- Rule Based Applicability
- An example is taxes are automatically calculated based on the location.
- Tax Classification Code (Backward Compatibility)
- User manually enters the tax code or have it defaulted on the invoice line to calculate taxes
Rule Based Applicability
The tax engine uses all the relevant attributes on the invoice header and lines to determine what taxes are applicable. This set of attributes are referred to as the tax determination factors. Some of the key attributes are listed here.
- Invoice Header
- Taxation Country
- Legal Entity
- Invoice Lines
- Ship To Location
- Product Type
- Product Category
- Tax Event Classes
Payables has seeded the following event classes in E-Business Tax. The deploying company could configure rules so that tax handling could be different for each of these documents.
- Standard Invoices: Includes Standard, Credit Memo, Debit Memo, Mixed Invoices.
- Prepayment Invoices
- Expense Reports
These can be updated using Tax Administrator Responsibility.
Navigation: Defaults and Controls – Configuration Owner Tax Options
Inclusive/Exclusive Taxes
E-Business Tax will determine if a given tax is inclusive or exclusive. In case of exclusive taxes, Payables will create a separate invoice tax line. For inclusive taxes, the item line will be updated to indicate it has included tax amounts.
Exceptions
- PO matched invoices: Taxes are always exclusive
- Expense Reports: Taxes are always inclusive
Manual Tax Lines
- Taxes are exclusive
- Invoice has not gone through tax calculation or invoice validation
- Tax Regime, Tax, Status and Tax Rate are mandatory.
After the invoice is validated or has tax calculated, user needs to enter a manual tax line from the tax details window.
Invoice Import
Setting column add_tax_to_inv_amt_flag to ‘Y’, will update the invoice amount with the calculated tax amount. This is set so that validation will not apply a line variance hold on the imported invoice.
Manual Tax Lines can be imported into AP. The required tax attributes like the regime, tax, status and the tax rate are required.
Manual Tax Lines can be allocated to specific Item lines during invoice import. Columns prorate_across_all_items and line_group_number are used for allocations.
Tax Variance
Tax Variance distributions are generated for invoices matched to PO or Receipt. The following tax variance distributions are created in R12.
- TRV – Tax Rate Variance
- TIPV – Tax Invoice Price Variance
- TERV – Tax Exchange Rate Variance
AP uses these attributes to further split the Non-Recoverable Tax distribution into the respective variance distributions if there is a tax variance.
Prepayment Application
Exclusive Taxes
When tax is exclusive, Tax lines will not be presented to the user in the Apply/Un-apply Prepayments window. Taxes are calculated during prepayment application.
Inclusive Taxes
When users are applying prepayments, the included tax amount is displayed on the window. It will appear as if we are applying the taxes as well. However, behind the scenes, E-Business Tax will actually do the calculation. The calculation mode is setup in E-Business Tax at the tax level. (Applied Amount Handling)
When a non-recoverable tax distribution is fetched from E-Business Tax that has a difference between the amount and the prorated amount, the distribution created by Payables will have a non-zero value (amount minus Prorated amount) populated in prepay_tax_diff_amount.
Tax Rate at the time of Prepayment
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.
- 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.
Note: If a particular tax is not required for prepayment invoices, you can set up a Determine Tax Applicability rule for the tax using the Transaction Generic Classification determining factor and the Transaction Business Category determining factor name of Purchase Prepayment.
Tax Detail Windows
Payables will provide links to three E-Business Tax windows.
- Summary Tax Lines – From Invoice Header
- Detail Tax Lines – From Invoice Lines
- Tax Distributions – From Invoice Distributions
Every time changes happen through these windows, Payables will synchronize its data with the tax repository and will refresh the Invoice window to show the most current data.
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.
Invoices Matched to Purchase Order
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:
If the Enforce Tax From Reference Document tax option is enabled for the applicable 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.
There are two types of debit/credit memos: On Account and Applied. E-Business Tax uses a different tax calculation method for each type.
- Tax applies to the purchase order but not to the invoice - The tax line appears with a zero amount.
- 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 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.
Debit Memos 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 Debit/Credit Memos: E-Business Tax calculates tax on On Account debit/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.
Note: If a particular tax is not required for On Account debit/credit memos, you can set up a Determine Tax Applicability rule for the tax using the Transaction Input Factor determining factor and the Line Class determining factor name with the debit/credit memo transaction event.
- 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.
Payables 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. E-Business 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.
Self-Assessed Taxes
With E-Business Tax, rules will be applied to transaction data to determine what tax is due and what was actually charged by the supplier. Any taxes that are not charged by the supplier can be automatically generated as self assessed.
An example is Oracle procuring from Dell. They are based in Texas where there is no sales tax. But, Oracle is liable to pay IRS the sales tax. E-Business Tax can be configured to compute the tax as self-assessed for the invoices from Dell.
Self Assessed Tax Lines are not stored in AP.
SA Tax Distributions are stored in ap_self_assessed_tax_dist_all. These are primarily used for accounting.
Key E-Business Tax Objects
- Tables
- Transaction Data – zx_lines_det_factors
- Summary Tax Lines – zx_lines_summary
- Detail Tax Lines – zx_lines
- Tax Distributions – zx_rec_nrec_dist
- Forms
- Tax Windows - $ZX_TOP/forms/US/ZXTRLLINEDISTUI.fmb
We have four object groups that are sub-classed from this form.
- ZX_TRX_LINE_STAT_OG
- ZX_LINES_OBJECT_GROUP
- ZX_DISTRIBUTIONS_OG
- ZX_TRX_DIST_STAT_OBJECT_GROUP
Do not delete and recreate ZX_TRX_LINE_STAT_OG and ZX_TRX_DIST_STAT_OBJECT_GROUP. The program units in these are "stubs" from ZX. We have coded AP specific logic in the invoice workbench after sub-classing. If you delete and recreate we loose our custom logic.
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