EBTax-FAQ Document

ORACLE APPLICATIONS
R12-Frequently Asked Questions
E-Business Tax
Oracle Solution Services India Pvt Ltd,

Prestige Technology Park,
Venus block, Phase-II, Level 6-9, Survey No.29,
Sarjapur Marthahalli Ring Rod,
Banglore, Karnataka-560 087.
INDIA
1
For Oracle employees and authorized partners only. Do not distribute to third parties.
© 2008 Oracle Corporation – Proprietary and Confidential
Table of Contents
Safe Harbor Statement..................................................................................................3

Oracle Training Materials – Usage Agreement...........................................................3
1. What is the purpose of Legal Justification Text fields on tax line?....................4
2. Is it possible to create a conditional exception for online purchases?................4
3. Explain Self Assessed Tax, use Tax and Offset Tax. ..........................................5
4. What's the required setup for Self Assessed Tax? ...............................................6
5. What is the flag "Enable Tax to be Applicable" used for? How to enable it?...7
6. What does updating the tax accounts on the first party legal establishment does
exactly? Is it for reporting purposes, auto accounting?..............................................8
7. Why does Validate Invoices that Use E-Tax Error with 'Unexpected Error
Occurred during Tax Calculation'? .............................................................................8
8. Why isn't Tax Compounding Calculation Working? ..........................................8
9. Why isn't Create Accounting Creating a Tax Line if Tax is Exempt? ...............9
10. Why does an Unexpected Error Occur During Tax Calculation?..................9
11. Why can't Tax on Invoice be Accounted? An Incorrect accounting_date is
on Tax Distributions? ...................................................................................................9
12. Why is the Inclusive and Exclusive Tax Calculation Incorrect?..................10
13. Why isn't it possible to Apply Offset Tax in an AP Transaction?.................10
14. How will the AR-Prepayment note sent to the customer match to the
incoming cash but only the incoming cash will be taxable?.....................................11
15. Is there new functionality because the cash value has to be shown in fully by
the Customer, but the VAT has to be paid to the tax authority? ...............................12
16. Is E-Business Tax another "add-on" product or is it something mandatory
throughout implementations? ....................................................................................12
2
Oracle EBS R12 Financials Best Practices
eBTax FAQ
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3
1. What is the purpose of Legal Justification Text
fields on tax line?
Summary: This field appears in receivables after clicking on tax, to the far
right. They look just like free text fields for putting memo details?
In RUP5 environment customer cannot update the TAX AMOUNT
Summary: - Customer upgraded his TEST instance (a clone of PROD) from

RUP4 to RUP5.The upgrade to RUP5 made the Tax Amount field in the
invoice workbench to become 'View only’. Customer didn't change any of his
TAX setup, but if RUP4 (PRODUCTION) he can modify / override TAX
AMOUNT, and in his TEST instance with RUP5 he can't.
Ans:- Reason not aware . However the following information has resolved the issue.
Apply Patch 7293393 Note:734785.1 Upgrade To R12.0.5 Has Made The Tax Form
Read Only cannot update The Tax
2. Is it possible to create a conditional exception for

online purchases?
Summary:- Customer wishes to know if they can somehow create a tax rate
that differs based upon the way a purchase occurs. For example, in some
states they are now seeking to collect tax revenue from online purchases at a
rate less than they collect for typical purchases. The example provided was
that one state (Florida I think) has 80% of the normal rate applied to online
interstate purchases. (ex a 10% rate would be 8% for online)
Ans(Suggestion) is as follows:- I understand that in your business case nature

of the transaction determines the tax and the tax rate
I suggest you to create and use Transaction Fiscal Classification functionality
of the product. Please note you may need to create reduced rate (80% of
normal rate) and rules based on Transaction Fiscal Classifications top trigger
the appropriate tax rate.
You may use any of the following Transaction Fiscal Classifications.
•Transaction Business Category
•Document Fiscal Classification
•User Defined Fiscal Classification
Please note Transaction Fiscal Classification need to be entered manually in

