Oracle Financials Handbook: EBS Tax

Showing posts with label EBS Tax. Show all posts

Taxability

Taxability from Baker Khader Abdallah, PMP

How OIE Works with E-BTax

How OIE Works with E-BTax from Baker Khader Abdallah, PMP

E-Business Tax Purchasing

E-Business Tax Purchasing Whitepaper from Baker Khader Abdallah, PMP

Tax Configuration Example

Tax Configuration Example from Baker Khader Abdallah, PMP

Use application tax options to update migrated tax setup or to create new tax setup
based on the Release 11i defaulting hierarchy model. You can use the Release 11i model
to default a tax classification code to a transaction line. E-Business Tax uses the tax
classification code as a determining factor in tax applicability and tax rate for the tax or
taxes associated with the transaction, according to the definition of the appropriate
direct tax rate determination rule.
For migrated Receivables transaction tax data, you can also manage these application
tax options:
• Customer tax exemption override
• Service provider override
• Latin Tax Engine options

E-Business Tax creates application tax options for Release 11i migrated data by
combinations of operating unit and application. These application tax options reflect the
setup as defined in Payables, Purchasing, Receivables, and Projects. You can update this
setup according to your requirements. 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.
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 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.
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 tables below indicate for
each application where you can update/enter tax classification codes.
Oracle Payables/Purchasing/Internet Expenses
Release 11i Tax Code Assignment E-Business Tax Update/Create
Expense Report Template N/A
Invoice Header N/A
Natural Account GL Tax Options window: Tax Classification Code
Defaults tabbed region.
Oracle Payables Financials Options Create Application Tax Options page.
Reference Document Purchase order or other reference document.
Supplier Main region or Account Tax Details region of the
Third Party Create Tax Profile page.
Supplier Site Main region or Customer Account Site Business
Purpose Tax Details region of the Third Party Site
Create Tax Profile page.
Item Define Item Page: Invoicing region.

Ship To Location Main region or Account Tax Details region of the
Third Party Create Tax Profile page.
Oracle Receivables
Release 11i Tax Code Assignment E-Business Tax Update/Create
Customer Site Main region or Customer Account Site Business
Purpose Tax Details region of the Third Party Site
Create Tax Profile page.
Oracle Receivables System Options Create Application Tax Options page.
Product Define Item Page: Invoicing region.
Revenue Account GL Tax Options window: Tax Classification Code
Defaults tabbed region.
Latin Tax Engine: System Options Tax
Classification
Create Application Tax Options page
Oracle Projects
Release 11i Tax Code Assignment E-Business Tax Update/Create
Output Tax Client Extension N/A
Customer Main region or Account Tax Details region of the
Third Party Create Tax Profile page.
Customer Site Main region or Customer Account Site Business
Purpose Tax Details region of the Third Party Site
Create Tax Profile page.
Expenditure Type/Event Type/Retention
Billing
N/A
Oracle Receivables System Options Create Application Tax Options page.
Project Billing N/A

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 tax rules that use tax
classification codes as determining factors. See: Using Direct Tax Rate Determination,
page 6-32 for more information.
Prerequisites
Before you can create or update application tax options, you may need to complete one
or more of these tasks:
• Set up tax classification lookup codes. (optional)
• Enable tax exemptions for the applicable taxes. (optional)
These task descriptions refer to creating new application tax options. The same steps
apply to updating existing application tax options. Use the Application Tax Options
page to select the operating unit/application that you want to update.
To set up application tax options (excluding Receivables):
1. Navigate to the Create Application Tax Options page.
2. Enter the operating unit and application name.
3. Select the defaulting order hierarchy for this operating unit/application
combination. The length of the available hierarchy reflects the Release 11i
application hierarchy.
4. If the defaulting order includes the Oracle Payables Financial Option or the Oracle
Receivables System Option, enter the financial options tax classification to assign to
this default.
To set up Receivables application tax options:
1. Navigate to the Create Application Tax Options page.
2. Enter the operating unit and the application name Receivables.
3. Select the tax determination method Oracle E-Business Tax or Latin Tax Engine.
Important: Selecting a tax determination method is an irreversible
process.
If you selected Latin Tax Engine, go to step 8.
4. Select the defaulting order hierarchy for this operating unit.
5. If the defaulting order includes the Oracle Receivables System Option, enter the
financial options tax classification to assign to this default

6. If applicable, enable the Allow Override and Entry of Customer Exemptions option.
To use customer tax exemptions, you must also complete these setups:
• Set up tax exemptions for the applicable customers. See: Setting Up Tax
Exemptions, page 3-10 for more information.
• Enable tax exemptions for the applicable taxes. See: Setting Up Tax Regimes,
page 2-6 for more information.
• Enable the Allow Exemptions option for the applicable configuration owners.
See: Setting Up Configuration Owner Tax Options, page 4-9 for more
information.
7. If you use Taxware for tax calculation on Order to Cash transactions, enter a value
for the Override Geocode for Taxware.
Taxware uses a two or nine digit code when the state, city, and zip code do not
uniquely identify a tax jurisdiction. E-Business Tax uses the value you enter here to
determine the point of order acceptance (POA) when calculating tax, if there is no
tax jurisdiction code defined.
8. If applicable, enter the Receivables system options tax classification code to assign
to this operating unit for Latin Tax Engine tax determination and calculation.
9. Enter the tax rounding information to use for transactions for this operating unit
that are calculated using the Latin Tax Engine.
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.
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.

