E-Business Tax Purchasing Whitepaper

E-business Tax A Purchasing Perspective
An Oracle White Paper Oct 2007

Purpose ............................................................................................................... 3 Overview............................................................................................................. 3 Prior Tax Structure............................................................................................ 4 Key Concepts..................................................................................................... 6 Integration With Purchasing............................................................................ 8 Tax Events ..................................................................................................... 8 Configuration Owner Tax Options............................................................ 8 Party Tax Profile ........................................................................................... 9 Implementation Considerations........................................................... 10 Country Defaults......................................................................................... 11 Tax Defaulting............................................................................................. 12 Displaying Tax Information...................................................................... 14 Modifying Tax Information ...................................................................... 15 Overriding Tax ....................................................................................... 15 Application Tax Options - Tax Hierarchy .............................................. 17 Supplier .................................................................................................... 17 Supplier Site ............................................................................................ 18 Item .......................................................................................................... 18 Tax Rules...................................................................................................... 19 Expert Rule ............................................................................................. 20 Guided Rule ............................................................................................ 21 Fiscal Classification..................................................................................... 22 Party Fiscal Classification...................................................................... 22 Product Fiscal Classification................................................................. 25 Transaction Fiscal Classification .......................................................... 33 Tax in Interface ........................................................................................... 34 Requisition Import................................................................................. 34 PDOI ....................................................................................................... 34 Tax During AutoCreate ............................................................................. 34 Quantity Based Tax .................................................................................... 34 Tax Setup.......................................................................................................... 36 Upgrade considerations .................................................................................. 41 Data Flow ......................................................................................................... 42 Troubleshooting .............................................................................................. 45 Tax Simulator.......................................................................................... 45 Troubleshooting Tips ............................................................................ 45 Tax Log and File Versions.................................................................... 46 Appendix .......................................................................................................... 48 References.................................................................................................... 48 Oracle Internal References ........................................................................ 48 Tax Determination Attributes................................................................... 49
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PURPOSE
Ebusiness Tax provides a repository to store tax information and record tax events. Individual applications (for e.g. Purchasing) avails the tax services provided by Ebusiness Tax to create/update/display tax information for its transactions.
Purpose of creating this document is to review impact of Ebusiness Tax introduced in R12 to Oracle Purchasing. This document will help you in implementing tax solution in Purchasing using R12 Ebusiness Tax solutions. This document will also help you in understanding the integration and troubleshooting your tax setups in Oracle Purchasing.
OVERVIEW
In release 12 EBusiness Tax has been introduced to provide an improved Tax solution to customers. Ebusiness Tax provides a repository to store tax information and record tax events. Individual applications (for e.g. Purchasing) avails the tax services provided by Ebusiness Tax to create/update/display tax information for its transactions. The tax services that can be availed from Ebusiness Tax are listed below.
a. Define Tax Content b. Determine Tax c. Manage Tax d. Record Tax e. Report Tax f. Reconcile Tax
Architecture has been built considering country specific tax requirements and applicability of rules for determining taxes. Based on the tax laws of a specific country, the transaction tax rates may vary by jurisdictions, products or product category, how the product will be used, type of transacting parties, type of transactions, the place of supply etc. Various rules are applicable for determining the appropriate tax on a specific transaction.
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The Tax Setups including rules are based on requirements used by the Tax Rules Engine, which will create/update Tax Lines. These lines are later reported using EBusiness Tax Reporting features. Figure below shows the e-business structure.
E-Business Suite Transaction

Oracle E-Business Tax
Tax Services Request Manager
Transaction Tax
Content Repository
STaxvices er
Record Repository
Content Services
Tax Determination Services
Tax Recovery Services
Tax Reporting
Tax Reporting Services
Partner Tax Content Interface
Tax Partner
Tax Content
Figure 1: E-Business Tax Architecture
PRIOR TAX STRUCTURE

