transactions are accounted for in the base products according to your tax configuration and tax rules setup in E-Business Tax. The Tax Reporting Ledger consists of the tax information recorded in each of these and related products. The tax extract copies the accounting information from each application and stores it in an interface table. Output from the tax extract is designed to look as close to a simple tax report as possible. You can use the available reporting tools, including: • RXi Reports Administration Tool – For printing RXi reports. You can modify an attribute set and print information according to your tax reporting needs. • Oracle Reports - For printing flat files and country-specific reports. • XML Publisher - For printing custom-formatted standard tax reports using the available templates. Use these tools to specify which fields of the Tax Reporting Ledger to include and to print the report in a format that meets your needs.
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The Tax Reporting Ledger supports the following reports: • Deferred Output Tax Register • Recoverable and Non-Recoverable Tax Registers • Single Cross Product Tax Register • Standard Input and Output Tax Registers
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XML Publisher
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XML Publisher Oracle XML Publisher simplifies the whole customization process. The traditional approach of combining the data definition, format, and translation in a single entity is now replaced by breaking the three components apart. With the three pieces now separated the whole model is simplified. • Data Definition - The data definition exists as a single entity, an Oracle report, PL/SQL package, Service Bean, etc. It now just becomes an ‘XML Data Engine’ that can service a reporting need, along with fulfilling other requirements (for example, business-to-business communication). • Report Templates – The technology behind XML Publisher is a W3C standard, XSL-FO. There are many XSL editors currently in the market that can be used to create report formats. XML Publisher also allows the user to create layouts using Microsoft Word, Microsoft Excel, and Adobe Acrobat. These familiar desktop tools make report template design easier for users. • Translation – XML Publisher is able to extract the report boilerplate to an XLIFF format. These files can then be translated by 3rd party translation companies.
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At runtime the three components are brought together by XML Publisher to generate the required output. Reports E-Business Tax provides XML Publisher templates for these standard reports: • Intra-EU Audit Trail Report • Tax Audit Trail Report • Tax Received Report • Tax Reconciliation Report • Tax Reconciliation by Taxable Account Report • Tax Register
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E-Business Tax Reports
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E-Business Tax Reports E-Business tax reports make use of the tax data extract to retrieve tax transaction information based on your tax configuration and tax rules setup. You can use E-Business tax reporting to organize tax report data according to the requirements of your company and the tax authority. Reports that make use of the E-Business Tax data extract include: • Customers with Invoices at 0 VAT and No VAT Registration Number • E-Business Tax Transactions Upgrade On Demand • Financial Tax Register • Intra-EU Audit Trail Report • Tax Partner Services Plug-In • Tax Received Report • Tax Reconciliation Report • Tax Reconciliation by Taxable Account Report • Tax Register Report • Tax Audit Trail Report
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• Tax-Only Open Invoices Report • VAT Exception Report For complete details on E-Business Tax reports, see: Oracle E-Business Tax Reporting Guide.
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EMEA VAT Reports
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EMEA VAT Reports The EMEA VAT Reporting feature in Oracle Financials for Europe lets EMEA countries manage their VAT reporting requirements. The EMEA VAT reports make use of the EBusiness tax data extract to retrieve VAT transaction information based on your tax configuration and tax rules setup. You can use EMEA VAT Reporting to organize tax report data according to the requirements of your company and the tax authority. EMEA VAT reports are XML reports that let you control the report presentation using report templates and XML Publisher. For complete details on EMEA VAT reporting, see: Oracle Financials for Europe User Guide.