Setting Up Tax Zones

Use tax zones to group existing geographical regions that share the same tax requirement. You can use tax zones with tax regimes, to identify tax requirements for a special geographic area and to create parent tax regimes that represent a related grouping of geographic regions for tax reporting purposes. You can also use tax zones with tax rules, to create tax rules that refer to a specific geographic location.

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 either set up a tax zone and corresponding tax regime for the applicable geographic area, or set up a country tax regime and use applicability rules to exclude the parts of the country where the tax requirement does not apply.

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, such as Country: State: County: City: Postal Code in the United States, and 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.

You can update the information in a tax zone at any time. You can also update the geographic information in a tax zone type, as long as the tax zone type does not contain tax zones. If you apply an end date to a geographic entity in TCA, then this removes all tax zones and tax zone types associated with the entity.

Prerequisites

Before you can set up tax zones, you must verify that the TCA master geography contains the geographic information that you need.

Set Up a Tax Zone Types

Navigate to the Create Tax Zone Type page.

Enter a tax zone type name. Use a name that uniquely identifies the geography and purpose of the tax zone type.

Enter the country where the tax zone type applies. E-Business Tax displays the country structure. If this is an international tax zone type, leave the Value field blank and check the Zone Creation Allowed box.

If this is a country tax zone type, enter a value at each level of the structure that you want to make available for tax zone creation. The highest level becomes the parent record for this tax zone type. You can create tax zones from any combination of child records.

Check the Zone Creation Allowed box for each level that you want to create tax zones.

In the Allow Postal Code Grouping region, check the "Create tax zones from groups of postal codes" box, if you plan to create tax zones for this tax zone type that consist of ranges of postal codes.

You can only check this box if:

The country has a geography explicitly defined as Postal Code; and

You enter a value in the level above Postal Code within the country structure

A group of postal codes often makes up an inner city tax jurisdiction.

Navigate to the Create Tax Zone page using the tax zone type that you just created.

Enter a name for this tax zone. Use a name that uniquely identifies this tax zone within the tax zone type.

Enter the code type and corresponding code for the geography associated with this tax zone. The available code types are:

FIPS Code - Federal Information Processing Standards.

ISO Country Codes - International Standards Organization

Tax Geography Code - Geography code of your tax service provider.

Unknown - User-defined codes that are not associated with a coding standard.

Enter an effective date range for this tax zone.

Note: If you update the tax zone end date, this does not affect the end dates of the geographies belonging to the tax zone.

If applicable, enter the time zone of this tax zone.

Add each geography of the tax zone type hierarchy that you want for this tax zone.

If you set the Postal Code Grouping option, then when you select a geography above the level of postal code:

Indicate whether to use the entire geography or a postal code range within the geography.

If you are using a postal code range, enter the range and the start and end dates.

After you set up the tax zone, you can create a tax regime using this tax zone.

Setting Up 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. You set up tax accounts under a primary ledger and operating unit. The calculated tax amounts post to the specified operating unit accounts at transaction time.

The actual account information that the system uses depends upon subledger accounting rules. You can also define tax accounts for tax rates, tax recovery rates, and tax jurisdictions. If you define tax accounts at the tax level, these accounts default to the tax rate level for the same tax and operating unit. You can update these default tax accounts in the tax rate setup.

Prerequisites

Before you can set up tax accounts, you may need to complete one or more of these tasks:

Set up primary ledgers and subledgers. (mandatory)
Set up operating units and assign them to primary ledgers. (mandatory)
Set up taxes. (mandatory)
Set up tax rates. (optional)
Set up tax recovery rates. (optional)
Set up tax jurisdictions. (optional)

Set Up Tax Accounts

Navigate to the Tax Accounts page.
Select the primary ledger to use for tax accounts. You can only select from primary ledgers in your security profile that have at least one operating unit assignment.
Navigate to the Create Tax Accounts page. E-Business Tax displays the ledger accounting segments under each tax account field.
Select the primary ledger operating unit to use for tax accounts.
Enter the tax accounts.

You can set up these tax accounts:

General Tax Accounts

Tax Expense. A Payables tax account that records tax amounts from invoice distributions; or a Receivables tax account that records taxes collected from customers and any legal deductions taken from these amounts.

Tax Recoverable/Liability. An account that records tax recovery amounts or relieves tax liability amounts.

Note: If the related tax is recoverable, and you also intend to self-assess the tax, then define a tax recoverable account for the associated recovery rates and a tax liability account for the associated tax rates.

Interim Tax. An account that records tax recovery or liability before payment of an invoice. You must set up an interim tax account for taxes and tax rates that have a deferred recovery settlement.

Accounts for Receivables Activities

Finance Charge Tax Liability. An account that records tax amounts on finance charges that are used as a deduction against overall tax liability.

Non-Recoverable Tax Accounts. Accounts that record tax amounts on earned and unearned discounts and adjustments that you cannot claim as a deduction against tax liability.

