Oracle E-Business Tax Overview 447283739.doc Effective Mm/dd/yy Page 1 of 41 Rev 1

Oracle E-Business Tax
Overview
Overview
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Oracle E-Business Tax Overview 447283739.doc

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Oracle E-Business Tax Overview
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Oracle E-Business Tax Overview
Schedule: Timing Topic

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Objectives

Agenda

E-Business Tax – New Product
E-Business Tax – New Product

Oracle E-Business Tax:
• Is a new product in this release.
• Provides the infrastructure for transaction tax knowledge management and delivery using
a global system architecture that is configurable and scalable for adding country-specific
tax content.
• Is a single point solution for managing transaction-based tax.
• Uniformly delivers tax services to all E-Business Suite business flows through one
application interface.
• Consists of a tax knowledge base, a variety of tax services that respond to specific tax
events, a set of repositories (for tax content and tax recording) that allows customers to
manage their local tax compliance needs in a proactive manner, as well as the ability to
integrate with external tax content providers through a single integration point.
Features
Features of E-Business Tax include:
• Date affectivity on your tax configuration.

• Tax simulator which enables you to test your tax configuration.
• Classify your tax exceptions:
- Item.
- Intended use.
- Place of supply.
• Look for commonalities:
- Define a classification rule to apply to many suppliers.
- Group geography facts using TCA Geography model.

E-Business Tax – Benefits
E-Business Tax – Benefits

E-Business Tax delivers the following benefits:
• Migration to Release 12 from Release 11i.
• Minimize the need for detailed regional tax knowledge.
• Simplified setup.
• Minimize the risk associated with tax compliance.
• Tax data modeling tool.
• Automatic tax handling for:
- Sales and use tax.
- Compound tax and surcharges.
- Deferred tax.
- Multiple tax registrations.

E-Business Tax Solutions for Business Needs




Integration Within Oracle E-Business Suite
Integration Within Oracle E-Business Suite

Oracle E-Business Tax provides transaction tax services for these products:
• Purchasing
• iProcurement
• Receivables
• Payables
• Project Accounting
• Trade Management
• General Ledger
Upstream/downstream products incorporating Oracle E-Business Tax are:
• Consigned Inventory
• Cash Management
• Collections
• Property Management
• iSupplier Portal

• Internet Expense
• Service Contracts
• Order Capture
• Order Management
• iStore
• Inventory Management (also Intercompany)
E-Business Tax does not provide tax services for these transactions:
• Payables withholding taxes.
• Latin American Receivables transactions.
• India transaction taxes.
You can continue to set up and maintain these taxes in the Oracle E-Business Suite using the
functionality available within the corresponding application.
Payables Integration
E-Business Tax integration points with Payables include:
• Product event classes:
- Standard invoices.
- Prepayment invoices.
- Expense reports.
• Tax calculation at line and distribution level.
• Additional tax attributes.
• Backward compatible (11i) tax calculation support:
- Capture tax classification code (same behavior as 11i tax code).
• Tax user interfaces (UIs) integrated for viewing and modifying tax lines.
• Self assess tax handling.
Purchasing Integration
E-Business Tax integration points with Purchasing include:
- Requisition.
- Release.
- Purchase order and agreement.
• Tax calculation at shipment line and distribution level.
• Additional tax attributes - captured using common UIs.
• Tax UIs integrated for viewing tax lines.
• Backward compatible (11i) tax calculation support.
Receivables Integration
E-Business Tax integration points with Receivables include:
- Invoice.
- Debit memo.

- Credit memo.
- Adjustment.
• Additional tax attributes – captured using common UIs.
• Backward compatible (11i) tax calculation support.
• Tax UIs integrated for viewing and modifying tax lines.
• Non recoverable adjustments handled by Receivables (same as in 11i).
General Ledger Integration
E-Business Tax integration points with General Ledger include:
• Supports only backward compatible tax calculation.
• Uses tax rate code for tax calculation.
• Similar to release 11i, for a journal entry line only one tax line is calculated using tax rate
defined for the selected tax rate code on the journal entry line.
Instructor Note
In Release 12.0, outside of the Procure to Pay process and the Order to Cash process, the only
applications E-Business Tax supports calculation of taxes on transactions is Trade Management
and General Ledger (for situations where a user enters a manual journal entry in General
Ledger).