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Latin American Tax Reports
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Latin American Tax Reports Oracle Financials for the Americas provides tax reports for Payables and Receivables transaction taxes to meet country-specific tax reporting requirements. These reports make use of the E-Business tax data extract to retrieve transaction tax information based on your tax configuration and tax rules setup. This includes transaction tax data generated by the Latin Tax Engine. Some of the Oracle Financials for the Americas tax reports are XML reports that let you control the report presentation using report templates and XML Publisher. Reports that make use of the E-Business Tax data extract include: • Argentine Receivables Income Tax Self Withholding Report • Argentine Receivables CITI Flat File • Argentine Receivables Perceptions Flat File • Argentine Receivables Other Perceptions Flat File • Argentine Receivables Sales Flat File • Argentine Receivables Sales Documents Duplicates Flat File
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• Colombian Receivables Income Tax Self Withholding Report • Colombian Receivables Sales Fiscal Book Report For complete details on Latin American tax reporting, see: Oracle Financials for the Americas User Guide.
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Asia/Pacific Tax Reports
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Asia/Pacific Tax Reports Oracle Financials for Asia/Pacific provides tax reports for Payables and Receivables transaction taxes to meet country-specific tax reporting requirements. These requirements include: • Korean VAT • Singaporean GST • Taiwanese Government Uniform Invoice (GUI) Some of the Oracle Financials for Asia/Pacific tax reports are XML reports that let you control the report presentation using report templates and XML Publisher. Reports that make use of the E-Business Tax data extract include: • Korean VAT Tax Report • Singaporean GST F5 Report • Singaporean Input Taxes Gain/Loss Report • Taiwanese Input VAT Report • Taiwanese Payables Sales/Purchase Return and Discount Certificate • Taiwanese Pro Forma 401 Report
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• Taiwanese Purchase Return and Discount Report • Taiwanese Output VAT Report • Taiwanese Receivables Government Uniform Invoice Report • Taiwanese Receivables Zero-Rate Tax Report • Taiwanese Sales Return and Discount Report For complete details on Asia/Pacific tax reporting, see: Oracle Financials for Asia/Pacific User Guide.
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Appendix A: Managing Migrated Tax Data
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Appendix A: Managing Migrated Tax Data
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Commitment To Continuity Direct Path From 11i
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Commitment to Continuity – Direct Path From 11i Oracle E-Business Tax provides a common model for setting up and using existing Release 11i tax data for tax determination and tax calculation. This includes tax data that was originally set up in Payables, Purchasing, Receivables, and Projects. E-Business Tax can calculate taxes on transactions in Release 12 using tax data migrated directly from Release 11i. The system gives the same tax result after migration for the same transactions, with no manual setup or modification required.
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Tax Definition Upgrade Flow
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Tax Definition Upgrade Flow The E-Business Tax solution for Release 11i migrated data includes these features: • Migration of application-specific ownership of tax setup to the E-Business Tax shared ownership model for all Procure-to-Pay and Order-to-Cash transactions. By default, Payables and Receivables tax data migrates to E-Business Tax as operating units owning tax content. You can continue to maintain operating unit ownership of tax content, and then gradually move this tax content into the shared ownership model (see next slide). • Migration of setups belonging to tax codes and rates (Payables tax codes and Receivables VAT taxes) to the E-Business Tax Regime-to-Rate flow. • Migration of existing tax codes to E-Business Tax as tax classification codes. • Migration of existing tax groups to E-Business Tax as Direct Tax Rate Determination rules. • Migration of existing tax code defaulting hierarchies to tax classification code defaulting hierarchies. • Tax determination and tax calculation based on the tax classification code and the Direct Tax Rate Determination rule type.
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Release 11i Architecture
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Tax Code Migration
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Tax Code Migration In Release 11i, the application-specific tax code performed many tax-related functions. These included the tax type, tax rate, offset taxes, recovery rules, taxable basis determination, tax calculation, and maintenance of related tax accounts. In addition, the Receivables tax group let you combine tax codes to calculate multiple taxes on single taxable items. In E-Business Tax, the five-tier architecture manages the setup, determination, calculation, and recording of taxes and tax-related data. Each tier maintains data specific to its functions and interacts with the other tiers as necessary to complete a tax transaction. In keeping with the E-Business Tax setup, the functions of Payables and Receivables tax codes migrate to E-Business Tax records according to the E-Business Tax Regime-to-Rate model, or Tax Definition tier. The Configuration tier manages the use of tax classification codes while the Rule Engine tier uses the Direct Tax Rate Determination rule to manage tax determination for transactions that use tax classification codes. The Services and Tax Management tiers perform their related functions for tax calculation and tax information recording. The major features of tax code migration from Release 11i to Release 12 include: • Operating unit (OU) as the configuration owner of the tax regime. • Tax type to tax regime code.