Expense/Revenue Accounts. Accounts that record net changes generated by adjustments, earned and unearned discounts, and finance charges. Receivables activities such as discounts and adjustments reduce the receivable amount, and are therefore considered an expense.

Tax Account Derivation for Accounts Payable

For non recoverable taxes, the calculated tax amount is accounted as follows:

Using the tax expense account defined at the TAX RATE.
If it is not defined, then using the item account defined at the AP invoice line level.

For recoverable taxes, the calculated tax amount is accounted as follows:
Using the tax recoverability account defined at the RECOVERY RATE.
If it is not defined then using the tax recoverability account defined at the TAX RATE.
If neither is defined, then the transaction is not validated.

Note: If recovery is DEFERRED, then the tax is accounted in an interim tax account defined at the TAX RATE until a payment is made.

Afterwards the tax amount gets transferred to the tax recoverability account.

Self Assessed Tax

For non recoverable taxes, the calculated tax amount is accounted as follows:

Using the tax expense account defined at the TAX RATE.
If it is not defined, then using the item account at the AP invoice line level.
For recoverable taxes, the calculated tax amount is accounted as follows:

Using the tax recoverability account defined at the RECOVERY RATE.

If it is not defined, then using the tax recoverability account defined at the TAX RATE.

If neither is defined, then the transaction is not validated.

Note: For the liability the credit tax engine considers the tax liability account, which is defined at the TAX RATE.

Tax Account Derivation for Accounts Receivable

For non partner tax calculation the accounting is done using default accounts set for the TAX type in Auto Accounting:

If for a specific segment the account code is specified under Constant, then that segment tax is accounted in that particular account code.

If for a specific segment taxes is specified under Table Name, then that segment tax is accounted using the tax liability account in TAX RATE.

For partner tax calculation the accounting is done using default accounts set for the TAX type in Auto Accounting:

1. If for a specific segment the account code is specified under Constant, then that segment tax is accounted in that particular account code.

2. If for a specific segment taxes is specified under Table Name, then for that segment the tax is accounted as follows:

1. Using the tax liability account at the tax jurisdiction.
2. If it is not found, then using the TAX RATE.

Note: This occurs when the Create Tax Accounts drop down is selected at the tax level.

Setting Up Tax Jurisdictions

A tax jurisdiction is a geographic region or tax zone where a specific tax authority levies a tax. A tax jurisdiction specifies the association between a tax and a geographic location. At transaction time E-Business Tax derives the jurisdiction or jurisdictions that apply to a transaction line based on the place of supply. The place of supply is the location where a transaction is determined to take place for a specific tax. E-Business Tax either uses a default place of supply or derives a place of supply based on tax rules.

You also use tax jurisdictions to define jurisdiction-based tax rates. A tax jurisdiction tax rate is a rate that is distinct to a specific geographic region for a specific tax. For example, the tax defined as California city sales tax can have different rates for each city tax jurisdiction.

You must set up at least one tax jurisdiction for a tax before you can make the tax available on transactions. A tax can apply to multiple jurisdictions, such as California county sales tax to all counties or Canadian Goods and Services Tax to many provinces. If you enable multiple jurisdictions for the tax, you can create multiple tax jurisdictions at once based on the geographic hierarchy defined for the tax. You can only do this if the tax uses the TCA master geography.

In addition, in some cities a different city rate applies to the incorporated area of the city, called the inner city. In these cases you can set up an inner city tax jurisdiction with its own rate for the applicable customers and Receivables tax. Inner city tax jurisdictions are often based on postal code groupings. If the legal jurisdiction and tax jurisdiction are based on the same geopolitical level (usually a country) and are governed by the same authority, you can set up a tax jurisdiction when you set up your company legal entity.

Prerequisites

Before you can set up tax jurisdictions, you may need to complete one or more of these tasks:

Set up taxes (mandatory).
Set up tax statuses. (mandatory to set up jurisdiction-based rates)
Verify or set up the TCA master geography. (mandatory to set up jurisdictions below the country level)
Set up tax zones. (optional)

Set Up a Tax Jurisdiction

Navigate to the Create Tax Jurisdiction page.
Enter a code and name to identify this tax jurisdiction. Use a coding convention that is in keeping with the tax regime, tax, and geographic region.
Enter the tax regime code and tax that this tax jurisdiction belongs to.
Enter the geography type for this tax jurisdiction. You can enter either the geography type or the override geography type that is defined for the associated tax.
Check the Inner City Jurisdiction box if this tax jurisdiction is used for customer sites within an inner city boundary.
An inner city boundary refers to an incorporated area of a city. Inner city jurisdictions often have tax rates that differ from tax jurisdictions in unincorporated areas of the same city.

Note: You must enable the Inside City Limits option in the Account

Site Address region of the applicable customer sites. An inner city tax jurisdiction only applies to customer sites with this option enabled.

If necessary, enter a numeric precedence level for this jurisdiction. The precedence level indicates which jurisdiction has the higher overriding precedence, when one or more jurisdictions override another jurisdiction within the same geographic hierarchy.

Note: You must set up an override geography type for the tax in order to use precedence levels.