Agenda

E-Business Tax Architecture
E-Business Tax Architecture

The E-Business Tax architecture consists of five tiers:
1. The Tax Definition tier is the tax data that you set up for each tax regime and tax that your
company or institution is subject to (also called the regime-to-rate flow). A tax authority
administers the taxes of a tax regime. Each tax within a tax regime comprises a certain
number of tax statuses, tax rates (and recovery rates, if applicable), and tax jurisdictions.
2. The Configuration tier identifies the factors that participate in determining the tax on an
individual transaction. These “taxability” factors are:
a. Party - The parties involved in the transaction. This can include first party legal
entities; ship from/ship to parties; bill from/bill to parties; tax registrations and
registration statuses of each party; type or classification of a party.
b. Product – The products transacted. This includes the designation of physical goods or
services, and in some cases the type or classification of the good or service.
c. Place - The places involved in the transaction, including the ship from and ship to
locations, and the bill from and bill to locations. Other places—such as point of origin
or point of acceptance—may also be factors, depending on the applicable tax
regulations.

d. Process - The kind of transaction that takes place. This can include: Procure to Pay
transactions, such as purchases, prepayments, and requisitions; Order to Cash
transactions, such as sales, credit memos, and debit memos; the type of sale or
purchase, for example, retail goods, manufactured goods, intellectual property,
resales.
Each of these factors can become determining factors in the creation of tax rules.
3. The Rule Engine tier comprises of the set of tax rules that are used to determine and
calculate tax on a transaction. You define tax rules for each combination of tax regime, tax
and configuration owner. You create tax rules by translating the tax regulations of a tax
authority into determining factors and tax conditions that the E-Business Tax tax rules
engine uses to evaluate the applicability of a tax on each transaction line. Tax rules
determine: the applicability of a tax; the place of supply and tax jurisdiction of the
transaction; the tax registration; the tax status and tax rate; the recovery rate (if
applicable); and the taxable basis and tax formula to use in calculation.
4. The Services tier manages the calculation of the tax amounts, and tax recovery amounts
(if applicable).
5. The Tax Management tier maintains all of the tax information pertaining to each
transaction, for use in tax reporting.
These tiers are discussed in further details throughout this course.
For complete details on setting up and using Oracle E-Business Tax, see: Oracle E-Business
Tax Implementation Guide and Oracle E-Business Tax User Guide.
Instructor Note
This architecture model reflects the E-Business Tax application and does not reflect the
applications that utilize E-Business Tax.

E-Business Tax Home Page
E-Business Tax Home Page

The E-Business Tax home page lets you manage the navigation to each of the E-Business Suite
applications and E-Business Tax components involved in setting up and maintaining your tax
configuration. The Page Hierarchy Personalization user interface displays the entire layout of a
configurable page in a hierarchy table, or HGRID.
The Setup Tasks region uses the HGRID to organize the required and optional setup tasks that
you need to complete your tax configuration. Certain setup tasks are conditionally required,
depending upon the details of your tax configuration. You can navigate to each setup page or
setup flow from the from the Setup Tasks region. Complete the setup tasks in the order
indicated to create a tax configuration.
Note. You must ensure that you complete all prerequisite implementation tasks in all applicable
E-Business Suite applications before you use the Setup Tasks region.

Agenda

E-Business Tax Key Concepts – Tax Definition
E-Business Tax Key Concepts – Tax Definition

The basic tax configuration includes the regime-to-rate flow for each tax regime.
Tax Authority
A government entity that regulates tax law, administers, or audits one or more taxes.
Tax Regime
The set of tax regulations that determine the treatment of one or more taxes administered by a
tax authority.
Examples of a tax regime include:
• A sales and use tax in the United States includes rules for state, county, and city sales and
use taxes.
• An excise tax regime in India includes rules for excise tax and additional excise tax.
• A VAT tax regime in Argentina includes rules for standard VAT, additional VAT, and
perception VAT.
Tax
A distinct charge imposed through a fiscal or tax authority.
Examples of a tax include VAT for the United Kingdom and TVA for France.