the transaction workbench.
Please also note this is only a suggestion based on the above question. You
may need to appropriately judge your business situations and requirements
4
3. Explain Self Assessed Tax, use Tax and Offset Tax.
Business background :-
Ø Applicable when goods are purchased from an unregistered seller
Ø Purchaser responsible for calculating and remitting the tax to the relevant
tax authority.
Ø The same is not displayed on line level but can be viewed under the tax
details tab. is accounted as liability.
How to Configure :-
For SA tax we are interested in suppliers or supplier sites registration status.
So user should configure following type of rule under the rule type
Registration status:-
If Bill From ( Supplier PTP) = Not Registered or
If Ship From ( Supplier site PTP) = Not Registered ( this condition only if
required)
Then take Registration status of Ship From ( First Party legal Establishment)
Now this is how it will evaluate. If supplier ( or site) is registered then normal
tax will be calculated. However if the supplier ( or site) does not have
registration details then it will treated as unregistered and in that case rule
will get triggered because of which tax engine will look at registration status
under the PTP of First party legal Establishment. Since there “Set for Self
Assessed” is checked tax will be correctly calculated as self assessed.
Offset Tax :-
How to Configure :-
1) Create a main tax and it should be made available for

transactions. If your tax is recoverable , ensure that you have
associated a recovery rate to it.
2) Now create an Offset Tax . Check the set offset tax flag for
this tax.
3) Create a Offset tax status.
4) Create a 100% offset tax recovery rate.
5) Create a negative offset tax rate.
6) Navigate to the tax rate details and attach the offset recovery
rate there. Also attach the recovery rate at the Offset Tax level.
7) Now attach the offset tax to the main tax rate details.
8) Ensure that “Allow Offset Taxes” has been checked at
configuration owner level for payables. If the basis is Bill
From then ensure that “Allow Offset Taxes” has been checked
at supplier SITE PTP. However if it is Ship from party site
then check that “Allow Offset Taxes” has been checked at
supplier PTP.
5
9) At the third party as well as the third party site level , “Set for
self assessment” should NOT be checked.
10) At the First party legal establishment level, the “Set for self
assessment” should NOT be checked
USE TAX ( cannot be configured in R 12 – Used to support only upgraded cases for
backward compatibility)
The 11i way :-
1) When a tax code with tax type as USE was associated in AP

invoice workbench , then the details of that tax would get
displayed in the USE TAX LIABILITY REPORT. Tax
distribution would not get created for this tax rate.
2) The total of that report would determine the tax liability and
user would create 2 accounting entries- One for accruing tax
liability and other for settlement.
The R12 way :-
1) Users would configure SELF ASSESSED TAX, which is the

R12 equivalent of USE TAX.
2) The self assessed tax information can be viewed on the AP
invoice workbench if user navigates to Tax Details
3) The accounting of self-assessed tax will automatically happen
in the TAX LIABILITY account defined at the TAX RATE
level. User will still have to create accounting for settlement.
4) If a user wants to ascertain the use / self assessed tax liability
then he just has to take the total of liability side of the
abovementioned account.
Debit side will have details of tax recoverable ( If any). Details can be obtained
if the user extracts the SLA account analysis report.
In case of Upgrade :-
Even after upgrade if the user associates the upgraded tax code with tax type
as use then the details of that tax will still appear in the use tax liability report
in the same manner as was happening in 11i. There is no change of
functionality nor any additional set up required here.
4. What's the required setup for Self Assessed Tax?

1. Responsibility: Oracle Payables - R12.AP.A.2
Automatic tax calculation is NOT enabled.
2. Path: Invoices -> Entry -> Invoices (APXINWKB.fmb
120.496.12000000.131)
3. Create an invoice and save.
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4. Create a tax line manually.
For the tax regime "TUSE REGIME" and Tax Name "TUSE TAX" (new
tax codes):
It's possible to create a manual tax line for the invoice, however, it is
not self-assessed.
Tax is created with Tax Type = Use.