Enter the tax authorities for this tax jurisdiction for submitting tax reports (Reporting) and submitting tax remittances (Collecting).
Enter the effective period for this tax jurisdiction.
If necessary, set this jurisdiction as the default tax jurisdiction for this tax, and enter a default effective date range that is within the jurisdiction date range.
If you associated tax reporting types with tax jurisdiction, enter any applicable tax reporting codes.
If necessary, define rates for this tax jurisdiction.
If necessary, enter tax account information for this tax jurisdiction.

Mass Creating Tax Jurisdictions

You can create multiple tax jurisdictions at once using the mass create functionality for taxes that relate to specific TCA geographic hierarchies. E-Business 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.

For example, create a county jurisdiction for every county in the parent geography type of State and parent geography name of California.

If you add new records to the parent geography type, you can re-run the mass create process for the same tax. E-Business Tax only creates jurisdictions for the new geography records. After E-Business Tax mass creates tax jurisdictions, use the Update Mass Created Tax Jurisdictions page to review the jurisdictions created and to modify information for individual tax jurisdictions.

Before you can mass create tax jurisdictions, you may need to complete one or more of these tasks:

Set up taxes. (mandatory)
Set the Allow Mass Creation of Jurisdictions option for the tax. (mandatory)
Set up tax statuses and tax rates. (mandatory to set up jurisdiction-based rates)
Enable multiple jurisdictions for the tax. (mandatory)
Set up TCA master geography for the applicable parent geography and child records. (mandatory)
Set up tax zones. (optional)

Mass Create Tax Jurisdictions

Navigate to the Mass Create Tax Jurisdiction page.

Enter the tax regime and tax that you are creating tax jurisdictions for. E-Business Tax displays the related geography information.

Create a naming convention for the tax jurisdictions. You can use the geography name or a combination of geography name and a tax short name of your choice.

E-Business Tax identifies duplicate names during the mass create process. You can revise individual jurisdiction names on the Update Mass Created Tax Jurisdictions page.

If necessary, enter the tax authorities for these tax jurisdictions for submitting tax reports (Reporting) and submitting tax remittances (Collecting).

Enter the effective period for these tax jurisdictions.

After you mass create tax jurisdictions, use the Update Mass Created Tax Jurisdictions page to perform these tasks:

• Review the list of tax jurisdictions created.

• Revise tax jurisdiction names and effective dates.

• Define tax rates for a tax jurisdiction.

• Enter tax account information for a tax jurisdiction.

Setting Up 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 country-specific reporting requirements.

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.

A tax reporting type region appears on the corresponding page of each E-Business Tax entity that you associate with tax reporting types. If applicable, the selection is limited to the tax reporting types associated with the corresponding tax regime and associated entities. Use legal justification reporting types to associate legal message text on your Receivables transactions and lines. This message can also be printed on invoices using BPA.

Prerequisites

Before you can set up tax reporting types, you may need to complete one or more of these tasks:

Set up tax regimes. (mandatory for regime-specific reporting)

Set up taxes. (mandatory for tax-specific reporting)

Set up a Tax Reporting Type

Navigate to the Create Tax Reporting Type page.

Enter a tax reporting type code and name, and an effective date range.

To create tax reporting codes, from the Reporting Type Purpose list, select Tax

Reporting Type. To create legal justification code, from the Reporting type Purpose list select the Legal Justification Message Type.

If applicable, enter the tax regime and tax to associate with this tax reporting type. If entered, this tax reporting type and its associated tax reporting codes are only available to the tax regime or tax.

Select the data type. For text data types, you can enter text in any language supported in your installation.

Check the Define List of Reporting Codes box to define a list of reporting codes to use with this tax reporting type. If the Reporting Type Purpose is Legal Justification Message Type, then this option is automatically selected.

The corresponding list of values for this tax reporting type will only contain the tax reporting codes that you define.

If necessary, enter a minimum and/or maximum length for the reporting codes that you define for this tax reporting type.

Use the Reporting Type Uses region to associate this tax reporting type with the applicable E-Business Tax entities.

You can associate a tax reporting type with more than one entity, but you can associate only one code from a reporting type within the same date range.

Enter the reporting codes to use with this tax reporting type.

Setting Up Tax Recovery Rates

In many parts of the world, some or all of the taxes on 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 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.

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. At transaction time, E-Business Tax uses the recovery rate derived from the recovery tax rules, or uses instead the default recovery rate that you define, if no recovery rate rules are defined or if no existing recovery rate rule applies to the transaction.

If you set up recovery rates for a tax that you also intend to self-assess, then define a tax recovery account for the associated recovery rates and a tax liability account for the associated tax rates.

Prerequisites

Before you can set up tax recovery rates, you may need to complete one or more of these tasks:

• Set up taxes. (mandatory)
• Set up first parties to self-assess taxes. (optional)

Set up a Tax Recovery Rate

Navigate to the Create Tax Recovery Rate page.

Enter the tax regime code, configuration owner, and tax.

Enter the tax recovery rate code to identify this recovery rate. Use a coding convention that is in keeping with the tax regime, tax, and tax status.

Select the recovery type to which this tax recovery rate applies.