Tax Jurisdiction
A geographical area where a tax is levied by a specific tax authority or where a specific tax rate
applies.
Examples of tax jurisdictions include:
• The tax jurisdiction for VAT in Germany is the country of Germany.
• The tax jurisdiction for a San Jose city tax is the City of San Jose, California.
• The tax jurisdiction for Provincial Goods and Services tax (PST) in Canada is a particular
Province, such as Ontario or British Columbia.
Tax Status
The taxable nature of a product or service in the context of a transaction for a tax type.
Examples of a tax status include taxable standard rate, zero rated, exempt, and non-taxable. A
tax status is similar to the concept of the tax type definition used within Payables and
Receivables in releases prior to Release 12.
Tax Rate
The rate specified for a tax status in effect for a period of time. You can express the tax rate as
a percentage or as a value per unit quantity.
An example of a tax rate is 7.5% for a state sales and use tax.
Recovery Rate
The rate of input tax that is allowed to be recovered or offset against output tax.
The recovery rate is applicable to VAT taxes. For example, organizations that only produce
VAT applicable goods and services can use 100% recovery rate on most purchases.
Organizations that produce VAT exempt goods and services, for example, financial institutions,
have a 0% recovery rate.
Operating Unit Tax Accounts
The tax accounts that the system uses to post the tax amounts derived from your transactions.
The tax accounts you define serve as default accounting information for taxes, tax rates, tax
jurisdictions, and tax recovery rates.
Instructor Note
The regime-to-rate flow does not include setting up a tax jurisdiction, however, the user must
create a tax jurisdiction within the basic tax configuration setup in order to enable a tax for use
on transactions. This is illustrated in Practice: Create a Regime to Rate Tax Model.

Key Concepts: Tax Authority
Key Concepts: Tax Authority

Tax Authority is a government entity that regulates tax law, administers, and/or audits one or
more taxes. Some examples of tax authorities are:
• Brazil - Secretaria da Fazenda Estadual (State Revenue Office)
• Brazil - Secretaria da Receita Federal (Federal Revenue Office)
• California, USA - California State Board of Equalization
• Canada -Canadian Customs and Revenue Agency
• France - Ministry of Economy, Finance and Industry
• Germany - Federal Ministry of Finance
• India - Central Board of Customs and Excise
• Singapore -Inland Revenue Authority of Singapore
• United Kingdom - HM Customs and Excise

Key Concepts: Tax Regime
Key Concepts: Tax Regime

Tax Regime is the set of tax rules that determine the treatment of one or more taxes
administered by a tax authority. Some examples of tax regimes are:
• Brazil - RICMS -> ICMS Regulation
• Brazil - RIPI -> IPI Regulation
• California, USA - California Sales Tax
• Canada - Canadian Goods and Services Tax
• India - Excise Tax
• Singapore - Singapore Goods and Services Tax
• United Kingdom - UK VAT

Key Concepts: Tax
Key Concepts: Tax

We can define Tax by a classification of a charge imposed by a government through a fiscal or
tax authority. Some examples of taxes are:
Tax Regime: Taxes:
------------------------------------------------ ----------------------------------------------------
RICMS - Regulamento do ICMS ICMS, ICMS-ST (Tributary Substitution)
RIPI - Regulamento do IPI IPI
California Sales Tax State Sales Tax
California Sales Tax District Sales tax
Canadian Goods and Services Tax GST
Canadian Sales Tax PST
India Excise and Customs Excise Tax
Singapore Goods and Services Tax GST
UK VAT UK VAT

