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E-Business Tax Purchasing Whitepaper

E-Business Tax Purchasing Whitepaper

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Published by: adhavan001 on Apr 21, 2011
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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
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

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

Oracle E-Business Tax

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Tax Content

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Tax Reporting


E-business Tax – A Purchasing Perspective Page 5

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 non-
taxable by removing the tax code from the PO shipment.
2. 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.
3. 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.
4. Summarized tax information on purchase order has been eliminated. Only
detailed tax line can be viewed on the purchase order.
5. Tax Code cannot be populated through the purchase order Preferences


6. 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.
7. 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).
8. Tax code has been removed from RFQs and Quotations form. Tax will be
defaulted when a quotation is autocreated to a standard purchase order.
9. PO documents cannot be reserved or submitted for approval if tax
calculation error has occurred.

E-business Tax – A Purchasing Perspective Page 6

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
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 organization’s accounts/budgeting. It serves more as a
way to direct payment of portion of the taxes already owed.

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