Enter the percentage recovery rate and effective date range.

Enter an effective date range that is within the date range of the tax and tax regime.

If you set this recovery rate as the default recovery rate, these rules apply:

This is the default tax recovery rate for this combination of tax regime, tax, recovery type, and effective date range only.

This recovery rate defaults to transaction lines only when there are no tax recovery rate rules defined, or when no existing tax recovery rate rule applies to the transaction.

You must enter a default effective date range that is within the date range of the tax recovery rate.

Check the Allow Ad Hoc Rate box to let users override the default recovery rate on individual tax lines.

Enter or update tax accounts for this tax rate for the applicable business establishments in your company.

If necessary, create another rate period for this tax regime, tax, and tax recovery information:

Update the effective to and default effective to dates from the previous period.

Enter effective from dates for the new period without any gap from the previous period.

Update the percentage rate and other settings as necessary for the new rate period.

Setting Up Tax Rates

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.

You can define tax jurisdiction and tax status rates as a percentage or as a value per unit of measure. For example, a city may charge sales tax at a rate of 8% on most goods, but may levy a duty tax with a special rate of $0.55 per US gallon on fuel. Values per unit of measure are in the tax currency defined for the tax.

You define tax rate codes and rate detail information per rate period. Rate periods account for changes in tax rates over time. A tax rate code can also identify a corresponding General Ledger taxable journal entry.

Prerequisites

Before you can set up tax rates, you may need to complete one or more of these tasks:

Set up tax statuses. (mandatory)

Set up tax transaction type lookup codes. (optional)

Set up an offset tax. (optional)

Set up first parties to self-assess taxes. (optional)

Set up tax recovery rates. (optional)

Set up tax jurisdictions. (optional)

Set up tax reporting types. (optional)

Set up primary and secondary tax recovery types. (optional)

Set up units of measure. (mandatory, for quantity rate types)

Set up tax recovery rules. (optional)

Set up a Tax Rate

Navigate to the Create Tax Rate page.

Enter the tax regime code. If you are setting up tax rates from within a tax jurisdiction, this information defaults from the tax jurisdiction.

Enter the configuration owner, tax, and tax status code.

If this is a tax jurisdiction rate, enter the tax jurisdiction code.

Enter a tax rate code to identify this tax rate. Use a coding convention that is in keeping with the tax regime, tax, and tax status.

Select the rate type.

Enter the rate:

If the rate type is Percentage, enter the percentage rate.

If the rate type is Quantity, enter the unit of measure (UOM) and the quantity rate. The quantity rate is the value per UOM in the tax currency.

Note: You can enter either a positive or negative rate. If this is an offset tax rate, you must enter a negative rate.

Enter the effective date range for this rate. If you do not enter an effective to date, then this rate remains in effect indefinitely and you cannot define another rate period.

Navigate to the Tax Rate Details page. Updates to tax rate details are for the tax rate and period.

In the Tax Rate Name field, enter a name or descriptive phrase to use for this tax rate and tax rate period.

In the Tax Transaction Type field, enter a tax transaction type to use for this tax rate period.

You can use lookups to set up tax transaction types and assign them to tax rate codes. Use tax transaction types to define local tax authority codes both for reporting purposes and for controlling which rates appear on an invoice.

Check the Internet Expenses Enabled box to use this tax rate for this period on expense reports.

Note: If you want to update this tax rate code for expense reporting at a later time, create a lookup code for this tax rate. You must use the tax rate code and name as the lookup code and name.

Enter a default recovery rate code to use for this tax rate. The effective dates of the tax rate and recovery rate must overlap. The default recovery rate applies if the recovery rate rules cannot determine an applicable recovery rate at transaction time.

Enter a rule code of recovery rate to use to determine the tax recovery rate. If the tax recovery rule that you select does not apply to the transaction, then E-Business Tax uses the default recovery rate.

Select the default recovery settlement: Immediate - Tax recovery is available at invoicing; Deferred - Tax recovery is available only after the invoice is paid.

Note: If the default recovery settlement is Deferred, then you must

set up an interim tax account for this tax rate to record the tax recoveries or liabilities that accrue prior to payment. Once you set up an interim tax account for this tax rate, you cannot change the recovery settlement to Immediate.

If this tax has an associated offset tax, enter the offset rate code. At transaction time, this rate is used as the offset rate.

If applicable, set this tax rate as the default tax rate for the tax status belonging to this rate period, and enter the effective dates that this tax rate is the default tax rate. This rate defaults to transaction lines only when there are no tax rate rules defined, or when no existing tax rate rule applies to the transaction.

If you enabled the Allow Override and Entry of Inclusive Tax Lines option at the tax level, then in the Allow Tax Inclusion field define the nature of tax inclusive handling for this tax rate.

Note: The tax inclusive handling setting at the tax rate level takes precedence over all other tax inclusive handling settings.

Check the Allow Tax Exemptions box to create tax exemptions for your customers for this tax rate.

Check the Allow Tax Exceptions box to create special tax rates for specific products for this tax rate.

Check the Allow Ad Hoc Rate box to let users override the default tax rate on individual tax lines. You can only set this option if the tax status associated with this tax rate has the option Allow Tax Rate Override enabled.

