Modified Type Status: G. Define The Party Tax Profile For Legal Entity & Operating Unit

https://support.oracle.com/CSP/main/article?cmd=show&type=NOT&d...
Case Study: Setup R12 E-Business Tax (EBTax) for Canada: Includes 2010 HST Changes [ID
577996.1]
Modified 09-JUN-2010 Type WHITE PAPER Status PUBLISHED
In this Document
Abstract
Objective
How to Use This Note
Document History
Case Study: Setup R12 E-Business Tax (EBTax) for Canada: Includes 2010 HST Changes
1. Introduction
2. If You Are Using an Upgraded Environment....
a. HST Setup:
b Tax Groups:
3. Pre-Requisite Setup
a. Setup Geography Hierarchy Structure & Details
b. Define Tax & Geography Validation
c. Setup a Legal Entity, Establishment, Ledger and Operating Unit
d. Associate the Operating Unit with the Legal Establishment
e. Replicate Seed Data
f. Setup Responsibilities for the New Operating Unit
g. Setup Mandatory Responsibility Level Profile Options
h. Setup Item Validation Organization For The Operating Unit
i. Setup a Freight Inventory Item
j. Setup Tax and TCA Profile Options
k. Setup Receivables System Options
l. Setup Receivables AutoAccounting
m. Setup Receivables Transaction Types
n. Setup Transaction Sources
o. Initialize Operating Unit Party Tax Profile
p. Setup Receivables Activity Types
q. Setup Banks, Branches and Accounts
r. Setup Receivables Receipt Class & Payment Method
s. Setup Approval Limits
t. Run Geography Name Referencing Program
4 Tax Setup
a. Define Regimes
b. Define Taxes
c. Define Tax Statuses
d. Define Tax Jurisdictions
e. Define Tax Recovery Rates
f. Define Tax Rates
g. Define the Party Tax Profile for Legal Entity & Operating Unit
h. Setup Default Tax Rules
i. Make Tax Available For Transactions
j. Perform a Baseline Test in AR
k. Perform a Baseline Test in AP
5. Tax Setup: Tax Setup For Common Scenarios
a. Adjusting the Taxable Basis for Quebec and Prince Edward Island
b. Zero Rated Items for Export
c. Applying Tax to Freight
d. Self-Assessed Taxes
e. Reporting By Tax Authority
f. Charging Different Tax Accounts For Each Tax
g. Setting up Tax recovery for ITC and Rebates
6 Testing Your Tax Configuration
a. Receivables
b. Payables
More Coming...
Summary
References
Applies to:
Oracle E-Business Tax - Version: 12.0 and later [Release: 12 and later ]
Oracle Purchasing - Version: 12.0 and later [Release: 12 and later]
Oracle Receivables - Version: 12.0 and later [Release: 12 and later]
Oracle Payables - Version: 12.0.0 and later [Release: 12 and later]
Oracle Order Management - Version: 12 and later [Release: 11 and later]
Information in this document applies to any platform.
Abstract
EBTax Information Center > EBTax Features (Setup & Troubleshooting) > Regime to Rate Setup > Note 577996.1
Objective
In Release 12, Oracle introduced E-Business Tax as the new tax calculation engine for the Order to Cash and Procure to Pay business flows. Each of these modules proprietary tax
engines from earlier releases were discontinued in favor of this new solution. (Latin Tax Engine, Golden Tax Adaptor and the India Globalization still exist)
This White Paper documents how a simplified implementation might be performed for a customer using E-business Tax for Canada in Release 12. This is a living document and we
encourage readers to post input, ask questions or share best practices on our community thread for Canada Tax Setup.
This Note includes changes reflective of HST adoption by British Columbia (BC) and Ontario (ON) scheduled to take effect July 1, 2010.
This white paper combines, extends and superseeds the following:

1) Oracle E-Business Tax Configuration Library (CLIC) Note 463001.1
2) Oracle E-Business Tax Implementation Guide Chapter 4: Canadian Sales Tax
3) White Paper titled: Integrating Oracle E-Business Tax With Oracle Receivables and Oracle Payables For Country Canada Release 12 (this document is no longer available for
viewing on My Oracle Support)
How to Use This Note
This note was written in a case study format using Canada as the example. It assumes that you have an existing implementation and that you are adding a new country, Canada, to
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your configuration.
Section 3 begins the case study with some mandatory setup steps. You should refer to the Financials Implementation Guide along with your module specific implementation
documentation as appropriate for your implementation. The steps documented in this section do cover mandatory setups for modules impacted by E-Business Tax. Each section also
attempts to document the tax implications of options you might select when performing the step.
Section 4 begins the tax specific setups. In this section we walk you through the basic setup of your tax system. This section focuses on what E-Business tax calls the "Regime to
Rate" flow where you identify the taxes that should be assessed. Also covered are the default settings used by the rule engine to determine if a tax should be charged and if yes, how
to calculate and record the tax.
Section 5 covers some of the more common business requirements applicable to this case study. In this section we explain in non-specific terms the general requirement that needs to
be satisfied and provide references whenever possible to the origin of the requirement. We then provide a link to a note that provides in-depth examples, screenshots and video of how
to configure a system to satisfy the requirement. Please note that these reference documents are not all specific to this case study but rather are intended to convey examples of how
the requirement might be satisfied.
Additional sections and content will be added to focus on Testing the solution and reporting. The intent of this Case Study is to help a new or existing user of E-Business Tax to
understand concepts and setup that may otherwise be dispersed across numerous implementation and user manuals. It also attempts to show how you can comply with some general
business requirements, thereby allowing you to focus on the less common requirements unique to your specific organization. We hope that this enables you to streamline your project to
reduce the time/cost of the effort and raise the value realized by your business from E-Business Tax.
Document History
Author : Kalyankar Tota & Patrick McBride

Create Date 19-MAY-2008 (Originally posted as the White paper referenced in the abstract above)
Update Date 08-Jun-2010 Modified to include expanded scope, correct typo's and resolve inconsistencies in regime to rate setup.
Case Study: Setup R12 E-Business Tax (EBTax) for Canada: Includes 2010 HST Changes
1. Introduction
For Canada, you can model your tax setups based on these setup examples. These examples are intended to demonstrate recommended setups, settings, and interdependencies for
each tax regime.
Disclaimer: This note is not intended to provide examples of all best practices nor cover all cases. The actual details of your own tax configuration setup will depend on your
company's specific internal and legal tax requirements and it is often the case that the same business requirement can be satisfied in many ways. Please consult your tax department
or obtain professional tax assistance to determine the specific requirements for your organization.
Assumptions: This case study will guide you through the creation of basic tax setup for Canada. It assume that you already have completed the setup/installation of the applications
and that you wish to add a new Canada Legal Entity/Operating Unit under which you will transact and pay/levy/collect taxes.
Note: For this Case Study, we have chosen 1-Jan-2001 as the Effective From date but you may need to choose some other date depending on your requirement.
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2. If You Are Using an Upgraded Environment....
a. HST Setup:
If you are using an 11i upgraded environment and the upgrade was completed BEFORE you setup your system for the BC and Ontario HST adoption, you will need to
take additional steps. Refer to Note 1062897.1 titled: Case Study: How to Switch from an Upgraded Tax Regime to a New Tax Regime - Canada HST example
b Tax Groups:
Tax Groups are no longer used in Release 12 - See Note 738000.1 Can I Create a Tax Group in R12 E-Business Tax?
For more on the upgrade process refer to Note 810443.1 Troubleshooting and Overview of the E-Business tax R12 upgrade for Order to Cash
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3. Pre-Requisite Setup
Note that some pre-requisites are not required to be performed when using an upgraded instance.
a. Setup Geography Hierarchy Structure & Details
Geography Hierarchy: A hierarchical relationships between a country and the specific geography elements that exist within a country (ex: State, Province, Territory, City,
County, Parish, Postal Code, etc)
To see how to setup a geography hierarchy, refer to Note 554492.1
Responsibility: Trading Community Manager