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• Tax code name to tax code and tax rate code (minus numeric identifiers). • All tax codes to tax status with the value of Standard. • Tax rate details, such as percentage rate, effective date range, default recovery rate, and offset tax code, to tax rate code record. • Location-based tax rates to TCA geographies (locations), tax jurisdictions, and tax rates. • Tax account details, such as set of books and tax code combination, to tax rate tax account record, including the ledger and recoverable/non-recoverable code combinations (if applicable). • Tax calculation details to tax classification code. • Tax group with tax compounding to tax regime, tax, and taxable basis formula. • Tax group rules to direct tax rate determination rules. • Financial System Options, such as rounding rule precision and minimum accountable unit, to tax regime and tax. • Payables System Options, such as tax inclusive handling, to tax.
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Data Ownership
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Data Ownership In Release 11i, each application owned and maintained its own tax codes and rates for use with its application-specific transactions. Because E-Business Tax provides a single source for all transactions for tax determination and tax calculation services, the ownership of the tax setup moves to the E-Business Tax shared ownership model. In this model, all legal entities and operating units of the company can share the same tax setup, while individual operating units and legal entities may need to own tax setup for specific requirements as defined by the tax authority. Existing operating units that have Release 11i tax setup migrate to E-Business Tax as partyspecific configuration owners, with the operating unit owning the tax setup. If a Receivables or Projects tax setup contains location-based tax codes, then these tax codes migrate as part of the common configuration, with the global configuration owner owning the location-based tax setup.
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Chapter 13 - Page 10
Operating Unit Tax Profiles
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Operating Unit Tax Profiles Responsibility: E-Business Tax Manager (N) Tax Managers > Parties > Party Tax Profiles Set up party tax profiles for the operating units owning tax content that migrated from Release 11i. You can use the operating unit party tax profile in either of two ways: • Operating Unit maintains tax content – In cases where you need to maintain tax content for an operating unit, enter and maintain the operating unit tax configuration options for the applicable tax regimes. You can also set up tax reporting codes for the operating unit. • Operating Unit uses associated Legal Entity – Indicate that the tax content belonging to the operating unit is used and maintained based on the configuration of the associated legal entity at transaction time. You do this by enabling the Use Subscription of the Legal Entity option. In this case, the operating unit tax content is either maintained by the legal entity alone, or it is shared across all legal entities that use the Global Configuration Owner setup. Note. If you enable the Use Subscription of the Legal Entity option to have the operating unit use the configuration of the associated legal entity, you cannot revert back to the operating unit owning the tax content.
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Chapter 13 - Page 11
If an operating unit uses the application tax options defaulting hierarchy for tax classification codes, E-Business Tax continues to use this hierarchy to default a tax classification code on transactions even if the operating unit uses the subscription of the legal entity.
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Tax Classification Codes
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Tax Classification Codes The migration of Release 11i tax codes and related tax setup to E-Business Tax is designed such that after migration you can arrive at the same tax result for the same transactions. Release 11i tax codes migrate to E-Business Tax as tax classification codes. The tax classification code is a tax determining factor under the Transaction Input Factor determining factor class. You can use tax classification codes and the Direct Tax Rate Determination rule type to set up a tax determination model similar to Release 11i. At transaction time, E-Business Tax uses the tax classification code that is defaulted to the transaction line to determine the tax status and tax rate for applicable taxes according to the Direct Tax Rate Determination rule defined for the configuration owner and tax. You can also manually enter a tax classification code on the transaction line. The use of tax classification codes in tax determination includes these elements: • Tax classification code setup - Payables and Purchasing tax codes migrate as input tax classification codes under the ZX_INPUT_CLASSIFICATIONS lookup type. Receivables and Projects tax codes migrate as output tax classification codes under the ZX_OUTPUT_CLASSICATIONS lookup type. You can use these lookup types to define additional tax classification codes according to your requirements.