Key Concepts: Tax Jurisdiction
Key Concepts: Tax Jurisdiction

Tax Jurisdiction is a geographic area where a tax is levied by a specific tax authority. Some
examples of tax jurisdictions are:
Tax Geographic Zone Jurisdiction
-------------- ----------------------- --------------------------------
ICMS São Paulo Sao Paulo ICMS
IPI Brazil Brazil IPI
State Sales Tax California (State) California State Sales Tax
County Sales tax San Francisco (County) SFO County Sales Tax
GST Canada Canada GST
PST Ontario Ontario PST
Excise Tax India India Excise Tax
GST Singapore Singapore GST
UK VAT UK UK VAT

E-Business Tax Key Concepts – Configuration Components
E-Business Tax Key Concepts – Configuration Components

Along with the basic tax configuration data of the regime-to-rate flow for each tax regime and
tax, your tax setup includes a number of other configuration components. Some of these
components are mandatory, some are optional, and some are conditionally mandatory,
depending on your tax requirements.
Party Tax Profiles (mandatory)
The party tax profile is the body of information that relates to a party’s transaction tax
activities. Set up and maintain a party tax profile for each party involved in your taxable
transactions. Parties can include:
• Legal entities, legal establishments, and operating units in your organization that have a
transaction tax requirement.
• Your customers and suppliers and their locations (conditionally mandatory).
• Tax authorities that administer tax regulations and rates.
Customer Tax Exemptions (conditionally mandatory)
A tax exemption applies either to a specific customer or to a combination of customer and
specific product. You define tax exemptions as part of the third party tax profile of the

applicable customers and customer sites. The details of tax exemptions are normally supported
by tax exemption certificates from the relevant tax authority.
Product Tax Exceptions (conditionally mandatory)
Set up tax exceptions to define special rates for specific products, as determined by the tax
authority. This lets you define general rules for a wide classification of products, while
applying a separate rule to a subset of products. At transaction time, E-Business Tax determines
whether the tax exception applies to the transaction line for the product and, if so, uses the
applicable exception rate.
Tax Registrations (mandatory)
Set up tax registrations for your first party legal establishments and your third party
customers/customer sites and suppliers/supplier sites. A tax registration contains information
related to a party’s transaction tax obligation with a tax authority for a tax jurisdiction where it
conducts business. E-Business Tax uses tax registrations in tax determination and tax reporting.
For each tax that you create, you must define either a default tax registration or a tax rule for
the rule type Determine Tax Registration.
Configuration Owners (mandatory)
The legal entities and operating units in your company are each subject to specific sets of tax
regulations as designated by the tax authorities where you do business. The configuration
owner determines, for each legal entity and operating unit, the ownership and use of each of
your tax setups.
E-Business Tax provides the concept of the Global Configuration Owner. The global
configuration owner represents ownership of all of your tax setups at the company level. In
most cases, legal entities and operating units can subscribe to the global configuration owner
and therefore share the tax content that is maintained at the company level. Where necessary,
an individual legal entity or operating unit can either override part of a tax setup or own its
own tax content.
Configuration Options (mandatory)
The regime-to-rate flows that you create identify the taxes and the set of regulations that make
up each tax requirement. Configuration options identify the relationships between the first
parties in your company and tax regimes to reflect the tax requirements of each party. You use
configuration options to associate legal entities and operating units with their applicable tax
regimes. You must set up a configuration option for each combination of first party and tax
regime, where the party is subject to any tax regulations belonging to a tax regime.
Service Provider (optional)
E-Business Tax lets you use the tax services of external service providers for tax calculation of
US Sales and Use Tax on Receivables transactions. E-Business Tax provides transparent
integration between the external provider tax service and Oracle Receivables.
In the first release of E-Business Tax, the third-party service providers for US Sales and Use
Tax calculation are Vertex Q-Series and Taxware Sales/Use Tax System.
Fiscal Classifications (conditionally mandatory)
E-Business Tax provides fiscal classifications to classify the parties, products, places, and
processes involved in your tax transactions. You use fiscal classifications as determining
factors in the creation of tax rules for tax determination. In some cases, fiscal classifications are

necessary to identify specific tax regulations. In other cases, you can use fiscal classifications
as a flexible tool for building a set of tax rules for a specific tax regime and tax.
Country Default Controls (optional)
Use country default controls to maintain tax setup information at the country level that you can
default to the applicable E-Business Tax and legal entity pages. Country default controls let
you designate transaction tax-related values in the countries where you do business. You can
update any default values that you enter on the applicable pages.
Instructor Note
The party tax profiles contain all of the tax information for each party, including tax
registrations and party fiscal classifications. Party tax profiles provide the basis for defining tax
profiles for the parties involved in tax transactions that are set up through Legal Entity and
Trading Community Architecture (TCA).

