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This is a document which comprehensively describes the localization feature for Korea in Oracle Applications 11i.

There is localization available as per the Korean government guidelines hence there are specific configuration steps need to be performed to enable any business to be able to cater to the processes that have been laid down by the local authorities.

System Administrator / Initial Setup


Enable the Localization
To enable the localization for Korea, few steps need to be followed 1. 2. 3. 4. 5. Enable the localization for Korea by enabling the License Define LE, OU, SOB Use localization menus to create the responsibility Define Responsibility as per the requirements Standard profile options need to be set at the responsibility level e.g. MO: Operating Unit, GL Set Of Books etc. 6. Assign Profile Options at responsibility level to enable GDF (Global Descriptive Flexfields) to enter the required information. All below profile options will be setup at Responsibility level. a. JG: Product This will need to be setup as Asia/Pacific Localization since Korea falls in the Asia/Pacific localization region. Post configuring this profile option, there b. JG: Application This will need to be setup to the application within the Oracle Apps. i.e. Payables, General Ledger, Receivables etc. c. JG: Territory The value of this profile option will be the country. d. MO: Top Reporting Level This profile option needs to be set to Set of Books at the responsibility level. The Korean VAT report will run at SOB level.

NAVIGATION: APPLICATION ADMINISTRATOR > PROFILES


Below profile options need to be configured for the all the responsibilities where Localization needs to be enabled.

Payables
The first part in Korea localization is Withholding Tax, where Korea has specific guidelines to be adhered to. Companies are required to withhold tax on certain types of income payments to their suppliers. Korean companies pay the supplier invoice net the withheld amount, issue a withholding certificate for the withheld amount to the supplier, and remit the withheld tax to the proper tax authority. Two types of withholding under Korean tax law: 1. Income withholding 2. Resident withholding. Income withholding has been further divided into Business withholding and General withholding. 1. Business withholding: This is withholding on payments for professional services to suppliers such as lawyers, accountants, and doctors. 2. General withholding: This is withholding on all other types of income payments to suppliers, such as interest, dividends, and real estate income payments. 3. Resident withholding: This is a surcharge on the General and Business withholding tax. Normal operating expenses, such as purchase transactions between companies, are not subject to withholding tax. We must use Korean Won as the functional currency. Below steps are required to be performed to set payables for Korean withholding 1. 2. 3. 4. 5. 6. 7. Define Income Category Codes Define Locations Define Organization Enable Withholding Tax Define Tax Authority Supplier Define Withholding Tax Codes Define Withholding Tax groups

1. Define Income Category Codes: There are various Income Category Codes for Korean withholding as per guidelines from tax law. These need to be defined as they are getting used in the transactions. These are AOL Lookups. The lookup type gets enabled once you enable the license for South Korea. The code we enter should match with the numeric code as prescribed by Korean tax law.

NAVIGATION: APPLICATION DEVELOPER > APPLICATION > LOOKUPS > APPLICATION OBJECT LIBRARY
i. Domestic income categories: The JAKR_AP_AWT_INC_CAT_DOMESTIC lookup type is available as we have enabled the license for Korea.
Lookup Code 10 11 21 22 60 Meaning Interest Income (A) Interest Income (B) Dividend Deemed Dividend Other Income

ii.

Foreign income categories: The JAKR_AP_AWT_INC_CAT_FOREIGN lookup type need to be used to define Foreign income categories.
Lookup Code 10 20 30 40 42 61 62 80 90 Meaning Interest Dividend Real Estate Business Income Individual Service Royalty Others Sales Gain Forest

iii.

Business income subcategories: The JAKR_AP_AWT_BIZ_INC_SUB_CAT lookup type need to be used to define Business income subcategories.
Lookup Code 41 42 43 44 45 46 47 48 49 Meaning Lawyer PA Doctor Architect Writer Entertainer Sportsman Insurance Sales Representative Others

2. Define Locations: This is a regular location that we define within any country. The important step in defining the location is to have one location for each company site. This location will be used while defining the Withholding Tax and for reporting the withholding tax to Tax Authority. This location will then need to be assigned to Organization which is classified as Legal Entity. While defining the location, the address style needs to be Korea (International). Once the assignment of the location to the Legal Entity is done then only, need to enter the Identification Number in the GDF which has been enabled on the Location form. 3. Define Organization: Define an Organization which is classified as Legal Entity. Assign the location that has been defined in step # 1 to this organization. 4. Enable Withholding Tax: Enable the withholding tax at Payables Options.