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• Tax classification code assignments - E-Business Tax replaces the Release 11i tax code assignments to products, parties, and application system options with tax classification code assignments. You can update these tax classification code assignments for the customers, suppliers, and other entities involved in your transactions. • Defaulting hierarchy - Set up a defaulting hierarchy for tax classification codes similar to the Release 11i Payables and Receivables tax code defaulting hierarchies. You can update existing migrated tax classification code hierarchy assignments and create new assignments. • Tax conditions - Set up tax condition sets using the TAX_CLASSIFICATION_CODE determining factor and condition values equal to the tax rate codes that you need. • Direct Tax Rate Determination rules - Set up tax rules under the Direct Tax Rate Determination rule type to determine tax applicability, tax status, and tax rate.
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Application Tax Options
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Application Tax Options Responsibility: E-Business Tax Manager (N) Tax Managers > Defaults and Controls > Application Tax Options E-Business Tax maintains Release 11i migrated data by combination of operating unit and application. This combination is called application tax options. Application tax options reflect the Release 11i tax setup as originally defined in Payables, Purchasing, Receivables, and Projects. Application tax options include: • Tax classification code assignments within the application’s setup. • Defaulting hierarchy, if defined, of tax classification codes to the transaction line. • For migrated Receivables transaction tax data: - Customer tax exemption override - Service provider override - Latin Tax Engine options You can use the Create Application Tax Options page to update migrated tax setup or to create new tax setup based on the Release 11i model. When you use the Release 11i model to default
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a tax classification code to a transaction line and to use the tax classification code in tax determination, E-Business Tax uses the tax classification code as the determining factor for the tax status and tax rate of the tax or taxes associated with the transaction, according to the details of the appropriate direct tax rate determination rule. Application tax options always apply to a combination of operating unit and application, even if the operating unit uses the subscription of the legal entity. After you create or update the application tax options that you want, you must enable migrated direct tax rate determination tax rules or set up new direct tax rate determination tax rules that use tax classification codes as determining factors. Inactivating a Defaulting Order You can inactivate the tax classification defaulting order for a specific operating unit and application. Enable this option when you no longer want to use tax classification codes in tax determination and tax calculation for transactions belonging to an operating unit and application combination. Note. Inactivating a defaulting order is an irreversible process. Once an operating unit and application defaulting order is inactivated, you cannot reactivate the same defaulting order nor can you create a new defaulting order for this combination of operating unit and application. See: Using Application Tax Options, Oracle E-Business Tax User Guide for a for a listing of each application where you can update/enter tax classification codes.
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Tax Defaulting Hierarchy Upgrade Flow
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Tax Defaulting Hierarchy Upgrade Flow The migrated entities associated with defaulting hierarchies for operating unit/application combinations retain the tax code that was originally assigned in the Release 11i application as a tax classification code. In some cases, you can update the tax classification code assignment or create a new assignment. The upgrade logic for the defaulting hierarchy is: • Upgrade Logic #1 – Release 11i tax codes become Release 12 tax classification codes. • Upgrade Logic #2 – The tax defaulting hierarchy from Payables, Receivables, and Purchasing Release 11i applications become application tax option defaulting hierarchies for the combination of operating unit and application. • Upgrade Logic #3 – You can either use the original tax codes assigned to the Release 11i transactions (migrated as tax classification codes), or you can update the details of the defaulting hierarchy according to your requirements. A defaulting hierarchy specifies both the sources to use for tax classification codes and the order in which E-Business Tax searches these sources to find a valid tax classification code at transaction time. If E-Business Tax cannot find a valid tax classification code within the hierarchy, or if a defaulting hierarchy is not defined for the applicable operating
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Chapter 13 - Page 19
unit/application, then you can optionally enter a tax classification code on the transaction line. If you do not enter a tax classification code on the transaction line, then the direct tax rate determination rule that is based on tax classification does not apply.