Prior to release 12, tax was defined in Accounts Payables module. Taxes were associated with rates, non-recoverable ratio and recovery rules. Country Specific tax requirements could not be incorporated seamlessly into the application.
Prior to release 12, tax was defined in Accounts Payables module. A tax component on the document total could be associated with the purchasing documents for portion of the tax which was non recoverable. Purchasing would default taxes based on hierarchy defined either in Oracle Payables (Setup > Options > Payables > Tax code defaults) or in Oracle Purchasing (Setup > Organization > Purchasing Options > Tax Default Alternate Region) if "Enforce Tax From Purchase Order" box in Payable Options (Setup > Options > Payables > Tax code defaults) was checked. Taxes were associated with rates, non-recoverable ratio and recovery rules. Taxes were then defined in at least one of the levels (also called the tax source) for e.g. Item, Supplier, Supplier Site, and Location etc. The order of defaulting was decided by the hierarchy defined in the Payables/Purchasing options discussed previously. Tax calculation was called on a Requisition/ Standard Purchase order or a Blanket release based on the hierarchy, recovery rules and rates. Tax calculation is performed using the AP Tax Engine, which was called from the distribution, or
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PO/Requisition. Once the tax is defaulted and saved tax cannot be redefaulted even on changing the tax source in the document. It was possible to override the tax defaulted on Purchasing documents prior to receipt or prior to reservation on funds on the document incase of encumbrance accounting. To override tax we need to have the profile option Tax: Allow Override of Tax Code set to Yes. Profile "Tax: Allow Override of Recovery Rate" allows override of recovery rate if the values of this profile is set to "Yes". Due to complexity of the tax specifications based on country/product, Oracle used to provide certain country/product specific solutions for diverse tax related requirements. (For e.g. Latin Tax Engine in GTE, Brazil AP/PO Tax Engine, India R11i localizations) E-business tax design was completely new for release 12. Most of the features available in 11i have been accommodated in release 12 e-business tax. Following are some of the features that will not be available in release 12 e-business tax as compared the 11i features: 1. Tax Code is removed from the Enter Purchase Order form. Instead tax classification field will be available in tax page available through Manage Tax link. Users can no longer make a purchase order shipment nontaxable by removing the tax code from the PO shipment. Recovery Rate field at the distributions level will no longer be defaulted based on the Tax Code and will no longer display the default recovery rate of the transaction. Override of recovery rate will be subject to controls setup within e-business tax. User updated Tax Code on the requisition lines will no longer be carried over to the PO document during autocreate. The Tax Classification will always be re-defaulted on the PO document. Summarized tax information on purchase order has been eliminated. Only detailed tax line can be viewed on the purchase order. Tax Code cannot be populated through the purchase order Preferences form. Tax cannot be modified through AutoCreate requisition 'Modify' action, as the tax is re-defaulted on the PO regardless of the tax in the requisition. Detailed tax information based on tax classification will not be available in the requisition. For requisitions, users will only be able to view the tax amounts (total, recoverable and non-recoverable). Tax code has been removed from RFQs and Quotations form. Tax will be defaulted when a quotation is autocreated to a standard purchase order. PO documents cannot be reserved or submitted for approval if tax calculation error has occurred.
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10. While importing documents in the interface with Authorization status Approved using PDOI, a tax calculation error will result in creation of a document with Incomplete status or in updating of an already Approved document to Requires Reapproval status, if the Initiate Approval parameter was set to Yes. 11. Tax calculation error in Requisition Import will create imported requisitions with interface authorization status in Approved status as Incomplete. 12. Withholding tax will no longer be supported. Withholding Tax does not affect any taxes that organizations owe the tax authority, so there is no significance to the organizations accounts/budgeting. It serves more as a way to direct payment of portion of the taxes already owed.
KEY CONCEPTS
Following are some of the key concepts in eBusiness tax as provided by this product. This will be used further in this discussion.
Tax Regime: A Tax Regime contains the set of tax rules that determine the treatment of one or more taxes that have been grouped together for administration or other purposes. For e.g. VAT Regime in Argentina that sets the rules for Standard VAT, Additional VAT, and Perception VAT and US Sales Tax Regime in US with State, County and City/District taxes.
Tax: A classification of a charge imposed by a government through a fiscal or tax authority. For e.g.: Standard VAT, Additional VAT, and Perception VAT in Argentina and State, County and City/District sales/use taxes in US
Tax Status: Tax Status is the taxable nature of a product or service in the context of a transaction for a tax. For e.g. Zero Rated, Standard Rated etc.
Tax Rate: The rate specified for a tax status in effect for a period of time; the tax rate can be expressed as a percentage or as a value per unit quantity. For e.g. Sweden Standard Rate VAT is 25% or US California State Sales/Use Tax Standard Rate is 7.25%
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Tax Jurisdiction: A geographic area where a tax is levied by a specific tax authority. For e.g. The Jurisdiction for the US California County Sales Tax for Imperial County is Imperial County.
Party Tax Profile: Holds all party tax related information. For e.g. Party Profile for Establishments, Party Profile for Suppliers and Sites or Party Profile for Customers and Sites.
Registrations: The registration of a party with a tax authority that confers tax rights and imposes certain obligations. For e.g. ESA78211646 (VAT - Spain), SE123456789012 (VAT - Sweden) etc.
Fiscal Classifications : Provides for the definition of tax fiscal classifications. A fiscal classification is a way that a tax authority classifies each part of a transaction.
Party Fiscal Classifications: A classification used by a tax authority to categorize a party for a tax. For e.g. Brazil Establishment Type (e.g. Commercial, Industrial, Manufacturing)
Product Fiscal Classifications: A classification used by a tax authority to categorize a product for a tax. For e.g. Brazil Product Nature (e.g. electronic goods, dairy goods, professional fees, non-professional fees)
Intended Use Fiscal Classifications: The purpose for which a product may be used. For e.g. Brazil Intended Use (e.g. Commercialization, Consumption, Industrialization)
User defined Fiscal Classifications: A user defined Transaction Fiscal Classification Type.
Document Fiscal Classifications: A classification used by a tax authority to categorize the documents associated with a transaction for a tax.
Fiscal Classifications: Transaction Business Category: A business classification used by Oracle to identify and categorize an external transaction into a Tax transaction.
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INTEGRATION WITH PURCHASING
There are a few fields on purchasing documents, which determine application of a tax. These 'Tax determination attributes' on purchasing documents are used to calculate the applicable taxes on the transaction. These attributes, along with Additional Tax Attributes for e.g. Intended Use, Product Fiscal Classification (Seen on the Additional Tax Information Page) and other internal factors determine the calculation of tax. Tax calculation is initiated on creation (saving/importing) of the purchasing document. Tax is recalculated if there are any changes that affect the tax calculation. Tax will be calculated by calling tax services available through ebusiness tax at the following events: 1. Document creation and update (Requisitions, POs, Releases) 2. Receipt transactions (Charges) Tax recalculation will be supported on a PO shipment line has been received/accrued or matched to invoice provided retroactive pricing is enabled. In Purchase Orders/Releases, tax is calculated at the PO shipment level and distributed to recoverable and non-recoverable components that determine tax amount at the PO distribution level. In requisitions, tax will be defaulted based on the tax setups in eTax and cannot be overridden. The requisition line and distribution will have the summary tax amount(total, recoverable and nonrecoverable). The tax is calculated in e-business tax by calling e-business Tax services and stored in e-business tax repository as mentioned in the 'Overview of EBusiness Tax Architecture in R12' section in this article.
Tax Events
Based on similarity in handling tax information and tax determination tax events are classified based on purchasing document types.
Tax events are classified in purchasing based on the purchasing document types. Following are the event classes in purchasing. Purchase and Internal Requisition (REQUISITION) Purchase Orders and Agreements (PO_PA) Blanket and Scheduled Release (RELEASE) The above event classes are based on the consideration of whether any tax determination is necessary and the similarity in the handling of the tax information.
Configuration Owner Tax Options
The event class is associated with a first party legal entity/operating unit owning tax content. Tax configurations can subscribe to the event class and additional options available based on each application using the Configuration Owner Tax Options. At transaction time, e-business Tax uses the tax option settings of the configuration owner and application event class instead of the default settings. Therefore it is necessary that the available options (for update) through configuration owner tax options and defaulting rule should both be set with the same value for the option to
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take effect. For purchasing application only the following option is available for updating. 1. 2. Allow Tax Applicability Offset Tax Basis
Figure 2: Configuration Tax Owner Option Other options are not updatable for purchasing application and will not available. This will be the standard behavior in release 12. By default the Regime Determination Set is Determine Applicable Regimes which uses the location based taxes. For migrated tax, using Direct Tax Rate Determination with tax classification codes, configuration owner tax options must be setup to use STCC as the regime determination set.
Party Tax Profile
This is a centralized repository that holds information related to parties involved in tax transaction. It is important for the party definitions to exist in party tax profile so that it can be used in the tax transactions with e-business tax. A parties involved in e-business tax is classified into four types: 1. First Party Legal Entity: An entity identified though registration with a legal authority within a jurisdiction. This entity has rights to enter into transactions with other parties, own property and incur debt. One of the responsibilities of this entity is to pay and report tax liabilities to the legal authority.
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First Party Legal Establishment: Legal establishments (also called branch, division, inventory organization or physical location) are building blocks of a legal entity. A legal entity is made up of at least one legal establishment. When a legal entity is created, an establishment is automatically linked to it. This is called the main establishment of the legal entity. You may need to create additional establishments based on registrations required within local level jurisdiction. Local level jurisdictions can have separate tax requirements for the establishments registered under it. E-business tax rules identify tax registration status of legal establishments involved in a transaction and through Party Tax Profile. Operating Unit Owning Tax Content: This option allows you to enter and maintain tax content for an operating unit. In releases prior to R12, the tax content was owned by Payables, Receivables and other applications that had data stripped by operating unit. Upon upgrade the tax is migrated to ebusiness tax as operating unit owning tax content. Third Party: External parties involved in a transaction are third party to tax configuration owners for e.g. supplier for purchasing business transactions. Third Party Site: For e.g. supplier site for purchasing business transactions. Third party can operate from multiple sites. Tax calculation can differ based on the location of the site. Tax Authority: A government entity that regulates tax law, administers, and/or audits one or more taxes. A tax authority promulgates a set of tax rules and regulations, for taxes under a given tax regime. 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.
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Implementation Considerations
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It is necessary to associate a first party legal entity and its main legal establishment in party tax profiles. In case they have not been associated a tax calculation error will result while saving the transaction. To create a new first party legal entity / legal establishment, query the legal entity and choose the party type as first party legal entity or first party legal establishment for legal entity and legal establish respectively. Click on the icon under the label titled Create Tax Profile. Now follow the instructions under chapter Managing Tax Profiles and Registrations in Oracle E-Business Tax User Guide to create a new tax profile for both the legal entity and its main legal establishment. If you had been using tax configurations defined under the Operating Unit Owning Tax Content, then tax content defined under the First Party Legal Entity will not be applicable. You may choose to use the tax content
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of its associated legal entity. To start using tax defined for the legal entity, navigate to party tax profile page and choose the party type as Operating Unit Owning Tax Content and query the operating unit concerned. Click on the icon under the label titled Update Tax Profile. Check the Use Subscription of the Legal Entity box and save the party tax profile. After setting this checkbox, all tax content subscribed to Operating Unit Owning Tax Content will no longer be applicable. In order to use tax regimes subscribed under Operating Unit Owning Tax Content, add the First Party Legal Entity to the regimes party subscription. Warning: Checking the Use Subscription of the Legal Entity box for the Operating Unit Owning Tax Content 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. Before using the third party tax profiles, it is necessary to set up the party / party site. You can create / update the third party information from the e-business tax page. Please follow the instructions under chapter Managing Tax Profiles and Registrations in Oracle E-Business Tax User Guide to create a third party tax profile.
Country Defaults
Country default controls let you default the transaction tax-related values in the countries that you do business. You can also setup the default Tax Authority for the country. You can default tax regime and tax for tax registrations belonging to the legal establishment in the applicable country by choosing the option against the tax regime or tax you entered as the default tax. For more details about this option, please refer to the Oracle E-Business Tax User Guide.
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Figure 3: Country Defaults

Tax Defaulting
Purchase documents call the eTax services for tax calculation every time the purchase order is saved regardless of the taxability of the document line/schedule/distribution.
Regardless of the availability of tax definitions in e-business tax, Purchase documents call the eTax services for tax calculation on saving the purchase documents (Requisition/PO/Releases). If calculation results in applicable tax lines, then these tax lines are defaulted on the purchase document. Tax calculation is based on the values of the 'Tax determination attributes' along with the Additional Tax Attributes on purchasing documents. The 'Tax determination attributes', and Additional Tax Attribute available on both purchase order and requisitions are available in the Appendix section below. The purchase documents makes a call to eTax services for tax calculation even if there are no tax definitions available in tax repository. Therefore ebusiness tax determines the tax applicability and purchasing only controls calls to the eBTax services. The eTax API is called to avail the eBTax services to calculate the tax applicability. Once the purchase document is saved the Manage Tax menu is enabled. When saving the purchase document, if there are tax calculation errors in ebusiness tax, a message will be displayed to the user. Subsequently, the tax lines will not be defaulted. Following is the error message that appears. An error occurred during Tax Calculation. Please correct the problem or contact your System Administrator. Your transactions have been saved. Tax will be recalculated when the document is submitted for Approval.
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The tax will be recalculated on submission for approval. If the tax calculation is still erroring the document cannot be submitted for approval. The following error message will be display on clicking the 'Approve' button. Error Messages: Unexpected error occurred during Tax Calculation Exception: xxx - An unexpected error has occurred. Please contact your system administrator. Please correct the problem or contact your System Administrator. For troubleshooting the tax setups, please refer the troubleshooting section of this article.
Steps: 1. Setup Ebusiness tax. 2. Enter the purchase document details.(PO/Release/Requisition) 3. Save the purchase document (PO/Release/Requisition)
Tax information will be displayed only after the purchase document is saved. The Manage Tax link is enabled, which navigates to a web page where the tax details can be viewed.
Figure 4: Manage Tax link on purchase order entry form
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Displaying Tax Information
Tax information will be displayed only after the purchase document is saved. The 'Manage Tax' link on the toolbar of the purchase document will be enabled on saving the purchase document and the users can navigate to the "Tax" page where defaulted tax information can be viewed. This page has the following two tabs for PO/Releases. 1. Schedules 2. Distributions
The above tabs will display the tax line details for each shipment in the Schedules tab and non-recoverable and recoverable tax distributions for each distribution in the distributions tab.
The Tax page will have the following tabs for requisition. 1. Lines 2. Distributions
If there are no taxes applicable for the purchase document the Manage Tax menu will still be enabled. There will be no tax lines seen on expanding the 'Details' in the 'Schedules Tab' of this 'Tax' page. Also the taxability of a shipment (schedule) can be seen from the purchase order summary (Shipment window > Taxable flag can be added to the Folder View). This is no longer available in the Enter Purchase Order screen as seen in releases prior to R12. In other places, if the tax is applied on the purchase order then the details of the tax on schedule / distributions are available through the Manage Tax link. We can no longer make a shipment as non-taxable by setting the tax classification to NULL in ebusiness tax. Overriding the defaulted tax with a zero-rated tax classification is intended to minimize regression due to non-availability of this functionality. Tax code details and recovery rate cannot be viewed from the Purchase Order Summary/Requisition Summary form. In purchase order summary form Taxable Flag will be displayed. This is the only place where we can find the Taxable Flag unlike the previous versions where they could be viewed from the distributions and purchase order entry form. Manage Tax is available as a drop down in the Professional Buyers Workcenter.
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Figure 5: Purchase Order Tax Page Steps: 1. Query the purchase document or save the purchase document (Enter Purchase Order (POXPOEPO)/Enter Releases (POXPOERL)) 2. Click on Actions > Manage Tax from the toolbar from Enter Purchase Order (POXPOEPO)/Enter Releases (POXPOERL) forms and Tools > Manage Tax for Requisition Entry (POXRQERQ) form.
Modifying Tax Information