Navigation: Trading Community > Administration > Geography Hierarchy
For Canada, you must minimally define a geography type of "Province" under the country "Canada".
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You may additionally wish to define lower levels in your hierarchy to enforce that users select valid city names and postal code combinations however this is not required
for Canadian tax calculates as taxes are based solely on the Country and Province. Some customers do choose to take this additional step to ensure that the mailing
addresses are valid. Refer to the Trading Community Architecture Administration Guide, Page 11-12 for more details on the complete implementation of this feature.
Once the Geography Type of "Province" is defined, add each province under the "View Details" link
Important Note: Due to an issue with TCA, when a Geography value is created (Say AB for Alberta) the system will set the default date to the system date. You
cannot update this via the application. TCA product management is tracking a fix for this in ER 7150723. If you have a need to import historical data a data fix will be
required until this UI defect is resolved.
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b. Define Tax & Geography Validation
To see how to setup an a geography validation, refer to Note 554492.1

Navigation: Trading Community > Administration > Geography Hierarchy
For Canada you must enable geography and tax validation at the province level for hz_locations
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You must also enabled Tax Validation for Reference1 for the hr_locations_all
Tax Relevancy:
1) Enabling Tax Validation for province ensures that all addresses match the province defined in TCA. Since TCA is the basis for the Jurisdictions and place
of supply logic in E-Business Tax, it is critical that these be consistent. If you do not have tax validation enabled, the transactions in AR will not validate the
tax location and tax calculation will not occur.
2) Enabling tax validation for HR_Locations ensures that the legal entity and operating unit addresses are valid for taxes and any rules referencing bill_from,
ship_from, POO or POA will work as intended.
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c. Setup a Legal Entity, Establishment, Ledger and Operating Unit
Refer to Note 1064366.1 to see step-by-step instructions for implementing a Legal Entity, Establishment, Ledger and Operating Unit as required for this
case study.
Responsibility: Legal Entity Manager

Navigation: Legal Entities > Create Legal Entity
Legal Entity: A legal entity is a clearly identified entity, which is given rights and responsibilities under commercial law, through registration with the country's
appropriate legal authority. Legal entities are responsible to account for themselves to company regulators, taxation authorities, and owners according to
rules specified in the relevant legislation.
In Release 12 Legal Entities "own" one or more Operating Units which in turn "own" transactions.
Patch 8671973 should be applied prior to starting this step or the province will not be displayed in your LOV
Tax Relevancy:
1) For E-Business tax, a tax regime can be associated to a Legal Entity and then optionally one or more Operating units in that Legal Entity can share the
tax setup.
2) At least one Legal Entity for Canada must be created. The Legal Entity should include the Tax Registration and represents a level where tax setup can
be attached.
3) The Registration defined on the Legal Entity record is the source for the legal establishment defaults. The Establishment tax profile in turn feeds the Bill
From in AR and the Bill To / Ship to in AP.
4) The checkbox on the Legal Entity controls self-assessment of taxes. For Canada, GST and HST must be self-assessed for imported goods. Be sure
you update the Legal Entity to reflect this after it is created
Legal Establishment: First party legal entities identify your organization to the relevant legal authorities, for example, a national or international
headquarters. First party legal establishments identify each office, service center, warehouse and any other location within the organization that has a tax
requirement. When you create a legal entity, the system automatically creates a legal entity establishment. You can create additional legal establishments
according to your needs. For each legal establishment there are one or more tax registrations, depending upon the tax requirements of the applicable tax
authority.
If you have multiple legal establishments you should additionally create records as children of the Legal Entity. Be sure to set the "Self Assessment" to the
proper value when creating additional legal establishments.
Note 604280.1 Explains How To Add New Legal Entity Registration Code for Countries that Are Not Available in the List
Tax Relevancy:
1) The Registration defined on the legal establishment feeds the Bill From in AR and the Bill To / Ship to in AP. These addresses are then considered if your
tax rules use these as the basis for tax calculation.
2) The checkbox on the Legal Establishment controls self-assessment of taxes. For Canada, GST and HST must be self-assessed for imported goods. Be
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sure you update the Legal Establishment to reflect this after it is created
Ledger: Also known as set of books in 11i and prior releases this is the object that owns the accounting structure used for transactions.
Operating Unit: Assign operating units to the primary ledger to partition subledger transaction data when multiple operating units perform accounting in the
context of one or more legal entities. At least one Operating Unit must be defined for each legal entity and set of books. Operating Units are also referred
to as "Organizations".
The Operating Unit Location is taken from the Legal Establishment record referenced in section 3 above
Tax Relevancy: Operating Unit along with Legal Entity represent two levels where tax content can be owned and tax setup performed.
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d. Associate the Operating Unit with the Legal Establishment
Responsibility: Legal Entity Manager

Navigation: Home > Search > Legal Entity Name > Go > Click on LE Name > Click on Establishments Tab
Once an operating unit is defined it must be linked back to the parent Legal Establishment record.
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e. Replicate Seed Data
Replicate Seed Data sets defaults in the system for an operating unit after it is created
To see how to run replicate seed data, Refer to Note 134385.1 How to Run the Replicate Seed Data Program
For more details on the purpose of the seed data program refer to Note 274974.1 What Effect Does "Replicate Seed Data" concurrent request have on
Appls?
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f. Setup Responsibilities for the New Operating Unit
Responsibility: System Administrator
For this case study, setup Operating Unit specific responsibilities for products including those shown below
1) E-Business Tax
2) Payables
3) Receivables
4) Order Management
5) General Ledger
Add additional responsibilities as needed for your company. Those shown above are minimal required for this case study.
Some Examples:
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g. Setup Mandatory Responsibility Level Profile Options

Navigation: Profile > System
Profile Options for Responsibilities created in step 3f
Profile Name GL AR AP OM EBTax

HR: User Type Yes Yes
MO: Operating Unit Yes Yes Yes Yes
GL Ledger Name Yes Yes Yes Yes Yes

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h. Setup Item Validation Organization For The Operating Unit
Item Validation Organization: Used to build the List of Values to a specific organization when selecting inventory items to include on an Order (or Invoice in AR)
To see a simplified step-by-step overview of how to setup an Inventory Organization with screenshots, refer to Note 1063992.1
Responsibility: OM Responsibility from section 3f

Navigation: Setup > System Parameters > Values
Sample Screenshot showing Associated Inventory Org
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i. Setup a Freight Inventory Item
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If you charge freight and wish to assess taxes on freight you must create an inventory item for tracking freight.
For more information on how tax on freight is configured, refer to Note 764297.1 - How Tax on Freight Works in R12 Order to Cash
This tax on freight note will again be referenced later in this case study when subsequent setup is performed.
Tax Relevancy: Without this setup the profile options in the next step cannot be set and then freight will be excluded from tax calculations and created as "freight"
instead of revenue.
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j. Setup Tax and TCA Profile Options
For more details on the tax profile options and how the influence taxes, refer to Note 466575.1