E-Business Tax Key Concepts – Tax Rules Engine
E-Business Tax Key Concepts – Tax Rules Engine

The tax rules engine uses your tax configuration setup and the details on the transaction to
determine which taxes apply to the transaction and how to calculate the tax amount for each
tax that applies to the transaction. You use the tax rule engine to create rules that reflect the
regulations of a tax authority for the taxes of a particular tax regime.
Tax Rules
Define a tax rule for a combination of a tax and rule type. Each tax rule applies to one tax
within a tax regime and belongs to one configuration owner. Tax rules let you create a tax
determination model to reflect the tax regulations of different tax regimes and the tax
requirements of your business.
Tax Determination Process
The tax determination process identifies the steps that the tax rules engine uses to determine
which taxes apply to a transaction and the tax amounts to calculate. Each step of the tax
determination process is represented by a rule type. You define one or more tax rules for each
rule type that you need.
The steps in the tax determination process are:
• Determine Place of Supply.

• Determine Tax Applicability.
• Determine Tax Registration.
• Determine Tax Status.
• Determine Tax Rate.
• Determine Taxable Basis.
• Calculate Tax Amounts.
• Determine Recovery Rate (for applicable taxes).
Tax Rule Defaults
You can assign default values to each rule type in the tax determination process. E-Business
Tax uses the default values in tax determination when no rule provides a value that applies to
the transaction.
Tax Determining Factors
A tax determining factor is an attribute that contributes to the outcome of a tax determination
process. Tax determining factors include geographical locations, tax registration status, or one
or more fiscal classifications. E-Business Tax provides the tax determining factors that you use
to build tax rules.
Tax Determining Factor Sets
You use tax determining factor sets to group together related tax determining factors. You
create tax determining factor sets to reflect the kinds of determining factors that go into the
determination of a particular tax. For example, geographical location is often a determining
factor in assessing VAT, while a specific product type may be a determining factor in assessing
an excise duty. You must associate one tax determining factor set with each tax rule.
Tax Condition Sets
A tax condition is a determining factor plus the operator and value that you define for the
determining factor in order to specify a particular result. For example, you may create a tax
condition using the geography determining factor to identify sales within a state by specifying
that the Ship From state equals the Ship To state.
A tax condition set groups together all of the tax conditions that constitute a particular tax rule.
In this sense, the tax condition set is the logic of the tax rule. It specifies the factors to consider,
and the resulting value that must exist for each factor, in order for the result of the tax rule to
be true.
Tax Rules Engine Components
The components of the tax rules engine work together in the following way:
• Each Tax Rule applies to one tax within a tax regime and belongs to one configuration
owner. You define a tax rule for a combination of a tax and a Rule Type.
• The Determining Factor Set contains the list of determining factors to consider in
evaluating a tax rule.
• You create Tax Condition Sets for the tax rule, using the determining factors of the
determining factor set assigned to the tax rule. Each tax condition of the tax condition set
contains a determining factor, an operator, and a value.
• Each tax condition set is assigned a priority within the tax rule. Each tax rule is assigned a
priority within a rule type.

• At transaction time, the rule engine examines each tax condition until it finds a result that
makes the rule true and applicable to the transaction. If no tax condition is found, then the
tax rule does not apply to the transaction. The rule engine looks to the tax rule with the
next highest priority and repeats the process until a tax rule is found. If no tax rule is found
that evaluates as true, then either the tax rule uses the default value (if applicable) or the
tax does not apply to the transaction.