Overriding Tax
Defaulted Tax information can be overridden in purchase orders and releases. Tax line can be manually added to the purchase orders/releases even if they have not been defaulted.
Override behaviour will be governed e-business tax as described in Note 458218.1. There is a Additional Tax Information button available from the Manage Tax page. This link is available after saving the purchase document. If there is a tax calculation error while saving the purchase documents, the additional tax information page will be greyed out and the tax cannot be overridden in such a case.
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Figure 6: Additional Tax Information Page
Steps: 1. Query the purchase document (Purchase Order Summary/Requisition Summary form) or save the purchase document (Enter Purchase Order (POXPOEPO)/Enter Releases (POXPOERL)) 2. Click on Actions > Manage Tax (Tools > Manage Tax for Requisition) from the toolbar from Purchase Order Summary/Requisition Summary/Enter Purchase Order (POXPOEPO)/Enter Releases (POXPOERL) forms. 3. The tax page will appear with details of tax lines. Click on the 'Additional Tax Information' button. 4. Locate the tax classification field. This field will have the existing tax classification for each tax line. Choose the new tax from the LOV. 5. Click on Apply and this will navigate you back to the manage tax page. This page will have the new tax calculation based on the new tax classification rate.
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Application Tax Options - Tax Hierarchy

The tax hierarchy is now available in ebusiness tax through Application Tax Options available by each operating unit for Purchasing application. This is similar to defining the tax hierarchy in Purchasing Options prior to release 12. Application Tax Options is available only for backward compatibility of the former Tax Defaulting Hierarchy.
Prior to ebusiness tax, a tax hierarchy would be defined either in payable options or in purchasing options, which would determine the source and the order of defaulting on purchase orders. The tax hierarchy is now available in ebusiness tax through Application Tax Options available by each operating unit for Purchasing application. This is similar to defining the tax hierarchy in Purchasing Options prior to release 12. The tax will be defaulted based on the defaulting order and the source option specified. Application Tax Options is available only for backward compatibility of the former Tax Defaulting Hierarchy. If you are using complex tax rules you may choose to disable the application tax options. This is a one-time option. Once the application tax option has been disabled, it would not possible to re-enable this option again for that operating unit. For purchasing application we can choose up to the following 5 sources to default the tax. 1. 2. 3. 4. 5. Supplier Supplier Site Item Ship-To Location Payables Financial Option
Figure 7: Application Tax Options