5. Define Tax Authority Supplier: This supplier is a supplier which is classified as Tax Authority. Korea business need to submit the withheld tax amounts to this supplier. There may be multiple Tax Authority suppliers depending on the business locations.

6.

Define Withholding Tax Codes: Define the withholding tax codes in Tax Codes window. Enter the GDF (global Descriptive Flexfield) with the all details.

7. Define Withholding Tax groups: Create withholding tax groups. This withholding tax group can be associated with Supplier at the supplier site OR invoice and thus this will apply to the invoice. In general, the practice in Korea is that they need to submit the withheld tax amounts to two different tax authorities. There is a surcharge applicable on the withholding tax. This surcharge is applicable on Business withholding amount. Hence we need to rank them to allow system correctly calculate the tax thereon. Hence creating Tax Group is needed. This tax group consists of the tax codes which will be then applied on the Invoice and in turn the tax amount will be calculated. This tax amount will then be submitted to the respective tax authority.

VAT in Korea
In Korea, companies need to be report both input / output VAT to the authorities. Below are the setup steps for VAT. 1. 2. 3. 4. 5. 6. Define Industry Lookup Define Locations Define Organization Define AP VAT Tax Codes Define AR VAT Tax Codes Define Tax group

A. Define Industry Lookups: The JAKR_AP_VAT_IND_CLASS lookup type is available as we have enabled the license for Korea

Lookup Code CONSTRUCT FOOD&ACCO FOREST MAINT MFG MINING PUB&IND SERVICE REAL ESTATE TRPT&TELE UTILITY

Meaning Construction Foods and Accommodation Forest and Others Maintenance Manufacturing Mining Public and Individual Service Real Estate and Business Service Transportation, Storage, and Telecommunication Utility

Description Construction Foods and Accommodation Forest and Others Maintenance Manufacturing Mining Public and Individual Service Real Estate and Business Service Transportation, Storage, and Telecommunication Utility

B. Define Locations: This is a regular location that needs to be defined within any country. The important step in defining the location is to have one location for each company site. This location will be used while defining the Withholding Tax and for reporting the withholding tax to Tax Authority. This location will then need to be assigned to Organization which is classified as Legal Entity. While defining the location, the address style needs to be Korea (International).

Once the assignment of the location to the Legal Entity is done then only, need to enter the Identification Number in the GDF which has been enabled on the Location form. C. Define Organization: Define an Organization which is classified as Legal Entity. Assign the location that has been defined in step # B to this organization. D. Define AP VAT Tax Codes: Define the Tax Codes in Payables Tax Codes window. These tax codes can then be assigned at Supplier level or supplier Site level. There is a need to define the different tax codes for difference company sites. Since there may be different locations where the company is operating from, and for each of this company site a different location needs to be defined. Hence those many tax codes need to be defined for each location. Once the tax codes are defined, assign the location in the GDF available in the tax codes window. E. Define AR VAT Tax Codes: Define the Tax Codes in Receivables Tax Codes window. This tax codes can then be assigned at Customer level or Customer Bill-To / Ship-To level. There is a need to define the different tax codes for difference company sites. Since there may be different locations where the company is operating from, and for each of this company site a different location needs to be defined. Hence those many tax codes need to be defined for each location. Once the tax codes are defined, assign the location in the GDF available in the tax codes window. F. Define Tax group: Define the Tax Groups to be able to associate them with the Invoices. These groups will be based on the locations that have been defined.

Reports
A. Korean Withholding Tax Report B. Korean VAT Tax Report A. Korean Withholding Tax Report: This report will be used for reviewing the withholding on payments to suppliers. B. Korean VAT Tax Report: This report will be used to report the Input / Output VAT taxes to the tax authorities. This report will use the Tax registration number (which has been entered at the Location GDF) to list transaction based on the various locations your company has. Also report will display the Industry classification and subclassification on the transactions.