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Configuration Owner Tax Options
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Configuration Owner Tax Options Responsibility: E-Business Tax Manager (N) Tax Managers > Defaults and Controls > Configuration Owner Tax Options Set up configuration owner tax options for a combination of configuration owner and application event class. You use configuration owner tax options to update the default tax options of transactions belonging to a specific configuration owner and application event class combination. At transaction time, E-Business Tax uses the tax option settings of the configuration owner and application event class instead of the default settings. You can make these updates for Release 11i migrated data: • Assign the STCC regime determination set to the applicable configuration owner and event class, if you intend to use Direct Tax Rate Determination with tax classification codes to calculate taxes on transactions. This is a mandatory step. • Update migrated tax option settings for an operating unit and event class.
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Chapter 13 - Page 22
Note. If you want to move from STCC processing to standard regime determination processing, apply an end date to the applicable configuration owner tax options and create new configuration owner tax options using a location-based regime determination set. In this way you can gradually transition operating units to the E-Business Tax tax processing model according to your requirements.
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Tax Account Information
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Tax Account Information Responsibility: E-Business Tax Manager (N) Tax Managers > Parties > Party Tax Profiles > Party Type: Third Party > (I) Update Party Tax Profile > (T) Account Tax Details Once you select a third party or third party site on the Party Tax Profiles page, navigate to the Create Tax Profile page to set up tax profiles for your customers, customer sites, suppliers, and supplier sites. Account Tax Details Use the Account Tax Details region to maintain migrated account tax information. Use the third party site Supplier Site Tax Details region to maintain operating unit supplier site tax information. Use the third party site Customer Account Site Business Purpose Tax Details region to maintain operating unit customer account ship-to site and bill-to site tax information.
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Agenda
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Direct Tax Rate Determination Rule
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Direct Tax Rate Determination Rule Responsibility: E-Business Tax Manager (N) Tax Managers > Tax Configuration > Tax Rules > Direct Tax Rate Determination rule type You can use the Direct Tax Rate Determination rule type to create a tax model similar to Release 11i, or you can use it to build new tax rules for tax regimes with simple tax regulations. Release 11i Tax Determination Model You can use tax classification codes and the Direct Tax Rate Determination rule type to set up a tax determination model similar to Release 11i. This tax determination model has these characteristics: • Regime Determination and Candidate Taxes – E-Business Tax uses the STCC regime determination set with the single determining factor Tax Classification Code, instead of location types, to derive a list of candidate taxes in this way: - Matches the tax classification code on the transaction line to Direct Tax Rate Determination rules defined for the applicable configuration owner that have tax conditions with the same tax classification code.
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- Looks for a tax with a tax rate code that matches the tax classification code on the transaction line. If one exists, then this tax is added to the list of candidate taxes. • Tax Applicability – If a Direct Tax Rate Determination rule is evaluated successfully, then the tax is applicable. This is unlike the Determine Tax Applicability rule type, where a successful evaluation of the rule may conclude that a tax is not applicable. • Tax Status – If the rule is evaluated successfully, E-Business Tax retrieves the tax status from the rule. • Tax Rate – If the rule is evaluated successfully, E-Business Tax retrieves the tax rate from the rule, if defined. If a rate is not defined for the rule, then E-Business Tax derives the rate using the standard execution. E-Business Tax then derives the taxable basis and calculates the tax. Tax Determination for Simple Tax Regulations You can use the Direct Tax Rate Determination rule type to set up a tax determination model for situations where you do not need to create separate rules for tax applicability, tax status, and tax rate. This model has these characteristics: • Regime Determination and Candidate Taxes – The rule uses the standard execution, but tax applicability depends on rule evaluation. • Tax Applicability – If the rule evaluates successfully, the tax is applicable and E-Business Tax derives the tax status and tax rate. If the rule does not evaluate successfully, then the tax is not applicable and the tax determination process ends. This is true even if the place of supply identifies a valid tax jurisdiction. • Place of Supply and Tax Registration – If the rule evaluates successfully, E-Business Tax attempts to derive a tax jurisdiction and the tax registration associated with it. If a tax jurisdiction is not found, then the tax is eliminated and the process ends. E-Business Tax then derives the taxable basis and calculates the tax.