Navigation: Profile > System
Profile Options required for Tax and TCA

Profile Option Name Value Reason in Case Study
HZ: Address Validation Level for Application Error Required
eBTax: Allow Ad Hoc Tax Changes Yes
eBTax: Allow Manual Tax Lines Yes Available to support data conversion
eBTax: Allow Override of Customer Exemptions No
eBTax: Allow Override of Tax Classification Code Yes Available if rules wish to be created based upon tax codes
eBTax: Allow Override of Tax Recovery Rate Yes Can lock down at lower levels if needed
eBTax: Inventory Item for Freight (Oracle Order Management only) Freight Enter the Item created in step 3i In order to assess tax on Freight Charges as per Revenue
Canada
eBTax: Invoice Freight as Revenue (Oracle Order Management Yes In order to assess tax on Freight Charges as per Revenue Canada
only)
eBTax: Read/Write Access to GCO Data Yes Allows for taxes to be defined at Global Configuration level
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k. Setup Receivables System Options
Responsibility: Receivables responsibility

Navigation: Setup > System > System Options
To see how to setup AR System Options, refer to the Oracle Receivables Implementation Guide, Page 2-24
Tax Relevancy:
1) "Tax Account" in Accounting System Options can be used in AutoAccounting setup as a source.
2) "Tax Invoice Printing Options" controls how tax is displayed on the default invoice print output (Bill Presentment Architecture can be utilized to create a custom
layout and field display)
3) "Application Rule Set" in the Miscellaneous system options determines how Receivables applies partial payments and credit memos to your customer's open
debit items, and how discounts affect the
open balance for each type of associated charges. Refer to the Treasury Board of Canada and/or each provincial revenue agency to determine how to evaluate
partial payments for your particular business need. Note that you can additionally control when/if a discount applies to a tax when you setup your receivable activity
types.
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l. Setup Receivables AutoAccounting
Responsibility: Receivables responsibility from step 3f

Navigation: Setup > Transactions > AutoAccounting
To see how to setup an AutoAccounting in Receivables, refer to Note 885225.1 on implementing Tax Accounting for Receivables.
For this Case Study, map the "account" segment for the "Tax" AutoAccounting so that it is derived from the 'Tax' account setup discussed later in this document.
Details on how the tax account is derived during invoice entry will be discussed later in this document.
Tax Relevancy:
1) The Tax AutoAccounting type is used to build the account combination that in turn is stored on the calculated tax amount on the tax line.
2) AutoAccounting is also called during the tax rule execution with the resulting account derived for your invoice line being available for use in your tax rules.
Note: If you define a tax rule to use the account combination, the account must be derived by AutoAccounting. Manually entered or overriden account
combinations will be ignored during rule execution. Refer to Note 943657.1 for more details on this restriction
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m. Setup Receivables Transaction Types

Navigation: Setup >Transactions > Transaction Types
Transaction Types are seeded automatically when "Replicate Seed Data" is run in step 3f. Transaction types must be added only if you require additional
transaction types beyond those seeded values.
Tax Relevancy:
1) The "Default Tax Classification" checkbox must be checked on the transaction type if you intend to use the transaction line tax classification codes in your tax
rule definitions. (Refer to Note 801535.1 for instructions on how this might be configured or reference section 5 of this document which discusses an example
applicable to Exports).
2) If your AutoAccounting setup references the transaction type as the source for Tax, the Tax Account must then be defined on the transaction type in this step.
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n. Setup Transaction Sources

Navigation: Setup > Transactions > Sources
Transaction sources are seeded by "Replicate Seed Data". This step can be skipped if you have no changes or additions to the seeded values
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o. Initialize Operating Unit Party Tax Profile
Responsibility: Tax Managers responsibility from step 3f

Navigation: Parties > Party Tax Profiles > Operating Unit Owning Tax Content
Enter the Operating Unit then click "Create" to initialize a tax profile. At this point in the Setup nothing further needs to be done except to click "Create Tax Profile"
and then apply.
Details will be added in a later step. This Tax Profile must exist before a Receivables Activity Type can be entered.
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p. Setup Receivables Activity Types

Navigation: Setup > Receipts > Receivable Activities
For this Case Study, setup one Receivable Activity Type for Adjustments as shown below. (Additional will be required for most implementations)
Canada does not discount the tax when an early-payment discount is applied. Reference: Revenue Canada: Taxable or Exempt
Tax Relevancy:
1) Tax Rate Code Source: The Tax Rate Code Source you specify determines whether Receivables calculates and accounts for tax on adjustments, discounts,
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and miscellaneous receipts assigned to this activity. If you specify a Tax Rate Code Source of Invoice, then Receivables uses the tax accounting information
defined for the invoice tax rate code(s) to automatically account for the tax. If the Receivables Activity type is Miscellaneous Cash, then you can allocate tax to the
Asset or Liability tax accounts that you define for this Receivables Activity. If you set the Tax Rate code Source to "None" then taxes will not be applied on the
adjustment. This is relevant for the discount example mentioned above.
2) Recoverable / Non-Recoverable: As the name suggests, this radio button determines if the adjustment should be considered when determining recoverable
tax amounts.
Note 1: If you wish to calculate tax on a miscellaneous receipt, the receivables activity type may not be linked to a jurisdiction specific tax rate because you
cannot enter ship-to information in the Receipts window. Please keep this in mind when planning your implementation.
Note 2: This step may need to be deferred until after the tax setup if you choose to set the tax rate code source to Activity and enter a code on the activity
type. This is most frequently done when an activity type is created for a misc cash receipt
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q. Setup Banks, Branches and Accounts
Follow the steps in Note 415529.1 to add the necessary roles to the Legal Entity you created.
To see how to setup a Bank, Branch and Account, refer to the AR Implementation guide
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r. Setup Receivables Receipt Class & Payment Method

Navigation: Setup > Receipts
To see how to setup a Receipt Class and Payment Method, refer to the AR Implementation guide
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s. Setup Approval Limits

Navigation: Setup > Transactions > Approval Limits
Approval Limits: Must be set in order for a user to enter and/or approve an invoice adjustment
To see how to setup approval limits, refer to the AR Implementation guide
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t. Run Geography Name Referencing Program

Navigation: Control > Request > Run
This program must be run for both HZ_Locations and HR_LOCATIONS_ALL for the country Canada
To learn about Geography Name Referencing Program and what it does, refer to the TCA Implementation guide
Tax Relevancy:
1) The Geography Name Referencing Program inserts records into a table that is used by E-Business Tax to translate address locations into jurisdictions.
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4 Tax Setup
Tax Setup is performed under the Tax Managers responsibility added in step 3
a. Define Regimes
Tax regime - A single system of taxation as defined by a set of laws and regulations that determines the treatment of one or more taxes administered by a tax
authority. Tax Regimes are typically defined at the country level.
Why Two Regimes?