Supplier
You can attach tax to the supplier using the following steps.
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1. 2. 3. 4. 5. 6.
In the tax page navigate to Parties > Party Tax Profiles. Choose Party Type as Third Party and query the Supplier in the Party Name for whom you like to define the tax. Click on update icon (Pencil icon). In the Main Tab check on Allow Tax Applicability. Check Set for Self Assessment / Reverse Charge if this is a self-assessed tax*. Navigate to Tax Registrations tab and click on Create button and add the tax regimes/taxes applicable to the supplier.
* A self-assessed tax is a tax calculated and remitted for a transaction, where tax was not levied but it is deemed as due.
Supplier Site
You can attach tax to the supplier site using the following steps. 1. 2. 3. 4. 5. 6. In the tax page navigate to Parties > Party Tax Profiles. Choose Party Type as Third Party Site and query the Supplier (using the Party Name field) for whom you like to define the tax. Choose the site for which you want to define the tax and click on update icon (Pencil icon). In the Main Tab check on Allow Tax Applicability. Check Set for Self Assessment / Reverse Charge if this is a self-assessed tax*. Navigate to Tax Registrations tab and click on Create button and add the tax regimes/taxes applicable to the supplier site.
* A self-assessed tax is a tax calculated and remitted for a transaction, where tax was not levied but it is deemed as due.
Item
You can attach tax to the item using the following steps. 1. 2. 3. 4. 5. 6. Navigate to Inventory/Purchasing Responsibility. Navigate to Items > Master Items Query the item for which you want to define the tax. Navigate to the Purchasing tab. Choose Yes from drop down for the Taxable field. Now choose the tax from Input Tax Classification Code field LOV*.
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* The tax will only be available in Input Tax Classification Code field LOV if the tax has been associated with a Tax Type in the tax configuration for this tax prior to enabling the tax. The place of supply rule determines the tax on the ship-to location based on the tax jurisdiction for the tax. This is available though the subscription owner profile in ebusiness tax. Tax for the Payables Financial Option can be applied through the Application Tax Options where tax to be applied can be selected for this option.
Tax Rules
Tax rules provide flexibility to use the tax as required by the business / tax authority. The User-friendly interface makes it easier for the implementation team to configure rules based on their requirements.
E-business tax provides flexibility to define all kinds of taxation rules that you normally encounter in your business scenario. Tax engine requires some of the mandatory tax rule types to be defined either by definining defaults available for these rule types, or by defining tax rules that will determine the value for these mandatory tax rule types. If both are defined, the tax engine will first use the rule. In case the rule does not evaluate a value, the default for the tax rule will be used. Rules can be defined even after the tax is live. Following are mandatory tax rule types required before enabling the tax for transactions. Determine Place of Supply - The specific jurisdiction where the supply of goods or services is deemed to have taken place for tax purposes, for a given tax; it is the result of the place of supply derivation. Determine Tax Applicability - The process and the data that identifies all the taxes that need to be determined/levied for a given transaction; the result will be an ordered list of applicable taxes. Determine Tax Registration - The registration of a party with a tax authority to ensure tax rights; responsibilities and rights are upheld. Determine Taxable Basis - The arrived at value, quantity or action, on which tax is calculated, after the tax rules which would affect it have been taken into consideration for a specific tax. These rules may include deductions, modifications, exemptions and discounts. Calculate Tax Amounts - The calculation of tax amount and formula to be used for calculating this amount.
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Figure 8: Tax Rules There are 2 methods available to define a rule. 1. 2. Expert Rule Guided Rule
Expert Rule
The below steps will guide you through a step-by-step process to create a tax rule using the expert rule. You can alternatively use the Guided Rule Entry option to define tax rules. For e.g. define applicability of tax only for ship to location as New York City 1. 2. 3. 4. Go to responsibility 'Tax Managers' Navigate to Advanced Setup Options > Tax Determining Factor Sets Click on 'Create' button Enter the following values a. Tax Determining Factor Set: <Enter a code for your Tax Determining Factor Set> b. Name: <Enter a name for your Tax Determining Factor Set> Set Usage: Tax Rules Optionally Enter: a. Regime Code: <Regime code where the rule will be applicable> Scroll down to the 'Associate Tax Determining Factors' region. Enter the following values a. Determining Factor Class: <In our case it is 'Geography'> b. Class Qualifier: <In our case it is 'Ship To'>
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c. Determining Factor Name: <In our case it will be 'City'> Click on 'Apply' to save the 'Tax Determining Factor Set' Navigate to Advanced Setup Options > Tax Condition Sets Click on 'Create' button Enter the following a. Tax Condition Set: <Enter a code for 'Tax Condition Set'> b. Determining Factor Set: <Enter the value from the LOV for the 'Tax Determining Factor Set' defined in step 4 above> Click on 'Continue' button We will see the 'Determining Factor Class', 'Class Qualifier' and 'Determining Factor Name' defaulted and greyed out Enter the following values: a. Operator: Not Equal To b. Value/From Range: NEW YORK Click on 'Finish' button. Query the tax in the Tax Configuration > Tax Rules page Click on Expert Rule Entry icon against the Determine Tax Applicability rule. Enter the following values: a. Rule Code: <Enter a Rule Code> b. Name: <Enter a Rule Code> c. Effective From: <Enter the effective date for this rule> d. Determining Factor Set Code: <Choose the 'Determining Factor Set Code' defined in step 4 above from the LOV> Click on Next to complete Step 1 of 3 Enter the following details: a. Condition Set Code: <Select the 'Tax Condition Set' defined in step 12 above from the LOV> b. Result: <for our case the value is 'Not Applicable'> Click on Next to complete Step 2 of 3 Enter the value of Rule Order and check the 'Enable' checkbox Click on 'Finish' to create the rule.
Guided Rule
You can also use the Guided Rule entry to define the rules for each tax. This step guides you through a step-by-step process to create a tax rule. You can alternatively use the Expert Rule Entry option to define tax rules. For e.g. define applicability of tax only for ship to location as New York City 1. 2. 3. 4. Query the tax in the Tax Configuration > Tax Rules page Click on Guided Rule Entry icon against the Determine Tax Applicability rule. Provide a name for the tax rule code and the effectivity. You can choose to apply this rule for all transactions or only for specific transactions.
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5. 6. 7. 8. 9.
Click on Enable and the click on Next button. In the Transactions tab enter the details for the location. In our case it will be New York. Also choose the operations. For e.g. equal to/not equal to. In our case choose not equal to. Click on Next button. Enter the condition set code and the order of preference for this rule.
10. Choose the result for the rule and its operation. In our case the rule combined with operation was: If Ship To not equal to New York. The result for this rule is that tax will not be applicable in such a case. So choose the option Not Applicable. So the rule becomes: If Ship To not equal to New York the tax is Not Applicable. 11. Click on Next and choose Enable to apply this rule.
Fiscal Classification
Fiscal Classification allows you a way to classify each part of your transaction and define tax rules based on these classifications. E-business tax allows you classifications based on party, product and nature of transaction.
As already defined Key Concepts section, Fiscal Classification is a way that tax authority classifies each part of a transaction. It is not necessary to define fiscal classification to setup taxes in e-business tax. It only allows you to classify each part of a transaction so that you may create rules based on them for specific tax requirements. We can model three types of fiscal classification in e-business tax. 1. 2. 3. Parties involved in the transaction - Party Fiscal Classification Products involved in the transaction - Product Fiscal Classification Nature of the transaction - Transaction Fiscal Classification
Party Fiscal Classification
The classification is used to categorize parties. For example a tax authority could claim a reduced tax rate for transaction in which the goods are purchased from a supplier establishment that have been classified as Research and Development organization by the tax authority in order to promote research activities. Steps: The below is an example of defining a rule for party fiscal classification for the above mentioned example: 1. Define Party Classification in TCA a. Go to responsibility Trading Community Manager b. Navigate to Trading Community > Administration > Classifications c. Click on Create Class Category button. d. Enter the following details
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i. Class Category Name: <Enter a name for you party classifications> ii. Meaning: <Enter the name for meaning of your party classification> iii. Description: <Enter the description for your party classification> e. Click on Apply and Create Class Codes f. Enter the value for Class Code, Meaning and Description (Description is optional) by which you would like to define your supplier establishment. For this example the following needs to be entered to define a party classification of type Research and Development: i. Class Code: Research and Development ii. Meaning: Research and Development iii. Description: Research and Development g. Click on Apply button. h. Click on Compile and this would submit concurrent program to define your party classification in TCA. (This step also returns the concurrent request id submitted for definition to take effect). i. Click on OK. 2. Create Fiscal Classification for the party in e-business tax a. Go to responsibility Tax Managers b. Navigate to Parties > Party Classification c. Click on Create button. d. Party Classification: <Choose the Party Classification defined in TCA during step 1 above> e. Fiscal Classification Type Code: <Define a code for your party fiscal classification code> f. Name: <Define a name for your party fiscal classification code> g. Effective From: <Enter the effective date> h. In the Tax regimes define all regimes to which this party fiscal classification will be applicable. Enter the following details for each regime: i. Regime Code ii. Effective From i. Click on Apply to save the party fiscal classification.
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Figure 9: Party Fiscal Classification
Figure 10: Party Fiscal Classification (Supplier Type) 3. Attach the Party Fiscal Classification to the party in PTP (Party Tax Profile) a. Go to responsibility Tax Managers b. Navigate to Parties > Party Tax Profiles c. Select the party type and party from the LOV and click on Go. In our case choose Party Type as Third Party and Party as the supplier that needs to be defined as a Research and Development type organization. d. Click on Update pencil icon. e. Navigate to the Classifications tab.
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f. g.
Click on button Add Another Row. Choose the Fiscal Classification Type Code defined step 2 above from the LOV. h. Choose the Fiscal Classification Code for the supplier based on the available codes defined in TCA. In our example the supplier Fiscal Classification Code is Research and Development. i. Click on Apply to save the party tax profile. 4. 5. Create a new tax status and tax rate. (Follow steps 3, 5 and optionally 6 in-case recovery is required in the section TAX SETUP below) Create an Expert / Guided Rule as shown in the Tax Rules section above. Please use the following specification to create the rule. a. Tax Determining Factor Set i. Determining Factor Class: Party Fiscal Classification ii. Class Qualifier: Ship From Party iii. Determining Factor Name: <'Fiscal Classification Type Code' defined in step 3 above> b. Tax Condition Sets i. Operator: Equal To ii. Value/From Range: <In our case 'Research and Development'> c. Tax Status: <Defined in step 4> d. Tax Rate: < Defined in step 4>
Therefore the rule becomes: When Ship From Party has a Party Fiscal Classification Value of Research and Development then apply the tax rate defined in step 4 above.
Product Fiscal Classification
The classification is used to categorize a product. There are three types of product classification available in e-business tax. 1. 2. 3. Inventory Based Non-Inventory Based Intended Use Classification
Inventory Based
This is used to classify categories defined in Oracle Inventory. This can only be used if Oracle Inventory is in installed status. For example, all domestically purchased items that are used as office supplies, will be sold at a lower rate. Steps:
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1.