If you enabled manual updating for this tax, then use the Adjustment for Ad Hoc Amounts field to define which value is adjusted when the tax amount changes: Taxable basis or Tax rate.

If you associated tax or legal justification reporting types with tax rate, enter any applicable tax reporting codes.

Enter or update tax accounts for this tax rate for the applicable business establishments in your company.

Setting Up Tax Statuses

A tax status is the taxable nature of a product in the context of a transaction and a specific tax on the transaction. You define a tax status to group one or more tax rates

that are of the same or similar nature.

For example, one tax can have separate tax statuses for standard, zero, exemption, and reduced rates. A zero rate tax status may have multiple zero rates associated with it in order to handle different reporting requirements for zero rate usage, such as Intra EU, zero-rated products, or zero-rated exports.

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.

Prerequisites

Before you can set up tax statuses, you may need to complete one or more of these tasks:

• Set up taxes. (mandatory)
• Set up tax reporting types. (optional)

Set Up a Tax Status

Navigate to the Create Tax Status page.

Enter the Tax Regime Code, Configuration Owner, and Tax.

Enter a Tax Status Code and name for this tax status. Use a coding convention that is in keeping with the tax regime and tax. The tax status code must be unique within the tax, configuration owner, and effective date range.

Enter the Effective Dates for this tax status. You must enter a date range that is within the date range of the tax.

Indicate if this is the Default Tax Status for this tax. If you define tax status rules for this tax, then this tax status becomes the default status only when no tax status rule applies to a transaction.

If this is the default tax status for this tax, enter the effective dates that this tax status is the default tax status. You must enter a default status effective date range that is within both the effective date range of the tax and of the tax status. If you do not enter a date range, then this remains the default status indefinitely.

If you associated tax reporting types with tax status, enter any applicable tax reporting codes.

Set the default controls for this tax status. These values default to all tax rates for this tax status:

Check the Allow Tax Exemptions box to create tax exemptions for your customers for this tax status.

Check the Allow Tax Exceptions box to create special tax rates for specific products for this tax status.

Check the Allow Tax Rate Override box to let users change the tax rate code derived from this tax status on transaction lines. Do not set this option if this tax status is for offset taxes.

If you set the Allow Tax Recovery option for this tax, select the default recovery settlement to use for this tax status:

Immediate - Tax recovery is available at invoicing;

Deferred - Tax recovery is available only after the invoice is paid.

Define Taxes

Define the taxes of a tax regime. Each separate tax in a tax regime includes records for the statuses, rates, and rules that are used to calculate and report on the tax. 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.

You can create a new tax, or create a tax that is based on an existing tax within the regime. When you create a new tax based on an existing tax, the attributes that remain constant for all taxes derived from the source tax are not available for update.

Before you can set up taxes, you may need to complete one or more of these tasks:

Set up tax regimes. (mandatory)

Set up ledgers and accounts. (optional)

Set up tax reporting codes. (optional)

Set up recovery type lookup codes. (optional)

Set up tax types. (optional)

To Define a New Tax

Navigate to Create Taxes page.

Enter the Tax Regime code. E-Business Tax defaults the tax settings from the tax regime.

Enter the Configuration Owner for this tax. The configuration owner determines the ownership and use of this tax and its associated setup.

Select the Tax Source:

Create a new tax: Use this option: (1) to create a tax that becomes the source for other taxes within this regime to share tax jurisdictions and tax registrations; or (2) to create a tax where the registration and jurisdiction information is independently maintained and not shared.

Create from an existing tax: Use this option to create a tax that shares the registration and jurisdiction information from an existing tax within this regime. In most cases, you should set up the taxes in a tax regime such that they can share the same jurisdiction and registration information.

Note: You cannot update the tax source setting after you save the tax record.

In the Tax field, enter a code for this tax. Use a coding convention in keeping with the tax regime code.

If the tax source is Create from an existing tax, then select an existing tax from the list of values.

Enter a Tax Name. You can create a unique tax name or use the code that you entered in the Tax field.

Enter a Tax Type to classify this tax for reporting purposes. E-Business Tax provides these tax types:

Sales - Direct taxes that are collected from the consumer by the supplier and paid to the tax authority.

VAT - Value added or cascading taxes.

Excise - Taxes on the production and manufacture of goods.

Customs Duty - Taxes charged on imported and exported products.

Environmental - Taxes charged as a result of environmental regulations.

You can add tax types according to your reporting needs.

Enter an effective date range.

Note: If you enter an Effective To date, you cannot update this date after you save the record.

Enter geographic information for this tax. This includes the Geography Type for the tax, such as City, County, or State, and the Parent Geography Type and Parent Geography Name of the geography type.

For example, if the tax is US County Tax, then the geography type is County, the parent geography type is Country, and the parent geography name is United States.

If the geography type is Country, enter Country for parent geography type and the tax regime country name for parent geography name.

Enter an override geography type that belongs to the parent geography type, if you plan to set up different rates for this geography within the same tax jurisdiction.

Enter the currency for this tax, and define the way that tax amounts are displayed on transactions and reported to the tax authorities.