As a best practice a regime should be created for each tax type. Since PST is a sales tax and GST/HST are VAT type taxes two regimes are defined. While
it is possible to combine these into a single regime, the compounding example for Quebec and Prince Edward Island presented later in the case study is based
upon a two-regime model. This also has been the basis for the testing of this case study thus if you do elect to combine these into one regime, you may need
to invest additional time to validate your solution.
Field Value Value

Tax Regime Code CA GST AND HST CA PST
Name CA GST AND HST CA PST
Regime Level Country Country
Country Name Canada Canada
Effective From 01-Jan-2001 01-Jan-2001
Used to Group Regimes No No
Allow Tax Recovery Yes Yes
Allow Override and Entry of Inclusive Tax Lines Yes Yes
Allow Tax Exemptions Yes Yes
Allow Tax Exceptions No No
Tax currency CAD CAD
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Minimum Accountable Unit 0.01 0.01
Rounding Rule Nearest Nearest
Tax Precision 2 2
Allow tax Inclusion Standard Non-Inclusive Handling Standard Non-Inclusive Handling
Allow Multiple Jurisdictions Yes Yes
Allow tax Rounding Override Yes Yes
Exchange Rate Type
Reporting Tax Authority
Default Recovery Settlement Immediate Immediate
Tax Accounts Precedent Level
Use Legal Registration Number No No
Allow Cross Regime Compounding Yes Yes
Compounding Precedence 1 2
Sample Screenshot of how this would be defined:
After entering the above page, select "Continue" and then add the configuration option settings as shown for your Operating Unit. Repeat this for the PST regime.
You may optionally set the "Configuration for Taxes and Rules" to "Common Configuration" if you do not wish to retain the flexibility for party specific (OU or LE
specific) tax setup.
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Note: You can also subscribe at the "Legal Entity" Level. If you only choose the LE option then you must also update your Party Tax Profile for the Operating
Unit to use the configuration of the Legal Entity or the tax will not be calculated. Also if you choose "Legal Entity" then it is not required that you subscribe the
operating unit as the aforementioned checkbox will cause the OU to defer to the LE setup. Finally, if you subscribe to the Legal Entity then any tax setup that
might exist at the OU level (Taxes, Rates, etc) would be ignored during tax calculation.
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b. Define Taxes
Tax: A tax represents a distinct charge that can be applied to a transaction.
Example: In Canada, depending upon the province, a transaction may have HST, GST and/or PST applied.
Field Value Value Value

Tax Regime Code CA GST AND HST CA GST AND HST CA PST
Configuration Owner Global Configuration Owner Global Configuration Owner Global Configuration Owner
Tax source Create a new Tax Create a new Tax Create a new Tax
Tax CA GST CA HST CA PST
Tax Name Federal Goods and Services Tax Harmonized Sales tax Provincial Sales Tax
Tax Type VAT VAT Sales
Effective From 01-Jan-2001 01-Jan-2001 01-Jan-2001
Enable Tax for Processing Yes Yes Yes
Geography Type PROVINCE PROVINCE PROVINCE
Parent Geography Type COUNTRY COUNTRY COUNTRY
Parent Geography Name Canada Canada Canada
Tax Currency CAD CAD CAD
Minimum Accountable Unit 0.01 0.01 0.01
Rounding Rule Nearest Nearest Nearest
Tax Precision 2 2 2
Exchange Rate Type
Compounding Precedence 1 2
Collecting Tax Authority
Applied Amount Handling Recalculated Recalculated Recalculated
Set as Offset Tax No No No
Set Tax for Reporting Purposes Only No No No
Allow Tax Inclusion Standard Non-Inclusive Handling Standard Non-Inclusive Handling Standard Non-Inclusive Handling
Allow Override and Entry of Inclusive Tax Lines Yes Yes Yes
Allow Tax Rounding Override Yes Yes Yes
Allow Override for Calculated Tax Lines Yes Yes Yes
Allow Entry of Manual tax Lines Yes Yes Yes
Use Legal Registration Number No No No
Allow Duplicate Tax Registration Numbers No No No
Allow Multiple Jurisdictions Yes Yes Yes
Allow Mass Creation of Jurisdictions Yes Yes Yes
Tax Accounts Creation Method Create Tax Accounts Create Tax Accounts Create Tax Accounts
Allow Tax Exceptions No No No
Allow Tax Exemptions Yes Yes Yes
Tax Exemption Creation Method
Allow Tax Recovery Yes Yes Yes
Allow Tax Recovery Rate Override Yes Yes Yes
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Allow Primary Recovery Rate Determination Rules Yes Yes Yes
Allow Secondary Recovery Rate Determination Rules No Yes No
Primary Recovery Type STANDARD STANDARD STANDARD
Secondary Recovery Type SREC
Allow Tax Rate Rules Yes Yes Yes
Default Recovery Settlement Immediate Immediate Immediate
Sample Setup Screenshots:
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c. Define Tax Statuses
Tax Status: A tax status is the taxable nature of a product in the context of a transaction and a specific tax on the transaction. You define a tax status to group
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one or more tax rates that are of the same or similar nature.
Example: One tax can have separate tax statuses for standard, zero, exemption, and reduced rates. A zero rate tax status may have multiple zero rates
associated with it in order to handle different reporting requirements for zero rate usage, such as Intra EU, zero-rated products, or zero-rated exports. For Canada
we have documented the setup to allow for this possibility though no specific example is provided in this limited setup shown below
Field Value Value Value Value Value Value Value Value Value Value
Tax Regime CA GST AND CA GST AND CA GST AND CA GST AND CA GST AND CA GST AND CA PST CA PST CA PST CA PST
Code HST HST HST HST HST HST
Configuration Global Global Global Global Global Global Global Global Global Global
Owner Configuration Configuration Configuration Configuration Configuration Configuration Configuration Configuration Configuration Configuration
Owner Owner Owner Owner Owner Owner Owner Owner Owner Owner
Tax CA GST CA GST CA GST CA HST CA HST CA HST CA PST CA PST CA PST CA PST
Tax Status CA GST CA GST CA GST CA HST CA HST CA HST CA PST CA PST CA PST CA PST
Code STANDARD ZERO EXEMPT STANDARD ZERO EXEMPT STANDARD SPECIAL ZERO EXEMPT
RATE
Tax Name CA GST CA GST Zero CA GST CA HST CA HST Zero CA HST CA PST CA PST CA PST Zero CA PST
Standard Exempt Standard Exempt Standard Special Rate Exempt
Set as Default Yes No No Yes No No Yes No No No