In Oracle Inventory define a category. For e.g. in our case we will define a category called Office Supplies. (Please refer to the page 4-66 of Oracle Inventory User's Guide for steps to create an inventory category) Create a new category set and associate the category set with the category created in step 1 above. In our example associate the category defined in step 1 above to the Purchase Category Set (This is a seeded category set available by default i.e. we will associate the category Office Supplies in the Purchasing Category Set. (Please refer to the page 4-68 of Oracle Inventory User's Guide for steps to update an inventory category to a category set) Assign items to the category defined in step 1. For e.g. in our case we will create an item File 6x6 which is a purchased item with the category Office Supplies. (Please refer to the page 4-74 of Oracle Inventory User's Guide for Assigning Items to Categories and page 4-74 of Oracle Inventory User's Guide for defining an item) Define a Product Fiscal Classification for the above category in ebusiness tax. a. Go to Tax Managers responsibility. b. Navigate to Products > Product Classifications c. Click on Create button to create a new Product Fiscal Classification. d. Inventory Category Set: <Choose the category set defined in step 2 above>. In our example we need to choose Purchasing (Purchasing Category Set) against which we have defined a category Office Supplies. e. Fiscal Classification Type Code: <Define a code for your product fiscal classification > f. Name: <Define a name for your product fiscal classification code> g. Effective From: <Enter the effective date> h. In the Tax regimes define all regimes to which this product fiscal classification will be applicable. Enter the following details for each regime: i. Regime Code ii. Effective From i. Click on Apply to save the product fiscal classification.
2.
3.
4.
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Figure 11: Product Fiscal Classification (Inventory Based)
5. 6.
7.
Create a new tax status and tax rate. (Follow steps 3, 5 and optionally 6 incase recovery is required in the section TAX SETUP below) Create an Expert / Guided Rule as shown in the Tax Rules section above. Please use the following specification to create the rule. e. Tax Determining Factor Set i. Determining Factor Class: Product Inventory Linked ii. Determining Factor Name: <'Fiscal Classification Type Code' defined in step 4 above > f. Tax Condition Sets i. Operator: Equal To ii. Value/From Range: <In our case 'Office Supplies'> (Please note the value of the category segments are concatenated without delimiters therefore query this LOV with value of one of the segments and use the category description to choose the correct segment) g. Tax Status: <Defined in step 5> h. Tax Rate: < Defined in step 5> Create a purchase order with category Office Supplies. The rate should be one created in step 5 above.
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Therefore the following rule will be applied: If the category used in purchase order is Office Supplies then apply the rate used in step 5 above.
Non-Inventory Based
This is used to classify categories that are not defined in Oracle Inventory. The advantage of such a classification is that, it can also be used if Oracle Inventory is not in installed status. We will continue to use the above example we without using Oracle inventory example, all purchased items that are used as stationary materials for your office supplies, will be sold at a lower rate. Steps: 1. Define a Product Fiscal Classification for the non-inventory category in e-business tax. a. Go to Tax Managers responsibility. b. Navigate to Products > Product Classifications c. Product Classification Source: From the drop down ensure to choose Oracle E-Business Tax. d. Click on Go button. e. This would retrieve the seeded fiscal classification type code: PRODUCT_CATEGORY. f. Click on the pencil icon below the Update field of PRODUCT_CATEGORY fiscal classification code, to update the information in this category. g. Click on Create button to create a new category. h. Enter the following details i. Fiscal Classification Code: <Enter a code for the fiscal classification which will be used as the category>. In our example we will define it as OFFICE_SUPPLIES ii. Name: <Enter a name for the fiscal classification which will be used as the category>. In our example we will define it as Office Supplies iii. Effective From: <Enter an effective date> i. Click on Apply j. You will now be able to view the OFFICE_SUPPLIES under PRODUCT_CATEGORY. (If you are not able to view it. Click the Next 5 arrow to check the entire list under PRODUCT_CATEGORY). k. You may create sub categories by clicking on the + icon under Create Sub Level heading. For example in our case we will create a sub-category called STATIONARIES. l. Enter the following details
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i. Fiscal Classification Code: <Enter a code for the fiscal classification which will be used as the sub-category>. In our example we will define it as STATIONARIES ii. Name: <Enter a name for the fiscal classification which will be used as the sub-category>. In our example we will define it as Stationeries iii. Effective From: <Enter an effective date> m. Click on Apply n. You will now be able to view the STATIONARIES under OFFICE_SUPPLIES category of PRODUCT_CATEGORY. (If you are not able to view it. Click the Next 5 arrow to check the entire list under PRODUCT_CATEGORY). o. Click on Apply to save the fiscal classification.
Figure 12: Product Fiscal Classification (Non-Inventory Based) 2. 3. Create a new tax status and tax rate. (Follow steps 3, 5 and optionally 6 incase recovery is required in the section TAX SETUP below) Create an Expert / Guided Rule as shown in the Tax Rules section above. Please use the following specification to create the rule. a. Tax Determining Factor Set i. Determining Factor Class: Product Non-Inventory Linked ii. Determining Factor Name: Product Category b. Tax Condition Sets i. Operator: Equal To
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4. 5. 6. 7. 8.
ii. Value/From Range: <In our case 'Office Supplies/Stationeries'> c. Tax Status: <Defined in step 5> d. Tax Rate: < Defined in step 5> Create a purchase order and save. Click on the Actions > Manage Tax link from menu. Click on Additional Tax Information button. Scroll to the Product Classification field and choose the product classification Office Supplies/Stationeries from the LOV. Click on Apply and the new tax rate will be used based on the rule created above.
Therefore the following rule will be applied: If the Product Classification field entered in additional tax information page from the Manage Tax link on the purchase order is Office Supplies/Stationeries then apply the rate used in step 2 above.
Intended Use
This is used to classify transactions based on purpose for which a product maybe used. There are two types of intended use. 1. 2. Inventory Based Non-Inventory Based
For upgraded instances intended use is always inventory based. For non-upgrade customers this choice can be made only once. Example of Intended Use can be recovery tax on alcohol is based on its use. If it is used for Industrial Manufacturing, the recovery rate will be higher than when it is used for direct Retail Sale. In this whitepaper we will discuss example of inventory based Intended Use. The difference is that for inventory based defaulting automatically occurs when we choose the inventory-based items. While for noninventory based intended use, the Intended use must be explicitly specified from the Intended Use field seen from the Additional Tax Information page after navigating to the tax page though the Manage Tax link. Also for non-inventory based intended use, the codes for Intended Use must be created in e-business tax. Steps: 1. In Oracle Inventory define categories for intended use. For e.g. in our case we will define a category called Industrial Use and Retail Sales. (Please refer to the page 4-66 of Oracle Inventory User's Guide for steps to create an inventory category)
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2.
Create a new category set and associate the category set with the category created in step 1 above or use the default INTENDED_USE category set. In our example associate the categories defined in step 1 above to the INTENDED_USE Category Set (This is a seeded category set available by default i.e. we will associate the category Industrial Use and Retail Sales in the INTENDED_USE Category Set. (Please refer to the page 468 of Oracle Inventory User's Guide for steps to update an inventory category to a category set)
Figure 13: Intended Use (Inventory Category)
3.
Assign items to the categories defined in step 1. For e.g. in our case we will create an item Industrial Alcohol which is a purchased item with the category Industrial Use. (Please refer to the page 4-74 of Oracle Inventory User's Guide for Assigning Items to Categories and page 4-74 of Oracle Inventory User's Guide for defining an item)
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Figure 14: Intended Use (Item Assignment)
4. 5.
Create a new recovery rate for your tax. (Follow step 6 in the section TAX SETUP below) Create an Expert / Guided Rule as shown in the Tax Rules section above. Please use the following specification to create the rule. a. Tax Determining Factor Set i. Determining Factor Class: Transaction Input Factor ii. Determining Factor Name: Intended Use b. Tax Condition Sets i. Operator: Equal To
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6.
ii. Value/From Range: <In our case Industrial Use> (Please note the value of the category segments are concatenated without delimiters therefore query this LOV with value of one of the segments and use the category description to choose the correct segment) c. Tax Recovery Rate: < Defined in step 4> Create a purchase order with category Office Supplies. The recovery rate should be defaulted from the one created in step 4 above.
Therefore the following rule will be applied: If the Intended Use of the item in purchase order is Industrial Use then apply the recovery rate used in step 4 above.
Transaction Fiscal Classification
The classification is used to categorize transactions according to the requirements of a tax authority. This is used when the nature of the transaction itself determines the tax and the tax rate that applies. The Transaction Fiscal Classification must be entered manually from the Additional Tax Information page (Purchase Orders > Manage Tax > Click on Additional Tax Information button). Three Types of Transaction Fiscal Classification can be defined in e-business. Transaction Business Category: To classify transactions based on the nature of business. Seeded Transaction Business Categories Expense Report Purchase pre-payment transaction Purchase transaction Sales transaction Sales transaction adjustment Intercompany transaction New categories can be created under the seeded categories. Document Fiscal Classification: To classify based on the documents required / the type of documents used for the transaction. For e.g. Export Sales User Defined Fiscal Classification: Used for defining transaction based on any other classifications from transaction other then the above mentioned. For e.g. a sample sale may invite a lower tax. So users can define a user defined fiscal classification of type Sample Sales and create rules to define tax rates for such a transaction.
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Tax in Interface
. Tax information provided through the interface will be considered as an override and not defaulting information. If tax details are not specified in the interface, then ebusiness tax will determine the appropriate tax classification and recovery rate.
Requisition Import
If the requisition lines interface (PO_REQUISITIONS_INTERFACE_ALL) does not specify any tax details, then ebusiness tax will determine the appropriate tax classification and recovery rate. Tax information provided through the interface will be considered as an override and not defaulting information. Therefore it should fulfill all the criteria for overriding a tax as mentioned in above under the heading Modifying Tax Information (Overriding Tax). A new field TAX_NAME is introduced in release 12. Tax classification can be provided for overriding the tax line information. TAX_CODE_ID field is supported on the data import for backward compatibility. If TAX_CODE_ID field based on the old AP tax codes is specified, then the tax classification will be derived and passed on to ebusiness tax.
PDOI
Tax classification can be provided in the PO_LINES_INTERFACE for overriding the tax line information using the TAX_NAME. If the PO lines interface (PO_LINES_INTERFACE) does not specify any tax details, then ebusiness tax will determine the appropriate tax classification and recovery rate. TAXABLE_FLAG will be used as an item attribute for item creation in Oracle Inventory to update the taxability of the item. However, taxable flag on the PO document transaction table, which will be derived based on the existence of tax lines on the shipment and will not be affected by the TAXABLE_FLAG provided in the interface.
Tax During AutoCreate
During AutoCreate the tax will be redefaulted on the purchase order based on the tax determining attributes of the purchase order. Tax overridden on the requisition will no longer be passed to the purchase order, as was the functionality prior to release 12.
During AutoCreate the tax will be redefaulted on the purchase order based on the tax determining attributes of the purchase order. Tax overridden on the requisition will no longer be passed to the purchase order, unlike the functionality prior to release 12. Tax will not be part of shipment grouping criteria so it is possible to have requisition lines with different tax values being grouped into a single PO shipment. Tax will be recalculated on the PO document created through autocreate.
Quantity Based Tax
One of the features of e-business tax for purchasing is the capability to define tax on the basis of quantity instead of the Line amount. In order to define tax based on quantity we can follow the steps mentioned in the TAX SETUP section below. Please follow the below mentioned changes in the 1. Tax Rate: In tax rate define the following (Step 5 in TAX SETUP section): a) Rate Type: Quantity b) UOM: <Unit of Measure for the purchase> c) Quantity Rate: <Rate of tax per quantity>