If you set the Allow Tax Rounding Override option at the regime level, you can update the rounding parameters for this tax. If you want to let an individual party update the rounding rule for this tax on its transactions, then set the Allow Tax Rounding Override option at the tax level and update the rounding rule in the applicable party tax profile.

Enter a single-digit compounding precedence to define the order in which this tax is calculated in the compounding process within this regime. Taxes are calculated in ascending order of compounding precedence.

In the Applied Amount Handling field, select the method to use to calculate taxes when a prepayment is applied to an invoice:

Recalculated - E-Business Tax uses the invoice tax rate for both the prepayment and the invoice line amount.

Prorated - E-Business Tax uses the prepayment tax rate for the prepayment amount and the invoice tax rate for the invoice line amount.

Check the Set as Offset Tax box if you are creating an offset tax. Setting this option disables the Controls and Defaults region and clears any values that were entered in this region.

Check the Set for Reporting Purposes Only box if you are not creating an offset tax but you want to calculate reverse charges without creating General Ledger postings. E-Business Tax will save the reverse charge information for reporting to the tax authorities.

If this is an offset tax option, enter a Recovery Type.

If you enabled the Allow Override and Entry of Inclusive Tax Lines option at the regime level, then in the Allow Tax Inclusion field define the nature of tax inclusive handling for this tax.

If the tax rates belonging to this tax vary in their treatment of tax inclusive handling, then enable the Allow Override and Entry of Inclusive Tax Lines option for this tax. You can then set tax inclusive handling at the tax rate level.

Note: If you do not set standard inclusive handling for this tax, you can still set this option for individual parties involved in transactions.

Define the manual updates available to users on transaction tax lines. Manual updates do not use tax rules and formulas:

Allow Override for Calculated Tax Lines - Let users override the automatic tax calculation on invoice tax lines.

Allow Entry of Manual Tax Lines - Let users create manual tax lines on invoices.

Check Allow Duplicate Tax Registration Numbers box to allow multiple parties to use the same tax registration number for this tax. Leave this box unchecked to enforce unique tax registration numbers across all parties and party sites.

Check Allow Multiple Jurisdictions box to define tax jurisdictions for this tax in more than one geographic region.

You must set this option in these cases:

different tax rates apply in each region.

different tax authorities administer taxes and require separate tax reporting in each region.

tax authority requires separate registrations for a party having multiple locations in different regions or multiple registrations for the same location.

Check the Allow Mass Creation of Jurisdictions box to let you mass create tax jurisdictions for this tax.

Select the Tax Accounts Creation Method. Select Create Tax Accounts if you intend to create tax accounts for this tax. If you intend to Use the Tax Accounts of an Existing Tax at transaction time, enter this tax in the Tax Accounts Source field.

For example, in the United States the county and city taxes may use the same tax accounts as that of the related state tax.

Check the Allow Tax Exceptions box to create special tax rates for specific products for this tax.

Check the Allow Tax Exemptions box to create tax exemptions for your customers for this tax.

If you enabled tax exemptions for this tax, select the tax exemptions creation method:

Create Tax Exemptions - Create tax exemptions for your customers for this tax.

Use Tax Exemptions from an existing tax - Use tax exemptions already created for customers for this tax. If you intend to use the tax exemptions of an existing tax at transaction time, enter this tax in the Tax Exemptions Source field. For example, county and city taxes may use the tax exemption of the state tax, when the state tax exemption applies to all cities and counties in the state.

If you set the Allow Tax Recovery option for the tax regime associated with this tax, enter tax recovery options:

If applicable, set the option to allow for user override of the calculated tax recovery rate on transaction lines. If this tax allows for more than one recovery type, use the Primary Recovery and Secondary Recovery fields to enter the corresponding recovery types. The Update Tax page displays the Default Primary Recovery Rate Code and Default Secondary Recovery Rate Code fields, if applicable.

If you plan to use tax rules to determine recovery rates, set the appropriate options. In this case, the recovery rates that you define for each recovery type only apply if the determination rules cannot find a recovery rate.

Select the default recovery settlement for this tax: Immediate - Tax recovery is available at invoicing; Deferred - Tax recovery is available only after the invoice is paid.

Note: If the default recovery settlement is Deferred, then you must set up an interim tax account for this tax to record the tax recoveries or liabilities that accrue prior to payment.

Check the Allow Tax Rate Rules box if you plan to use rules to determine the tax rate for this tax at transaction time.

If you set the tax account creation method as Create Tax Accounts, enter Tax Account information for this tax.

If you defined a tax reporting type for this tax, enter the applicable tax reporting codes.

Create Tax Regime

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. Some tax regime values default to the taxes that belong to the regime in order to help minimize tax setup.

The tax regime groups similar taxes together, designates the geography within which taxes apply and defaults the settings and values you define to each tax in the regime. It also optionally optionally provides a single registration for all taxes associated with the regime.

The common tax regime setup is one tax regime per country per tax type. You can also set up a tax regime as a parent tax regime to group related tax regimes together for reporting purposes.

You must associate a tax regime with all of the first party legal entities and operating units that are subject to the tax regulations of the regime.