Tax Status (1)
Default Status 01-Jan-2001 01-Jan-2001 01-Jan-2001

Effective
From
Allow tax Yes Yes Yes

Exemptions
(2)
Allow Tax Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Rate Override
Default Immediate Immediate Immediate Immediate Immediate Immediate Immediate Immediate Immediate Immediate
Recovery
Settlement
1) Set as default Tax status: Each tax status must have at least one default. Tax Rules must be written to set alternate values as required.
2) Allow Tax Exemptions: With a rule based approach to setting tax exemptions, exempt transactions will be linked to an exempt tax status and rate. Setting
the "Yes" value to this configuration option will also allow a user to define a tax exemption on a transaction or directly in the party tax profile to record the
exempt reason code. This is however not required nor enforced. Because the exemptions are primarily tracked by way of tax status/rates we suggest that
you use Caution when reporting if you intend to use the tax exemption fields on the seeded reports.
Sample Screenshot of Tax Status
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d. Define Tax Jurisdictions
Jurisdiction: The incidence of a tax on a specific geographical area. A tax jurisdiction is limited by a geographical boundary that encloses a contiguous political or
administrative area, most commonly the borders of a country. Often this is represented by a state, province, city or a county tax jurisdiction. In E-Business Tax, a
tax jurisdiction can use the geography setup from your TCA geography hierarchy to identify a tax rate. Taxes such as HST and PST therefore may require rates at
the jurisdiction level.
Example: Canadian PST and HST are applicable based upon the jurisdictions.
Important Note Do not begin this step if you plan to import historical transactions and have not applied the data fix referenced in step 3.a You will not be able
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to back-date the jurisdiction start dates if this fix has not been applied and your LOV for the Geography will return no rows.
Setup Jurisdictions for CA GST AND HST
Field Value Value Value Value Value Value Value Value Value Value Value Value
Tax CA AB CA BC CA BC CA MB CA NB CA NL CA NS CA NT CA NV CA ON CA ON CA PE
Jurisdiction
Code
Tax CA Alberta CA British CA British CA CA New CA CA Nova CA CA Nunavut CA Ontario CA Ontario CA Prince
Jurisdiction Columbia Columbia Manitoba Brunswick Newfoundland Scotia Northwest Edward
Name and Labrador Territories Island
Tax Regime CA GST CA GST CA GST CA GST CA GST CA GST AND CA GST CA GST CA GST CA GST CA GST CA GST
Code AND HST AND HST AND HST AND HST AND HST HST AND HST AND HST AND HST AND HST AND HST AND HST
Tax CA GST CA HST CA GST CA GST CA HST CA HST CA HST CA GST CA GST CA HST CA GST CA GST
Geography Province Province Province Province Province Province Province Province Province Province Province Province
Type
Parent Country Country Country Country Country Country Country Country Country Country Country Country
Geography
Type
Parent Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada
Geography
Name
Geography AB BC BC MB NB NL NS NT NV ON ON PE
Name
Precedence 1 1 1 1 1 1 1 1 1 1 1 1
Level
Collecting
Tax
Authority
Reporting
Tax
Authority
Effective 01-Jan-2001 01-Jul-2010 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jul-2001 01-Jan-2001 01-Jan-2001
From
Effective To 30-Jun-2010 30-Jun-2010
Set as No No No Yes Yes No No No No No No No

Default Tax
Jurisdiction
Default 01-Jan-2001 01-Jan-2001

Effective
From
Setup Jurisdictions for CA PST
Field Value Value Value Value Value Value

Tax Jurisdiction Code CA BC CA MB CA ON CA PE CA QC CA SK
Tax Jurisdiction Name CA British Columbia CA Manitoba CA Ontario CA Prince Edward Island CA Quebec CA Saskatchewan
Tax Regime Code CA PST CA PST CA PST CA PST CA PST CA PST
Tax CA PST CA PST CA PST CA PST CA PST CA PST
Geography Type Province Province Province Province Province Province
Parent Geography Type Country Country Country Country Country Country
Parent Geography Name Canada Canada Canada Canada Canada Canada
Geography Name BC MB ON PE QC SK
Precedence Level 1 1 1 1 1 1
Collecting Tax Authority
Effective From 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001
Effective To 30-Jun-2010 30-Jun-2010
Set as Default Tax Jurisdiction No Yes No No No No
Default Effective From 01-Jan-2001
Sample Screenshot of a Jurisdiction Setup
14 of 24 14/06/2010 04:35
-------------------------------------------------------------------------------------------------
e. Define Tax Recovery Rates
For Canada GST is normally fully recoverable when paid as an input to creating another item. (Input Tax Credit or ITC)
PST is recoverable under criteria established by each province
HST is recoverable as primary (Federal Recovery of the 5% portion) and secondary (Provincial recovery of the 7% or 8% provincial component of HST)
Rebates: In Canada, some entities such as Municipalities and Hospitals are able to claim a Full or Partial Rebates for GST or HST taxes paid in cases where the
taxes are not subject to Input Tax Credits. Rebates may also occur in other countries using a similar methodology. For more on this refer to the Canada Revenue
Agency.
Tax Recovery Rates

The rates below reflect only a subset of those you will likely require. Expand this as needed for your unique industry and business.
IMPORTANT: Review Note 735991.1 on setting up Tax recovery before you enable your tax for transaction processing.
Field Value Value Value Value Value Value Value Value Value
Tax Regime CA GST AND CA GST AND CA GST AND CA GST AND CA GST AND CA GST AND CA GST AND CA GST AND CA PST
Code HST HST HST HST HST HST HST HST
Configuration Global Global Global Global Global Global Global Global Global
Owner Configuration Configuration Configuration Configuration Configuration Configuration Configuration Configuration Configuration
Owner Owner Owner Owner Owner Owner Owner Owner Owner
Tax CA GST CA GST CA HST CA HST CA HST CA HST CA HST CA HST CA PST
Tax Recovery CA GST STD CA GST ZERO CA HST STD CA HST BC CA HST ZERO CA HST STD CA HST BC CA HST ZERO CA PST ZERO
Rate Code REC RATE REC RATE PROV REC PROV REC PROV REC FED REC FED REC REC RATE REC RATE
RATE RATE RATE RATE RATE
Recovery Type Standard Standard Sec Rec Type1 Sec Rec Type1 Sec Rec Type1 Standard Standard Standard Standard
Percentage 100 0 61.54 58.33 0 38.46 41.67 0 0

Recovery Rate
Effective From 01-Jan-2001 01-Jan-2001 01-Jan-2008 01-Jul-2010 01-Jan-2008 01-Jul-2010 01-Jul-2010 01-Jan-2001 01-Jan-2001
Effective To
Set as Default Yes Yes
Effective From 01-Jan-2001 01-Jan-2001
Allow Ad Hoc Yes Yes Yes Yes Yes Yes Yes Yes Yes
Rate
Note: Do not use a '%' sign in the tax recovery rate code as this will return errors when attempting to set the recovery rate on a tax rate. Internal bug
9343870 was logged.
Error that will occur if this is done is: "The rate period and the associated default recovery rate must overlap. You can: adjust the rate period; enter another
default recovery rate that is valid for the entered rate period; or clear the default recovery rate."
-------------------------------------------------------------------------------------------------
f. Define Tax Rates
Tax Rates - At least one tax rate is required for each tax status. Additional Tax Rates may be needed at the Jurisdiction Level if the tax rate applicable for the tax
is unique for a particular jurisdiction.
Example: - In Canada, HST is applied at a 13% rate in all provinces that have adopted HST except for BC where the Rate is 12%. To satisfy this requirement a
single rate of 13% can be defined with no jurisdiction and then a 12% rate can be defined and associated with the BC jurisdiction. This minimizes the setup
required by creating an exception based setup.
Note: In some cases such as Alcohol sales, taxes are applied at the quantity level. If therefore a $0.05 tax is applicable for each bottle a secondary tax,
15 of 24 14/06/2010 04:35
status and rate can be created to apply this tax. This is not reflected in the examples below
Setup Rates for GST AND HST
Tax Regime Code CA GST AND CA GST AND CA GST AND CA GST AND CA GST AND CA GST AND
HST HST HST HST HST HST
Configuration Global Global Global Global Global Global

Owner Configuration Configuration Configuration Configuration Configuration Configuration
Owner Owner Owner Owner Owner Owner
Tax CA GST CA GST CA GST CA HST CA HST CA HST
Tax Status Code CA GST CA GST CA GST CA HST CA HST CA HST

STANDARD ZERO EXEMPT STANDARD STANDARD ZERO
Tax Jurisdiction CA BC
Code
Tax Rate Code CA GST CA GST CA GST CA HST CA HST CA HST