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Figure 15: Quantity Based Tax (Tax Rate) 2. Tax Rule: In tax rules of for the tax, use the following as default value (Step 7 in TAX SETUP section): a) Determine Taxable Basis: STANDARD_QUANTITY
Figure 16: Quantity Based Tax (Tax Rules)
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TAX SETUP
Following are the brief setup steps for defaulting basic tax in purchasing. Based on the business requirement the setups can be complex involving multiple tax rules. These steps can be used for performing quick tests for using tax in purchasing. 1. (Responsibility: Tax Managers, Navigation: Tax Configuration > Tax Regime) a. Regime Level - A Tax Regime is usually defined for a country b. Controls and defaults Following options can be checked. Instead of replicating choices for different OUs, define which regimes need to support recovery / Exemptions / Exceptions / Overrides
Set up Tax Regime
i. Allow Tax Recovery ii. Allow Tax Exemptions iii. Allow Tax Exceptions c. Click on Next to choose the subscriptions for the regime. d. Party Subscription Options i. Define the parties (legal Entity / operating unit) that subscribe to this tax. ii. Configuration for Taxes and Rules: Choose if the regime will be available as Common Configuration i.e. Tax setups will be available for tax across legal entities / operating units (use Global Configuration Owner as the Configuration Owner in the rest of the setups) or you may use Party Specific that only allows tax setups to be used for the specific legal Entity / operating unit or you
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e. 2.
may use Common Configuration with Party Overrides which will allow you to define portion of the tax setups to be overridden and available only for your specific legal Entity / operating unit. iii. Configurations for Product Exceptions: Choose if the product exceptions can be Common Configuration to allow the regime to use product exceptions across all the legal entities / operating units units (use Global Configuration Owner as the Configuration Owner when setting up product exceptions) or choose Party-Specific Configuration to configure party specific product exceptions. Click on Finish to save the tax regime. (Responsibility: Tax Managers, Navigation: Tax Configuration >
Set up Tax
Taxes) a. Configuration Owner: <Based on the tax regime setup for Configuration for Taxes and Rules in Step 1> b. Geography Type: Based on the applicability of the tax to a geography c. Parent Geography Type: Based on the geography of the tax regime. d. Tax Type: Based on the type of tax for e.g. VAT, Sales etc. e. Applied Amount Handling: Recalculated is set by default. Set to Prorated for tax to arrive at an amount calculated previously. f. Controls: Check the options required for your tax. For e.g. the following can be checked for overriding tax rounding/tax line and entry of manual tax line. i. Allow Tax Rounding Override ii. Allow Override for Calculated Tax Lines iii. Allow Entry of Manual Tax Lines g. Tax Exceptions/Exemptions Controls: Check the following options to allow Tax Exceptions and Tax Exemptions. i. Allow Tax Exceptions ii. Allow Tax Exemptions h. Tax Recovery Controls: Recovery rate is not mandatory and is totally optional. Once the allow recovery rate tab is checked for a tax then it will not be live till recovery rate is defined. Check the following options to allow tax recovery and override. i. Allow Tax Recovery ii. Allow Tax Recovery Rate Override i. Defaults: Set the following options/defaults. i. Allow Tax Rate Rules: Checked ii. Default Recovery Settlement: Immediate j. Save the Tax details by clicking on Apply
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3.
(Responsibility: Tax Managers, Navigation: Tax Configuration > Tax Status) a. Configuration Owner: <Based on the tax regime setup for Configuration for Taxes and Rules in Step 1> b. Set as Default Tax Status: Checked (For defaulting it as the tax status) c. Default Controls: Following options are available. Choose the options required for your tax. i. Allow Tax Exemptions ii. Allow Tax Exceptions iii. Allow Tax Rate Override d. Tax Rate Defaults: Set the following option. i. Default Recovery Settlement: Immediate e. Save the Tax Status details by clicking on Apply
Setup Tax Status
4.
(Responsibility: Tax Managers, Navigation: Tax Configuration > Tax Jurisdiction) a. Geography Type: Based on the applicability of the tax to a geography b. Parent Geography Type: Based on the geography of the tax regime. c. Parent Geography Name: Name of the parent geography. For e.g. if the parent geography type was country, the geography name could be United States, UK, India etc (based on your tax). d. Geography Name: Name of the jurisdiction geography. For e.g. if the geography type was country, the geography name could be United States, UK, India etc (based on your tax). e. Effective From: <specify the effective date> f. Default Tax Jurisdiction Settings: Set the following options / defaults i. Set as default Tax Jurisdiction: Checked ii. Default Effective From: <specify the effective date> * There should be at least one default jurisdiction.
Setup Tax Jurisdiction Code
5.
(Responsibility: Tax Managers, Navigation: Tax Configuration > Tax Rate) a. Configuration Owner: <Based on the tax regime setup for Configuration for Taxes and Rules in Step 1> b. Rate Type: Percentage (For calculating the tax rate based on percentage) c. Percentage Rate: <Set the rate for the tax> d. Rate Details: Click on the icon under the Rate Details and set the following. i. Set as Default Rate: Checked
Setup Tax Rate
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e.
f.
ii. Default Effective From: <Date effective> Tax Accounts: Click on the icon under the Tax Accounts and set the following. i. Ledger: Primary Ledger Name ii. Click on Create iii. Operating Unit: <Enter the value of Operating Unit> iv. Tax Recoverable/Liability: <Enter the code combination for this account> v. Click on Apply vi. Click on Apply *Tax accounts can to be defined at the tax and rate level. If defined at both the places then rate level takes precedence. Save the Tax Rate details by clicking on Apply
*There can be multiple taxes under a regime, multiple statuses under a tax and multiple tax rates under a status. 6.
Setup Tax Recovery Rate* (Responsibility:
Tax Managers, Navigation: Tax Configuration > Tax Recovery Rate) a. Configuration Owner: <Based on the tax regime setup for Configuration for Taxes and Rules in Step 1> b. Recovery Rate Periods: Set up the following values i. Percentage Recovery Rate: <Recovery Rate%> ii. Effective From: <specify the effective date> iii. Set as Default Rate: Yes iv. Default Effective From: <specify the effective date> *Recovery rate is not mandatory and is totally optional. Once the allow recovery rate tab is checked for a tax then it will not be live till recovery rate is defined. Recovery rate can to be defined at the tax and rate level. If defined at both the places then rate level takes precedence.
7.
(Responsibility: Tax Managers, Navigation: Tax Configuration > Tax Recovery Rules) a. Query the tax for the Configuration Owner (Based on the tax regime setup for Configuration for Taxes and Rules in Step 1) b. Setup the following default rule types i. Determine Place of Supply: Ship To ii. Determine Tax Applicability: Applicable iii. Determine Tax Registration: Ship From Party iv. Determine Taxable Basis: STANDARD_TB v. Calculate Tax Amounts: STANDARD_TC
Setup Tax Rules Update Tax
8.
a.
to make it available for transactions Query the Tax
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b. Update the following option: i. Make Tax Available for Transactions: Checked ii. Default Primary Recovery Rate*: <Choose the setup in step 6 from the LOV> c. Apply the changes. 9. (Responsibility: Tax Managers, Navigation: Defaults and Controls > Configuration Owner Tax Options) a. Set up the following for enabling tax on Purchase Orders i. Configuration Owner: <As defined in the tax regime> ii. Entity Name: Purchase Order iii. Application Name: Purchasing iv. Effective From: <specify the effective date> v. Event Class: Purchase Order and Agreement vi. Enabled: Checked
Setup Configuration Owner Tax Options Setup Application Tax Options*
10.
(Responsibility: Tax Managers, Navigation: Defaults and Controls > Application Tax Options) i. Application Tax Options: <Operating Unit> ii. Operating Unit: Vision <Operating Unit> iii. Application Name: Purchasing iv. Defaulting Order 1: <Choose from the drop down list> v. Defaulting Order 2: <Choose from the drop down list> vi. Defaulting Order 3: <Choose from the drop down list> vii. Defaulting Order 4: <Choose from the drop down list> viii. Defaulting Order 5: <Choose from the drop down list> *Defining Application Owner Tax Options is optional
11.
Setup Tax on Source:
Depending on the source from where tax needs to be defaulted, please define the setups as mentioned in the section for Application Tax Options - Tax Hierarchy. (i.e. Supplier, Supplier Site, Item, Ship-To Location or Payables Financial Options). For e.g. for supplier, following setups are required. a. In the tax page navigate to Parties > Party Tax Profiles. b. Choose Party Type as Third Party and query the Supplier in the Party Name for whom you like to define the tax. c. Click on update icon (Pencil icon). d. In the Main Tab check on Allow Tax Applicability. e. Check Set for Self Assessment / Reverse Charge if this is a selfassessed tax. f. Navigate to Tax Registrations tab and click on Create button and add the tax regimes/taxes applicable to the supplier.
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12.
with a supplier defined in step 11 above and save the purchase order. Click on Actions > Manage Tax to navigate to the tax details page.
Create a Purchase Order
You could also view a demonstration of the tax setups for purchasing though the viewlets attached with this white paper.
UPGRADE CONSIDERATIONS
Following are some of the important impacts upon upgrade. Since the upgrade path for release 12 is only though 11i, we will only be considering this release in our considerations for upgrade. Also, this article would discuss only impacts on purchasing perspective. 1. In release 11i, tax was maintained separately for payables, receivables etc. The tax used in purchasing was stored in payables and tax calculation APIs from payables were called for determining tax amount. The tax was operating unit based. In release 12 a centralized repository will be used to store taxes from across applications. The tax setup will be upgraded as partyspecific configuration owners, with the operating unit owning the tax setup. This means that the tax regimes for migrated taxes will subscribe to party with Operating Unit Owning the Tax Setup i.e. the operating unit will still continue to own the tax. Each tax code, including the tax codes within a tax group, migrates to EBusiness Tax as a tax classification code. Payables and Purchasing tax codes migrate as input tax classification codes. Each tax code will be migrated with each tax code having its regime to rate flow. The tax group will also be migrated as a tax classification, but will not have an associated regime to rate flow in e-business tax. To group all related taxes classifications under its related tax group, a direct rate determination rule is created during migration that will be based on the tax classification code that has the same name as tax group code. If tax codes are not part of any tax groups then there will be no Direct Rate Determination rule. You may define additional rules to determine taxes to be defaulted on a transaction. A new Regime Determination Template Standard Tax Classification Code (STCC) will be created during migration using determining factor of Tax Classification Code -which will indicate that the tax calculation would be based on the old Release 11i approach. This will be available as Regime Determination Set on the configuration tax owner option for the Operating Unit Owning Tax Content. When the template is STCC, a shortcut approach is used to calculate taxes based on the passed Tax Classification Code. This is a special Regime Determination Template which does not use Location based Determining Factors. All other Regime Determination Templates must use location based determining factors.
2.
3.
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4. 5.
Direct Rate Determination Rules for the defaulted tax classification code would determine the applicability of one or more taxes on a taxable line. For Location based taxes, location values will be upgraded into the Trading Community Architecture (TCA) Geography model as legislative geography elements such as STATE, COUNTY, CITY and POSTAL CODES as well as TAX ZONES to cover ZIP code ranges or groups of ZIP ranges with the same GEO code. The upgrade will automatically create Tax Jurisdictions for each Tax Zone within the context of a Regime and Tax. For each of these Tax Jurisdictions, the upgrade will create a Tax Jurisdiction Rate with a percentage rate associated with the relevant tax Regime, Tax, Tax Status (STANDARD) and Tax Jurisdiction. Supplier and supplier sites migrate to Trading Community Architecture (TCA) as TCA parties and party sites. For these parties, E-Business Tax includes the tax classification code field as part of the supplier or supplier site party tax profile. Release 11i Purchasing and Payables defaulting hierarchy are upgraded to Application Tax Options for each OU separately for Purchasing and Payables respectively. Both these hierarchies will be independent of the other unlike 11i tax hierarchy where payables based hierarchy could be used in purchasing. The current recovery rates will be upgraded as "primary" recovery rates with the Release 11i Accounting based recovery rules upgraded as Recovery Rate Rules. Tax Registrations defined at HR locations or HR Organization levels in Release 11i are upgraded as Tax Registrations at Party Tax Profile for Legal Establishments. Additional Release 12 functionality is available to define multiple registrations for the same party and different regimes, taxes or jurisdictions, as well as the ability in Release 12 to define registration status that can be used in rules.