Creating a New Tax Regime

1. Navigate to the Create Tax Regime page.

Responsibility: Tax Manager

Navigation: Tax Managers -> Tax Configuration -> Tax Regime -> Create

Main Information Region

Enter a unique tax regime code and tax regime name.

Select the regime level to define the geographic area of the tax treatment. You can only use Group of Countries for parent tax regimes.

If the regime level is:

Country, enter the Country Name.

Group of Countries or Tax Zone, enter the tax geography type and tax geography name associated with the group of countries or the tax zone that you want. The tax geography type and tax geography name correspond to the tax zone type and tax zone respectively.

If applicable, enter parent regime information:

If this tax regime is a parent regime, check the Used to Group Regimes box.

If this tax regime belongs to a parent regime, enter a parent regime code.

Enter the effective period for this regime. The dates you enter default to all related tax setup within the regime.

Note: If you enter an Effective To date, you cannot update this date after you save the record.

Note: Consider your tax planning carefully before entering the tax regime Effective From date. This date must accommodate the oldest transaction that you want to process within this tax regime. After you create the tax regime, you can only update this date with an earlier date.

Controls Region

Set tax-level Controls for this tax regime:

Allow Tax Recovery: Lets you set up tax recovery for the taxes in this tax regime. Tax recovery is a tax that is paid by a registered establishment can claim back all or part of taxes due from the tax authority.

Allow Override and Entry of Inclusive Tax Lines: Lets you change the setting for tax inclusive handling at the tax level. You should only set this option if the taxes in this tax regime vary in their treatment of tax inclusive handling.

Allow Tax Exemptions: Lets you set up customer tax exemptions for this tax. A tax exemption is a full or partial exclusion from taxes within a given time period.

Allow Tax Exceptions: Lets you designate special tax rates for specific products as determined by the tax authorities. A tax exception is a condition or combination of conditions that result in a change from the standard values for a particular product.

Defaults Region

Enter a Tax Currency. The tax currency is the currency required by the tax authority. You use the tax currency to pay the tax authority and to report on all tax transactions.

If necessary, enter the exchange rate type to use to convert the transaction currency to the tax currency.

Enter the tax rounding parameters to use for all taxes in this regime:

Minimum accountable unit is the smallest unit a tax amount currency can have. For example, the minimum accountable unit for the USD is 0.01 for a Cent.

Rounding rule is the method to use to round off taxes to the minimum accountable unit.

Tax precision is a one-digit number that indicates the number of decimal places to which to calculate tax. Enter a precision of 0 to round to a whole currency unit. For example, to round off a calculated tax amount of 1.466 to 1.47, define a tax precision of 2, a rounding rule of Up or Nearest, and a minimum accountable unit of .01.

If you want to apply different tax rounding parameters to an individual tax, then set the Allow Tax Rounding Override option.

Enter the default Tax Authority to use on your tax reports, for the submission of tax reports (Reporting) and the submission of tax remittances (Collecting).

Use the Allow Tax Inclusion field to define the nature of tax inclusive handling. Tax inclusive handling defines the relationship, as designated by the tax authority, between the line amount and the tax amount:

Standard Inclusive Handling: The price on the transaction line is inclusive of tax.

Standard Non-Inclusive Handling: The price on the transaction line is exclusive of tax. The tax amount is added to the price.

Special Inclusive Handling: Use this option for special tax handling, such as a taxable base amount based upon the line amount rather than the adjusted line amount, or based on the line amount plus another tax amount.

If you set the Allow Tax Recovery option, select the default recovery settlement:

Immediate - Tax recovery is available at invoicing.

Deferred - Tax recovery is available only after the invoice is paid.

Check the Allow Multiple Jurisdictions box if one or more of the taxes in this tax regime apply to multiple tax jurisdictions.

Check the Allow Tax Rounding Override box to let you update the rounding parameters for individual taxes in this regime.

Check the Use Legal Registration Number box if the tax authority requires that you use the same registration number for this tax for both legal and transaction tax purposes.

Check the Allow Cross Regime Compounding box and enter the compounding precedence, if taxes in this regime are involved in any compounding operation with taxes in another regime of the same configuration owner. The compounding precedence indicates the order in which to consider the taxes in each regime. You must set this option in each of the participating tax regimes if any of these cases apply:

a tax in this regime impacts the taxable base of a tax in another regime.

a tax in another regime impacts the taxable base of a tax in this regime.

a tax in this regime impacts the taxable base of a tax in another regime on the same transaction line.

You must also complete these setup steps for cross-regime compounding:

Define the compounding precedence for the taxes in this regime according to the cross-regime compounding requirements.

Set up a taxable basis tax formula or tax calculation tax formula for each tax involved in the compounding.

Set up a Taxable Basis tax rule or Calculate Tax tax rule for each tax regime and tax, and assign the tax formulas to these rules.

Click Continue to enter configuration options. for more information.

Note: If you do not set standard inclusive handling for the taxes in this tax regime, you can still set this option for individual parties involved in transactions.

Note: You must ensure that you set this option correctly for each tax regime. You cannot update this setting after you save the tax regime record.

Note: You must set up the applicable first party legal entities before you can enter configuration options for a tax regime.