STANDARD ZERO RATE EXEMPT STANDARD STANDARD ZERO RATE
RATE RATE RATE RATE
Rate Type Percentage Percentage Percentage Percentage Percentage Percentage
Percentage Rate 5 6 7 0 0 13 14 15 12 0
Effective From 01-JAN-2008 01-JUL-2006 01-JAN-2001 01-JAN-2008 01-JUL-2006 01-JAN-2001 01-Jan-2001 01-Jan-2001
Effective To 31-DEC-2007 30-JUN-2006 31-DEC-2007 30-JUN-2006
Tax Rate Name CA GST CA GST Zero CA GST CA HST CA HST CA HST Zero
Standard Rate Exempt Rate Standard Standard Rate
Rate Rate Rate
Default Recovery CA GST CA GST CA GST CA GST CA GST CA HST STD CA HST STD CA HST STD CA HST BC CA HST
Rate Code STANDARD STANDARD STANDARD ZERO REC ZERO REC FED REC FED REC FED REC FED REC ZERO REC
REC RATE REC RATE REC RATE RATE RATE RATE RATE RATE RATE RATE
Recovery Type STANDARD STANDARD STANDARD STANDARD STANDARD STANDARD STANDARD STANDARD STANDARD STANDARD
Default Recovery Immediate Immediate Immediate Immediate Immediate Immediate Immediate Immediate Immediate Immediate
Settlement
Set as Default Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Rate
Default Effective 01-Jan-2008 01-Jul-2006 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2008 01-Jul-2006 01-Jan-2001 01-Jul-2010 01-Jan-2001
From
Default Effective 31-Dec-2007 30-Jun-2006 31-Dec-2007 30-Jun-2006

To
Allow Tax Standard Standard Standard Standard Standard Standard Standard Standard Standard Standard
Inclusion Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive
Handling Handling Handling Handling Handling Handling Handling Handling Handling Handling
Allow Override Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
and Entry of
Inclusive Tax
Lines
Allow Tax No No No No Yes No No No No No

Exemptions
Allow Tax No No No No No No No No No No
Exceptions
Allow Ad Hoc No No No No No No No No No No
Rate
Adjustment for Ad Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable
Hoc Amounts Basis Basis Basis Basis Basis Basis Basis Basis Basis Basis
Tax Accounts: Optional Optional Optional Optional Optional Optional Optional Optional Optional Optional
Tax
Recovery/Liability
Setup Rates for PST
Tax Regime Code CA PST CA PST CA PST CA PST CA PST CA PST CA PST CA PST CA PST CA PST
Configuration Global Global Global Global Global Global Global Global Global Global
Owner Configuration Configuration Configuration Configuration Configuration Configuration Configuration Configuration Configuration Configuration
Owner Owner Owner Owner Owner Owner Owner Owner Owner Owner
Tax CA PST CA PST CA PST CA PST CA PST CA PST CA PST CA PST CA PST CA PST
Tax Status Code CA PST CA PST CA PST CA PST CA PST CA PST CA PST CA PST CA PST ZERO CA PST
STANDARD STANDARD STANDARD STANDARD STANDARD STANDARD STANDARD SPECIAL EXEMPT
RATE
Tax Jurisdiction CA QC CA ON CA PE CA SK CA BC CA SK CA ON
Code
Tax Rate Code CA PST CA PST CA PST CA PST CA PST CA PST BC CA PST SK CA PST ON CA PST ZERO CA PST
STANDARD STANDARD STANDARD STANDARD STANDARD SPECIAL SPECIAL SPECIAL RATE EXEMPT
RATE RATE RATE RATE RATE RATE RATE RATE RATE
Rate Type Percentage Percentage Percentage Percentage Percentage Percentage Percentage Percentage Percentage Percentage
Percentage Rate 7 7.5 8 10 5 9 3.5 1 0 0
Effective From 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001
Effective To 30-Jun-2010 30-Jun-2010 30-Jun-2010
Tax Rate Name CA PST

Standard
Rate
Default Recovery CA PST ZERO CA PST ZERO CA PST ZERO CA PST ZERO CA PST ZERO CA PST ZERO CA PST ZERO
Rate Code REC RATE REC RATE REC RATE REC RATE REC RATE REC RATE REC RATE
16 of 24 14/06/2010 04:35
Recovery Type STANDARD STANDARD STANDARD STANDARD STANDARD STANDARD STANDARD
Default Recovery Immediate Immediate Immediate Immediate Immediate Immediate Immediate

Settlement
Set as Default Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Rate
Default Effective 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001
From
Default Effective 30-Jun-2010 30-Jun-2010 30-Jun-2010

To
Allow Tax Standard Standard Standard Standard Standard Standard Standard Standard Standard Standard
Inclusion Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive
Handling Handling Handling Handling Handling Handling Handling Handling Handling Handling
Allow Override Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
and Entry of
Inclusive Tax
Lines
Allow Tax No No No No No No No No No Yes

Exemptions
Allow Tax No No No No No No No No No No
Exceptions
Allow Ad Hoc No No No No No No No No No No
Rate
Adjustment for Ad Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable
Hoc Amounts Basis Basis Basis Basis Basis Basis Basis Basis Basis Basis
Tax Accounts: Optional Optional Optional Optional Optional Optional Optional Optional Optional Optional
Tax
Recovery/Liability
Sample Screenshots: Tax Rate
Tax Rate Details
17 of 24 14/06/2010 04:35
Tax Accounts
-------------------------------------------------------------------------------------------------
g. Define the Party Tax Profile for Legal Entity & Operating Unit
18 of 24 14/06/2010 04:35
A tax profile is the body of information that relates to a party's transaction tax activities. A tax profile can include tax registration, tax exemptions, configuration
options, main and default information, party fiscal classifications, tax reporting codes, and account tax details.
Steps Required:
1) Setup a tax profile for the Operating Unit and Legal Entity. Make sure that you have selected both tax regimes as associated to the Operating Unit (will
automatically copy to the Legal Entity) or that you set both tax regimes as associated to the legal entity and you check the "Use Subscription of the Legal Entity"
checkbox on the Operating Unit tax profile. For this case study we are subscribing at the operating unit.
2) Make sure the "Set for Self Assessment / Reverse Charge checkbox is checked if you wish to self-assess in AP (required for imports)
Sample Screenshot of OU Tax Profile
Tax Relevance:
1) Tax Profiles contain vast amounts of data that can influence tax calculations and reporting. Most significantly, the configuration options tab on the Legal Entity
and Operating Unit identify the tax regimes that will be invoke when a transaction is created.
Note: If you select the "Use Subscription of the Legal Entity" on the Operating unit tax profile, the configuration options will be ignored and instead the
application will reference the legal entity. This also eliminates some features in E-Business Tax such as the ability to define tax rules that reference operating
unit "owned" components such as transaction type. Use caution when selecting this value as you can not reverse this selection.
2) Self-Assessment is critical for AP if you import materials.
-------------------------------------------------------------------------------------------------
h. Setup Default Tax Rules
Tax Rules are evaluated by the rule engine for each enabled tax within a tax regime. Rules use a combination of defaults plus 1..N number of additional user
defined rules to determine if a tax should be applied, what the taxable basis should be for the tax application, what rate to use, what jurisdiction is relevant (Place of
supply), what source to use for a tax registration, what tax status to apply, what calculation method to execute and finally what recovery rate to apply (if
applicable).
Setup defaults for each of the taxes defined in step 4b as shown below
Rule CA GST CA HST CA PST