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Stages of Implementation - From 11i to R12
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Stages of implementation – from Release 11i to Release 12 E-Business Tax lets you use Release 11i tax setup to calculate taxes on transactions without modification. Over time, you can update existing tax setup in line with E-Business Tax, and gradually learn to set up taxes and tax-related content using the full power of E-Business Tax. The stages outlined below provide a general guideline for moving from a Release 11i tax implementation to an E-Business Tax tax implementation: • Point A – The fully automated standard migration. The morning after the completion of the upgrade, you can just carry on running transactions with the same results as in Release 11i Payables and Receivables. • Point B – A few minimum setup changes allow you to take advantage of enhanced EBusiness Tax functionality. For example, create a new regime-to-rate configuration for one tax regime, in place of tax classification codes. • Point C – Full use of E-Business Tax functionality and features.
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Tax Configuration Migration Path
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Tax Configuration Migration Path The automated migration process converts Release 11i tax data to E-Business Tax tax configuration data. Once the automated migration process is complete, you can begin using your migrated tax data in E-Business Tax without any additional modifications or updates. Over time, you can apply incremental updates and modifications to migrated tax data in order to gradually move from the Release 11i tax code model to the E-Business Tax regime-to-rate and tax rules model. This gradual change can include: • Replace tax classification codes with tax statuses and tax rates, and inactivate the corresponding defaulting hierarchy. • Use tax rules, for example, for status and rate determination and tax recovery. • Use the TCA geography hierarchy. • Create tax setup data under the Global Configuration Owner, to allow future sharing of tax content. As you become familiar with E-Business Tax setup tasks, you can create new tax data directly in E-Business Tax, according to your requirements.
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Chapter 13 - Page 31
See: Tax Configuration Migration Path, Oracle E-Business Tax Implementation Guide for guidelines for using Release 11i tax data in E-Business Tax and ways to increase your use of E-Business Tax features for your tax determination needs.
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Point A Scenario – VAT Upgrade Mapping
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Point A Scenario – Upgrade Mapping An example of VAT setup in Release 11i and the migration to Release 12 illustrates the tax configuration in Release 12. For this Point A scenario, your Release 11i tax functionality is supported in Release 12 with no manual updates required.
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Point B Scenario – VAT Upgrade Mapping
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Point B Scenario – Upgrade Mapping An example of VAT setup in Release 11i and the migration to Release 12 illustrates the tax configuration in Release 12. For this Point B scenario, your Release 11i tax functionality is supported in Release 12 with minimal updates required. Scenario B assumptions: • Only the UK purchasing part of the organization wants to move to Point B. • There is a single OU for all of UK business. • Changes should not affect Sales (AR) side of business. • Must avoid complex/repetitive manual processes (for example, they do not want to perform mass changes to suppliers/supplier sites). Scenario B requirements: • Begin to use new E-Business Tax functionality. • Increased use of tax rules: - Recovery Rules - Import/Export Rules
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Chapter 13 - Page 34
- Reduced Status/Rate Rules - Exempt Status/Rate Rules • Use Reverse Charge instead of Offset processing for Intra EU purchases. • Use other features, such as geography, for more specific rules. • Use Product Type to identify goods and service transactions. Note. New Tax setup should be created as Global Configuration Owner to allow more flexibility for future use and sharing. Scenario B setup steps: • Define Configuration Owner Tax options to allow AP to use new tax functionality. • Set up specific rules for AP for: - Registration Rule to trigger Reverse Charge - Status Rules (for example, Export/Import, Intra EU self Assessment, Reduced and Exempt handling) - Recovery Rules
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Summary
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