6.
7.
8.
9.
For more detailed impact please refer to the Oracle Applications Upgrade Guide: Release 11i to Release 12 and Oracle Financials and Oracle Procurement Functional Upgrade Guide: Release 11i to Release 12.
DATA FLOW
Following is the mechanism of calls to the ebusiness tax to calculate tax. 1. Purchasing will populate tax-determining attributes to global temporary tables. 2. It will then call ebusiness tax API's to calculate tax. 3. Once the tax lines are calculated, appropriate tables in ebusiness tax is populated with tax details and the purchasing tables are updated to indicate taxable line. 4. The data from the global temporary tables will be deleted.
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Following are the main ebusiness tax tables that will contain the setup information that will help support in troubleshooting ebusiness tax information.
a. Tax Regimes: ZX_REGIMES_B b. Taxes: ZX_TAXES_B c. Tax Status: ZX_STATUS_B d. Tax Rates: ZX_RATES_B e. Tax Jurisdictions: ZX_JURISDICTIONS_B f. Tax Rules: ZX_RULES_B
To get a dump of the eTax setups, you can use the following set of queries. Please provide the tax regime code when prompted. If the issue is limited to a tax then provide the tax name when prompted else please leave it blank. SELECT * FROM zx_regimes_b WHERE tax_regime_code = '&tax_regime_code'; SELECT * FROM zx_taxes_b WHERE DECODE('&tax_name',null,'xxx',tax) = nvl('&tax_name','xxx') AND tax_regime_code = '&tax_regime_code'; SELECT * FROM zx_status_b WHERE tax = '&tax_name' AND tax_regime_code = '&tax_regime_code'; SELECT * FROM zx_rates_b WHERE tax = '&tax_name' AND tax_regime_code = '&tax_regime_code'; SELECT * FROM zx_jurisdictions_b WHERE DECODE('&tax_name',null,'xxx',tax) = nvl('&tax_name','xxx') AND tax_regime_code = '&tax_regime_code'; SELECT * FROM zx_rules_b
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WHERE tax = '&tax_name' AND tax_regime_code = '&tax_regime_code'; Following are the main ebusiness tax tables that will contain the transaction information that will have the tax details after tax is calculated.
a. ZX_LINES: This table will have the tax lines for associated with PO/Release schedules. TRX_ID: Transaction ID. This is linked to the PO_HEADERS_ALL.PO_HEADER_ID TRX_LINE_ID: Transaction Line ID. This is linked to the PO_LINE_LOCATIONS_ALL.LINE_LOCATION_ID
b. ZX_REC_NREC_DIST: This table will have the tax distributions for associated with PO/Release distributions. TRX_ID: Transaction ID. This is linked to the PO_HEADERS_ALL.PO_HEADER_ID TRX_LINE_ID: Transaction Line ID. This is linked to the PO_LINE_LOCATIONS_ALL.LINE_LOCATION_ID TRX_LINE_DIST_ID: Transaction Line Distribution ID. This is linked to the PO_DISTRIBUTIONS_ALL.PO_DISTRIBUTION_ID RECOVERABLE_FLAG: Recoverable Flag. If the distribution is recoverable then the flag will be set to Y and there will be values in the RECOVERY_TYPE_CODE and RECOVERY_RATE_CODE.
c. PO_REQ_DISTRIBUTIONS_ALL: This table will have the tax distributions for associated with Requisition distribution. RECOVERABLE_TAX: Recoverable tax amount NONRECOVERABLE_TAX: Non Recoverable tax amount
d. ZX_LINES_DET_FACTORS: This table holds all the information of the tax line transaction for both the requisitions as well as the purchase orders/releases. TRX_ID: Transaction ID. This is linked to the PO_REQUISITION_HEADERS_ALL.REQUISITION_HEADER_ID / PO_HEADERS_ALL.PO_HEADER_ID
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TRX_LINE_ID: Transaction Line ID. This is linked to the PO_REQUISITION_LINES_ALL.REQUISITION_LINE_ID / PO_LINE_LOCATIONS_ALL.LINE_LOCATION_ID
TROUBLESHOOTING
Tax Simulator
Simulator is a powerful user interface too that can be used to simulate Tax Calculation based on what-if scenarios. It gives flexibility to test new and/or changed tax rules. Tax Simulator helps on audit trail with respect to which Tax Rules were satisfied in calculating a particular tax. You can start using the Oracle Tax Simulator by attaching this responsibility to your user. Navigate to the Oracle Tax Simulator and enter the Header and Line information as appropriate. Click on Tax Lines to display the tax lines for your tax. For detailed steps please review the tax simulator viewlet attached to metalink Document ID (Note) for this whitepaper. Useful Tips: 1. Ship from Ship to and Bill From Bill to LOVs change depending upon the application selected. Ship To/Bill To information is required for calculation of location-based tax. First Party locations need to be associated with the legal establishment for the tax simulator to calculate tax.
2.
Troubleshooting Tips
1.
Determine the configuration owner subscription - Party tax profile of Operating Unit. Check whether the OU has subscribed to LE setups. Depending upon the set up above check whether the configuration owner has subscribed to the regime. Check the configuration option e.g. party specific configurations. For the configuration owner (OU or LE) as determined above check the Configuration Owner Tax Option for the event class. Check the Regime Determination Set. For location-based taxes it should be Determine Applicable Regime. Check the Tax Applicability flag. Check the Party Tax Profile of the Third Party (supplier) and third party site (supplier site). Check for the Tax Applicability flag at main tab and at registration tab Regime to Rate Flow: Depending upon the regime subscription option e.g. party specific, common configuration or common with party override, check following tax set ups. Check that every set up entity is effective for the transaction date. Check that one status is default and every status has a default
2.
3.
4.
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rate. In case of jurisdiction specific rates, check that every jurisdiction has a default rate.
5.
Tax Rules: Check the default place of supply or the rule for the tax. There should be at least one valid jurisdiction for the place of supply determined. Check whether the tax is by default Applicable. If not then at least one rule must be satisfied.
Tax Log and File Versions
If there is an error while calculation please use the Note 417238.1 to obtain the tax debug log. Below are the information that will be sufficient for Oracle Support to progress the service request for any ebusiness tax calculation issues. 1. Set the following profile options on at user level for the user saving the purchase order. FND: Debug Log Enabled = 'Y' FND: Debug Log Level = 'Statement' FND: Debug Log Module = % 2. Now change the responsibility to purchasing and open the Purchase Order/Requisition Form where this issue is happening and enter the details. 3. Obtain the AUDSID for your login. For obtaining this, perform the following from just before opening Purchase Order / Requisition form. Go to Help->About Oracle Applications, you will find the AUDSID field. (* Sometime AUDSID is not available for a few customers Please ignore this step in such a case) 4. Obtain the max log sequence using the following query. SQL> select max(log_sequence) from fnd_log_messages; 5. Just before saving the PO/Requisition, turn trace on by: Help > Diagnostics > Trace > Trace with Binds 6. Save the purchase order / requisition and then stop immediately afterwards by. Help > Diagnostics > Trace > No Trace
8. You will get a message showing the location of the trace file. 9. Please retrieve trace with tkprof. Run the trace file through tkprof as follows: tkprof <filename>.trc <filename>.out explain=<found username/password>
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example: tkprof file1234.trc file1234.out explain=<apps/apps> 10. Please get the debug log using the following query. SQL> select * from fnd_log_messages where log_sequence > <output from step1> and (module like 'ZX%' or module like 'zx%) and audsid = <audsid from step 3 above> order by log_sequence; * If the AUDSID is not available please use the following query to retrieve the tax log. SQL> select * from fnd_log_messages where log_sequence > <output from step1> and (module like 'ZX%' or module like 'zx%) and user_id = (SELECT user_id FROM fnd_user where user_name = &Username) order by log_sequence;
11. Provide the output of Diagnostics: Appscheck concurrent program. Navigate to Purchasing/Purchasing Super User/System Administrator Responsibility. Click on View > Request and Click on Submit a New Request Click on OK for option Single Request Choose the concurrent program Diagnostics: Apps Check Select the following parameters Application1= Ebusiness Tax Application2 = Purchasing Submit the Request and upload the output of the program for validating the file version information.
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APPENDIX References
Note 406376.1 Note 417238.1 Note 398841.1 Note 415698.1 Note 437693.1 Note 456310.1 Note 458218.1 Note 458320.1
Oracle E-Business Tax Release 12 Known Issues How to obtain tax debug logfile when using application version 12 or higher FAQ: Purchasing Integration With E-Business Tax Oracle E-Business Tax key benefits, some new features and resource material R12 Unexpected Error Occurred During Tax Calculation R12 Oracle E-Business Tax Configuration Defaulted Tax Rate From E-Business Tax Cannot Be Overriden E-Business Tax Calculation Issues After Entering The Next Line/ Deleting Shipments/ Adding New Shipments in Purchase Order Defaulted Tax Rate From E-Business Tax Cannot Be Overriden E-Business Tax Calculation Error Occurs. Tax Log Shows 'Error Unable To Get The HQ_ESTB_PARTY_TAX_PROF_ID For Legal_Entity xx' Oracle E-Business Tax Documentation Resources, Release 12 1. 2. 3. 4. Oracle E-Business Tax Implementation Guide Oracle E-Business Tax User Guide Oracle Financials and Oracle Procurement Functional Upgrade Guide: Release 11i to Release 12 Oracle Applications Upgrade Guide: Release 11i to Release 12 (zipped)
Note 458218.1 Note 461844.1
Note 397158.1
Oracle Internal References
Note 419415.1
What to do with E-Business tax and Legal Entity SRs?
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Tax Determination Attributes
Requisitions ======= Header ---------Requisition Type Transaction Currency Tax Header (Navigation: Tools > Manage Tax) ---------------Taxation Country Document Sub-type Line ------Item Unit of Measure Quantity Unit Price Amount Need-by Date Tax Classification Ship-to Organization Ship-to Location Supplier Supplier Site Additional Tax Attributes (Navigation: Tools > Manage Tax > Additional Tax Information) --------------------------------Business Category Intended Use User-defined Fiscal Classification Product Fiscal Classification Product Category Assessable Value Distribution --------------Quantity Amount Charge Account Tax Recovery Rate Project Task
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Award Expenditure Type Expenditure Organization Expenditure Date Additional Tax Attributes (Navigation: Tools > Manage Tax > Additional Tax Information) -------------------------------Intended Use POs/Releases ========= Header ----------PO Document Type Transaction Currency Rate Type Rate Date Rate FOB Supplier Supplier Site Bill-to Location Provisional Tax Determination Date
(for Consumption Advice Orders)
Tax Header (Navigation: Tools > Manage Tax) ---------------Taxation Country Document Sub-type Line -----Item Unit of Measure Unit Price Shipment ------------Quantity Amount Need-by Date Tax Classification Ship-to Organization Ship-to Location Source Document
(for Scheduled Releases of Planned PO)
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Source Shipment
Additional Tax Attributes (Navigation: Tools > Manage Tax > Additional Tax Information) -------------------------------Business Category Intended Use User-defined Fiscal Classification Product Fiscal Classification Product Category Assessable Value Distribution ---------------Quantity Amount Account CCID Tax Recovery Rate Project Task Award Expenditure Type Expenditure Organization Expenditure Date Source Distribution
Additional Tax Attributes (Navigation: Tools > Manage Tax > Additional Tax Information) -------------------------------Intended Use (defaults from shipment level)
Acknowledgement
I wish to record my sincere appreciation towards: My team mates Ajith, Mani, Muhittin, Selvan and Subhashini for all their help and feedback in completing this document. Also Anand Naik and Vasvi Kedia from Product Management, Ranjith Palani and Rajalingam Ramaswamy of Product Development Team, and Clarina Allen and Janet Flores from Procurement Support team for reviewing this whitepaper. Thanks to Anand Naik for providing guidance at various situations. A Special thankyou to Andrea Balasuriya from Product Release Readiness Team for constantly providing help from every direction. I am very grateful to Chandu Tadanki for his constant encouragement and support.
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E-business Tax A Purchasing Perspective October 2007 Author: Varkey Joseph Oracle Corporation World Headquarters 500 Oracle Parkway Redwood Shores, CA 94065 U.S.A. Worldwide Inquiries: Phone: +1.650.506.7000 Fax: +1.650.506.7200 oracle.com Copyright 2007, Oracle. All rights reserved. This document is provided for information purposes only and the contents hereof are subject to change without notice. This document is not warranted to be error-free, nor subject to any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose. We specifically disclaim any liability with respect to this document and no contractual obligations are formed either directly or indirectly by this document. This document may not be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without our prior written permission. Oracle, JD Edwards, PeopleSoft, and Siebel are registered trademarks of Oracle Corporation and/or its affiliates. Other names may be trademarks of their respective owners.