Direct Tax Rate Determination Blank Blank Blank
Determine Place of Supply Ship to, use bill to if ship to is not found Ship to, use bill to if ship to is not found Ship to, use bill to if ship to is not found
Determine Tax Applicability Applicable Applicable Applicable
Determine Tax Registration Ship From Party Ship From Party Ship From Party
Determine Tax Status CA GST STANDARD CA HST STANDARD CA PST
Determine Tax Rate CA GST STANDARD RATE CA HST STANDARD RATE CA PST STANDARD RATE
Determine Taxable Basis STANDARD_TB STANDARD_TB STANDARD_TB
Calculate Tax Amounts STANDARD_TC STANDARD_TC STANDARD_TC
Note: Not all tax rules defaults are set in the "tax rules" window
1) Direct Tax Rate Determination is normally only used for upgraded regimes. This rule is also ignored if any other rules are enabled
2) Determine Tax Status is set on the tax status setup form
3) Determine Tax Rate is set on the Tax Rate setup form
4) Taxable basis is set to exclude early payment discounts as Canada does not discount the tax when an early-payment discount is applied. Reference:
Revenue Canada: Taxable or Exempt
Sample Screenshot of the GST Tax Defaults is Shown Below
19 of 24 14/06/2010 04:35
-------------------------------------------------------------------------------------------------
i. Make Tax Available For Transactions
Enable each tax for transaction processing.
To see how to enable a tax and learn more about the settings and validation required to enable a tax, refer to note the E-Business Tax User Guide
Note: Not shown are several steps required to define a tax recovery rule. If you have selected to allow primary tax recovery rate determination rules then at
least one such rule must exist for each tax. These steps involve setting up inventory and thus are not currently shown in this case study. They will be added as
supporting content is created.
To enable a tax for this case study take the following actions:
1) Query the tax

2) Select "Update"
3) Expand Tax to view "Defaults and Controls
4) Select a "Default Primary Recovery Rate Code" and "Default Secondary Recovery Rate Code" as shown in the table below
5) Apply
Field Value Value Value

Tax CA GST CA HST CA PST
Default Primary Recovery Rate Code CA GST STANDARD REC RATE CA HST 100 PCT FED REC RATE CA PST STANDARD REC RATE
Default Secondary Recovery Rate Code CA HST 61.54 PCT PROV REC RATE
61.54 PCT rate is based upon current primary HST recovery rate for all provinces except for BC. In BC the recovery rate is 7/12th or 58.33%. A separate rate
and rule must be defined to apply this recover rate.
-------------------------------------------------------------------------------------------------
j. Perform a Baseline Test in AR
At this point in the Case Study you should be able to test and see taxes calculating. Perform the simple test below to validate your setup:
1) Create a customer
Name: Canada Test Corporation

Address: 123 Main Street, Toronto, ON L5R 3P4, Canada
Set as Primary Bill To address and save
2) Open the GL period(s)
3) Enter an invoice for this customer. Save. Taxes should calculate
20 of 24 14/06/2010 04:35
So how did the prior steps cause this to calculate?
1) An Invoice was entered against a specific Operating Unit which is part of a Legal Entity
2) The OU or LE are linked to the "Tax Regime" by way of the tax profile. This triggered E-Business tax to consider the regime.
3) The tax place of supply rule validated that the bill-to address should be considered
4) The bill-to address on the invoice had a province and country that could be tied to a taxing jurisdiction within the regime
5) The taxing jurisdiction was found to be associated with a valid tax rate
6) The tax was applicable
7) Standard tax calculation was used (rule defaults said to use line amount * Tax rate)
-------------------------------------------------------------------------------------------------
k. Perform a Baseline Test in AP
Perform AP Setup as required for your site. See the AP Implementation Manual for required steps.
For this case study a simplified set of steps were performed that included:
1) Setup Payment Terms
2) Setup bank, branch and account (used same setup as from AR in section 3)
3) Setup Financial Options (required to setup inventory org first - see section 3)
4) Setup Supplier:
Name: Canada Supplier
Address: 123 Oracle Way Toronto, ON ABC123
Invoice was entered with minimum data

Control amount for tax was entered as $13 and Invoice amount of $100
Calculate Tax returns the amounts shown below for GST and PST
21 of 24 14/06/2010 04:35
-------------------------------------------------------------------------------------------------
5. Tax Setup: Tax Setup For Common Scenarios
This section discusses tax setup necessary to address some common scenarios encountered in Canada. For more on how to setup tax rules and use determining
factors please review Note 1108463.1 where we list each determining factor and provide sample tax rule setup built upon this case study.
a. Adjusting the Taxable Basis for Quebec and Prince Edward Island
The taxable basis formula for most transactions is (line amount) *(tax rate). Since the PST in Quebec and on Prince Edward Island is calculated on the selling price
plus GST, you will need to define a Determine Taxable Basis tax rule to identify when a different taxable basis is needed and which taxable basis tax formula to
use.
Note 1063491.1 documents the step-by-step setup required to comply with this requirement.
Tax Setup Impact of Note on Case Study:

1) Tax Regime compounding must be enabled and precedence set (Already shown in step 4a on Tax Regime setup)
2) Tax Zone setup required (New step - no impact on prior setup)
3) Tax Formula setup required (New step - no impact on prior setup)
4) Taxable Basis Rule setup required (New step - no impact on prior setup)
-------------------------------------------------------------------------------------------------
b. Zero Rated Items for Export
The Canada Revenue Agency has stated that good exported out of Canada are zero rated for GST if they take delivery outside of Canada. Goods delivered inside
Canada may also be zero rated as exports in certain circumstances such as when the purchase is not a consumer and the purchaser exports the goods as soon as
is reasonable in the circumstance after you deliver them.
The default logic will automatically exclude items with a ship-to address outside of Canada from having GST applied. This example assumes that all exports should
in fact have a tax line with a zero rate tax instead of no tax line at all. It addresses two scenarios:
Scenario 1: Goods are sold with a ship-to address outside of Canada

Scenario 2: Goods are delivered in Canada for immediate export
Again in both of these cases the tax should apply with a Zero Rate.
Note 1063534.1 'How To Apply A Zero Rate Tax To Exports' has been created to provide step-by-step instructions for setting up rules to comply with this
requirement.
A similar approach can be taken when creating tax rules for other Exempt or Zero Rated goods as defined by Canada Revenue

1) 2 Tax place of supply rules required
2) Tax rate must be added to regime to allow for LOV selection
-------------------------------------------------------------------------------------------------
c. Applying Tax to Freight
In Canada, GST and HST are normally assessed on the transportation expenses. Refer to the GST/HST Info Sheet published by Canada Revenue for more
details. The requirement is therefore to tax freight charges along with the item cost. This is done by following the instructions referenced in the note below.
Note 764297.1 - How Tax on Freight Works in R12 Order to Cash
22 of 24 14/06/2010 04:35
Note: The example in the note is not specific to this case study but the same flow/approach can be used for Canada.

1) Tax Profile Option Settings required
2) Freight must be defined as inventory item
3) Product Fiscal Classification setup may be required
4) Tax applicability rule may be required
5) Tax exception may need to be created
-------------------------------------------------------------------------------------------------
d. Self-Assessed Taxes
In Canada, taxes must be self-assessed for a number of scenarios including against purchases where the supplier is outside of Canada and not registered to
assess taxes.
To see how to configure your system to comply with this sample scenario, refer to Note 948414.1 How to Configure a Tax for Automatic Self-Assessment in R12
E-Business Tax and Payables

1) Tax profile for LE may need to be updated
2) Vendor tax profiles may need to be created
3) Tax Registration Rule may be required
-------------------------------------------------------------------------------------------------
e. Reporting By Tax Authority
In order to run reports by Tax Authority you must create a taxing authority and associate at the proper level in your regime to rate setup.
To see how to configure a Tax Authorities (aka Legal Authority), follow the steps outlined in Note 817698.1.
For PST you should associate the Tax Authority at the Jurisdiction level.
Be sure to create a Tax Authority for Canada Revenue Agency as well as one for each PST taxing authority. A tax authority can be defined as a collecting or
reporting tax authority.