Tax Determination Management
Tax Determination Management

Tax Determination Management is responsible for calculating the tax on transactions according
to the hierarchy of rule types in the tax determination process.
The tax determination process functions in this sequence:
• Determine Place of Supply: Determines the location where a transaction is considered to
have taken place for a specific tax.
• Determine Tax Applicability: Determines the taxes that apply to a given transaction.
• Determine Tax Registration: Determines the tax registration status for the applicable taxes
of the parties involved in the transaction.
• Determine Tax Status: Determines the tax status of each applicable tax to use on the
transaction.
• Determine Tax Rate: Determines the tax rate for each applicable tax to use on the
transaction.
• Determine Taxable Basis: Determines the amount to use upon which to calculate the tax
rate.
• Calculate Tax Amounts: Calculates the tax and displays the calculation results.

• Determine Recovery Rate: Where applicable, determines the recovery rate to apply to
each applicable tax on the transaction.
Determine Place of Supply
For example, in Europe the default for place of supply of goods is often Ship From. In the
United States, the default for place of supply of goods is often Ship To.
Determine Tax Applicability
You can include or exclude specific taxes if there are conditions which control when the tax is
applicable.
Determine Tax Registration
Normally, the default is Bill From Party, but there are cases, such as reverse charge or self
assessment, where the default is Bill To Party for specific transactions.
Determine Tax Status and Determine Tax Rate
For example, you can apply a zero rate to the sale of children’s clothes for United Kingdom
VAT. The system also looks for customer-specific tax exemptions and general exceptions that
may apply.
Determine Taxable Basis
In many cases, the taxable basis is the line amount, but this may or may not include certain
types of discounts. For example, in Brazil, there may be reductions in the taxable basis that
apply.
Calculate Tax Amounts
The normal calculation is taxable basis * rate. Defaults for both Taxable Basis and Tax
Calculation Formulae are delivered as part of seeded data.
Determine Recovery Rate
For example, for manufacturing companies, VAT on regular purchases used for company
business is 100% recoverable. However, if you are a financial institution which only makes
VAT exempt sales, you are not allowed to recover any taxes and the recovery rate would
therefore be 0% on all purchases.

Agenda

E-Business Tax Processing
E-Business Tax Processing

E-Business Tax, making use of its tax content repository, follows a series of tax determination
steps. Most of these steps behave according to their underlying tax rules.
Once all rule conditions and results are evaluated, the system calculates taxes and stores them
in the tax lines repository.
The tax line repository has all necessary information needed for tax reporting. You can extract
tax report information from the repository. You can display this data in several formats such as
PDF, HTML and RTF.
Oracle eBusiness Tax provides a single solution for tax for all Oracle eBusiness Suite
applications.
Instructor Note
All concepts displayed in this slide are discussed in the previous notes throughout this module.

Receivables Transaction Example

This Receivables transaction example shows how E-Business Tax answers some basic business
questions during its Tax Determination process.
• Tax regimes are identified based on the countries of the parties involved.
• A default value or a Place of Supply rule indicates the place of supply.
This example illustrates the Tax Determination process. See: Oracle E-Business Tax: Part 1:
Setting Up Tax Rules for a detailed discussion on the Tax Determination process.


A default party type value or a tax registration rule determines from which party (first party or
third party) to evaluate tax registration status.
The party classification is derived from the parties available in the transaction (first and third
parties). That classification can be compared to the ones used as a tax determining factor in any
rule type.


In the Transaction Lines window, other types of information are relevant for tax calculation:
• Quantity times Unit Price is the default seeded Taxable Basis formula, but other formulas
can be defined.
• The item available in a given transaction line can potentially have one or more product
classifications, and these classifications can be used as a tax determining factor in any rule
type. The item itself or its classifications can also be used as part of Tax Exceptions
definition.


In the Detail Tax Lines window, the Tax Rate times Taxable Basis is the default seeded Tax
Amount formula, but other formulas can be defined.
Refer to Guided Demonstration – Create a New Tax (Environmental) [LAB4230Y]

Summary


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