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E-business Tax A Purchasing Perspective

An Oracle White Paper Oct 2007

E-business Tax A Purchasing Perspective

E-business Tax A Purchasing Perspective

E-business Tax A Purchasing Perspective

E-business Tax A Purchasing Perspective

E-Business Suite Transaction

Tax Determination Services

Tax Recovery Services

Tax Reporting Services

Partner Tax Content Interface

Figure 1: E-Business Tax Architecture

PRIOR TAX STRUCTURE

E-business Tax A Purchasing Perspective

E-business Tax A Purchasing Perspective

E-business Tax A Purchasing Perspective

E-business Tax A Purchasing Perspective

INTEGRATION WITH PURCHASING

E-business Tax A Purchasing Perspective

E-business Tax A Purchasing Perspective

E-business Tax A Purchasing Perspective

E-business Tax A Purchasing Perspective

Figure 3: Country Defaults

E-business Tax A Purchasing Perspective

Figure 4: Manage Tax link on purchase order entry form

E-business Tax A Purchasing Perspective

Displaying Tax Information

E-business Tax A Purchasing Perspective

Modifying Tax Information

E-business Tax A Purchasing Perspective

Figure 6: Additional Tax Information Page

E-business Tax A Purchasing Perspective

Application Tax Options - Tax Hierarchy

Figure 7: Application Tax Options

E-business Tax A Purchasing Perspective

E-business Tax A Purchasing Perspective

E-business Tax A Purchasing Perspective

E-business Tax A Purchasing Perspective

9. 10. 11. 12.

13. 14. 15.

16. 17. 18. 19.

22. 23. 24.

E-business Tax A Purchasing Perspective

Party Fiscal Classification

E-business Tax A Purchasing Perspective

E-business Tax A Purchasing Perspective

Figure 9: Party Fiscal Classification

E-business Tax A Purchasing Perspective

Product Fiscal Classification

E-business Tax A Purchasing Perspective

E-business Tax A Purchasing Perspective

Figure 11: Product Fiscal Classification (Inventory Based)

E-business Tax A Purchasing Perspective

E-business Tax A Purchasing Perspective

E-business Tax A Purchasing Perspective

E-business Tax A Purchasing Perspective

Figure 13: Intended Use (Inventory Category)

E-business Tax A Purchasing Perspective

Figure 14: Intended Use (Item Assignment)

E-business Tax A Purchasing Perspective

E-business Tax A Purchasing Perspective

Quantity Based Tax

E-business Tax A Purchasing Perspective

Figure 16: Quantity Based Tax (Tax Rules)