1) Legal Authority must be created
2) Legal Authority must be linked to existing tax objects (jurisdiction, rates, etc) as needed for business requirements
-------------------------------------------------------------------------------------------------
f. Charging Different Tax Accounts For Each Tax
Receivables:
In many cases, companies desire to track their tax liabilities using unique tax account combinations for each Tax that is assessed on an invoice. For example, in
Canada an invoice may be charged both PST and GST. To report on the liability out of GL these would need to hit separate account combinations.
This is accomplished by setting up Receivables AutoAccounting and mapping E-Business Tax accounts at the proper level.
To see a detailed example of how this setup is performed and how E-Business Tax and Receivables work together to derive interim tax accounts, refer to Note
885225.1 Setting up Tax Account for R12 E-Business Tax and Oracle Receivables.
Payables:
To see more information about how tax accounting is configured for Payables, refer to the accounting section in Note735991.1

1) Tax setup may require changes (NOTE: Changes must be made prior to performing section 4!)
2) Jurisdiction setup may require changes (NOTE: Changes must be made prior to performing section 4!)
3) Tax Accounts must be set at appropriate levels
-------------------------------------------------------------------------------------------------
g. Setting up Tax recovery for ITC and Rebates
As discussed earlier in section 4e of this note, Canada allows for recovery on HST and GST and some provinces allow recovery of all or some PST payments. To
satisfy this requirement you will need to configure recoverable taxes.
For HST recovery both a primary recovery rate and secondary recovery rate are typically required. Configure primary recovery for the federal portion of your tax
recovery and secondary recovery for the provincial recovery.
If you can recover both through Input Tax Credits and Rebates, consider setting up unique recovery rates for each. You can then set accounts for each scenario to
simplify your reporting and tax form preparations.
To see a detailed example of how recoverable taxes are implemented, refer to Note 735991.1
-------------------------------------------------------------------------------------------------
6 Testing Your Tax Configuration
This section will be expanded greatly in the coming months with detailed test cases and more comprehensive scenarios. The intent of this section is to provide a listing of
topics that should be considered when testing your setup.
a. Receivables
1. Invoice Entry with automatic calculation

2. Invoice Entry with Manual Entry of Tax Line
3. AutoInvoice Integration with other modules
4. AutoInvoice Integration with Legacy systems
5. AutoInvoice Data Migration
6. Credit Memo - Applied
7. Credit Memo - On Account
8. Adjustments (Tax)
9. Adjustments (Non-Tax)
10. Tax Accounting
11. Tax Compounding
12. Tax Exemptions
13. Exports
23 of 24 14/06/2010 04:35
14. Exception Rates

15. Miscellaneous Receipts
16. Receipt Applications
17. Tax Reporting
b. Payables
1. Standard Invoice Entry with tax control amount

2. Self-Assessment
3. Credit Memo's
4. Tax Recovery
5. Tax Reporting
6. Tax Exception Rates
7. Tax Exemptions
More Coming...
As mentioned in the note header, this is a living case study document and work is underway to expand the scope of content to include the following:
1) Fiscal Classifications
2) tax accounting - Payables
3) Configuration Owner Tax Options
4) Taxable Journal Entries
5) Tax Reporting: What exists, how to use it for Canada
6) AR Invoice Printing and Bill Presentment of Tax information
Any additional suggestions or ideas are welcome and should be posted to our community thread for Canada Tax Setup.
Check back often on this note as we will be adding content daily through July 2010
Copyright 2010 Oracle. All rights reserved. Oracle is a registered trademark of Oracle. Various product and service names referenced herein may be trademarks
of Oracle. All other product and service names mentioned may be trademarks of their respective owners.
Disclaimer: This document is provided for information purposes only and the contents hereof are subject to change without notice. Oracle does not warrant that this
document is error-free, nor does it provide 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. Oracle specifically disclaims 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 the prior written permission of Oracle.
Summary
References
NOTE:1062897.1 - Case Study: How to Switch From an Upgraded Tax Regime to a New Tax Regime - Canada HST example
Related
Products
Oracle E-Business Suite > Financial Management > Financials Common Modules > Oracle E-Business Tax
Oracle E-Business Suite > Procurement > Procurement > Oracle Purchasing
Oracle E-Business Suite > Financial Management > Credit to Cash > Oracle Receivables
Oracle E-Business Suite > Financial Management > Procure to Pay > Oracle Payables
Oracle E-Business Suite > Order Management > Order Management > Oracle Order Management
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Modified 09-JUN-2010 Type WHITE PAPER Status PUBLISHED

This white paper combines, extends and superseeds the following:

How to Use This Note

Author : Kalyankar Tota & Patrick McBride

2. If You Are Using an Upgraded Environment....

a. Setup Geography Hierarchy Structure & Details

To see how to setup a geography hierarchy, refer to Note 554492.1

Responsibility: Trading Community Manager

b. Define Tax & Geography Validation

To see how to setup an a geography validation, refer to Note 554492.1

Responsibility: Trading Community Manager

c. Setup a Legal Entity, Establishment, Ledger and Operating Unit

Responsibility: Legal Entity Manager

d. Associate the Operating Unit with the Legal Establishment

Responsibility: Legal Entity Manager

e. Replicate Seed Data

f. Setup Responsibilities for the New Operating Unit

Responsibility: System Administrator

g. Setup Mandatory Responsibility Level Profile Options

Responsibility: System Administrator

Profile Options for Responsibilities created in step 3f

Profile Name GL AR AP OM EBTax

MO: Operating Unit Yes Yes Yes Yes

GL Ledger Name Yes Yes Yes Yes Yes

h. Setup Item Validation Organization For The Operating Unit

Responsibility: OM Responsibility from section 3f

i. Setup a Freight Inventory Item

j. Setup Tax and TCA Profile Options

Responsibility: System Administrator

Profile Options required for Tax and TCA

eBTax: Allow Ad Hoc Tax Changes Yes

eBTax: Allow Override of Customer Exemptions No

k. Setup Receivables System Options

Responsibility: Receivables responsibility

l. Setup Receivables AutoAccounting

Responsibility: Receivables responsibility from step 3f

m. Setup Receivables Transaction Types

Responsibility: Receivables responsibility from step 3f

n. Setup Transaction Sources

Responsibility: Receivables responsibility from step 3f

o. Initialize Operating Unit Party Tax Profile

Responsibility: Tax Managers responsibility from step 3f

p. Setup Receivables Activity Types

Responsibility: Receivables responsibility from step 3f

q. Setup Banks, Branches and Accounts

r. Setup Receivables Receipt Class & Payment Method

Responsibility: Receivables responsibility from step 3f

s. Setup Approval Limits

Responsibility: Receivables responsibility from step 3f

To see how to setup approval limits, refer to the AR Implementation guide

t. Run Geography Name Referencing Program

Responsibility: Trading Community Manager

Why Two Regimes?

Field Value Value

Name CA GST AND HST CA PST

Regime Level Country Country

Country Name Canada Canada

Effective From 01-Jan-2001 01-Jan-2001

Used to Group Regimes No No

Allow Tax Recovery Yes Yes

Allow Override and Entry of Inclusive Tax Lines Yes Yes

Allow Tax Exemptions Yes Yes