Supplier and supplier site are setup (party tax profiles) with “Self
Assessment / Reverse Charge” selected and Tax Registration Status:
REGISTERED.
"Self Assed Tax

Setup_with_Registrat
5. Please refer to attached Doc on Issue .
5. What is the flag "Enable Tax to be Applicable" used

for? How to enable it?
Summary:- Upgraded tax codes show the following options at Tax level:
Make Tax Available for Transactions: Selected

Enable Tax to be Applicable: Not Selected
New tax codes show only the option:
Make Tax Available for Transactions: Selected
It's possible to create manual tax lines for the new tax codes, but not for the upgraded
tax codes.
There are 2 flags for migrated taxes. LIVE_FOR_PROCESSING_FLAG and

LIVE_FOR_APPLICABILITY_FLAG.
LIVE_FOR_APPLICABILITY_FLAG is the “Enable Tax to be Applicable” flag.

This flag is not visible for other upgraded or newly created taxes where by
default they are set to Y in back end. However for migrated USE TAXES and
migrated LOCATION TAX it is set to N as they are not calculated. As in 11i,
USE taxes are not visible on the AP workbench but as are displayed in the
USE TAX LIABILITY REPORT. Also during migration of location based AR
taxes in addition to STAE,COUNTY and CITY tax , a dummy LOCATION
TAX is also created for rule transactional input factor rule evaluation of other
3 taxes.
LIVE_FOR_PROCESSING_FLAG is the *“Make live for transactions flag*”

which comes as checked for upgraded taxes. For newly created taxes this has
to be explicitly checked.
7
6. What does updating the tax accounts on the first
party legal establishment does exactly? Is it for
reporting purposes, auto accounting?
Hint:- In the user guide. it also states: Tax registration account information
takes precedence over customer and supplier account information. So what
does this exactly mean?
There is currently no use of tax accounts at first party legal establishment

under registrations tab( at least to my knowledge) .
The only details we have is ,we do not use 'tax accounts' at registrations level.
These details originally came from Brazilian AP tax solution for tax rate
differential account information. Since Brazilian AP tax solution is not used
by any customer, these details are not migrated into R12 eBTax registrations.
7. Why does Validate Invoices that Use E-Tax Error

with 'Unexpected Error Occurred during Tax
Calculation'?
Cause: The tax account is not set up properly.
Make sure all the tax setups are complete, including the tax account.
See Note 455598.1 for more information.
8. Why isn't Tax Compounding Calculation Working?
Cause: Tax Rules have been set at the wrong level

Need to ensure Independent tax calculation rule is calculated prior to the
dependent calculated rule.
-- Tax Manager Responsibility
¾ Tax Configuration
¾ Tax Rules
-- Query the desired combination of:

¾ Configuration Owner
¾ Tax Regime Code
¾ Tax
¾ Rule Type
-- Now Review Rule Order
The lowest number takes precedence

Example: 1 will take precedence over 2
8
-- for compounding ensure
Independent tax calculation rule is calculated first (e.g. Rule order 1) then
dependent calculated rule next (e.g. Rule order 2)
9. Why isn't Create Accounting Creating a Tax Line if

Tax is Exempt?
Cause: Unpublished Bug 6350100 - Zero amount Non-recoverable distribution

is getting created in Payables (This bug is unpublished and unavailable via
MetaLink.)
1. Although the concerned invoice would have a line in the invoice line
tab, there would be no corresponding distribution line of zero amount
generated in ap_invoice_distributions_all table. In short, distribution will be
created only if the amount is greater than zero.
2. Since there is no distribution of zero amount generated, no subsequent
accounting lines are generated for the same.
The fix for this bug is included in apetxutb.pls 120.66.12000000.9 or higher,

available in Patch 6350100. (This patch is available through controlled release.
Please contact support for assistance with obtaining the patch.)
10. Why does an Unexpected Error Occur During Tax

Calculation?
Cause: Incorrect setup.
The Ship-to default in the invoice was different from the invoices that were
matched to the PO; and the ship-to address defaulting on the AP invoices did
not have a corresponding City Tax code.
After the right setup the validate could be done.
11. Why can't Tax on Invoice be Accounted? An

Incorrect accounting_date is on Tax Distributions?
Cause: zxmirecdmsrvpvtb.pls version 120.89.12000000.7 causes this issue;
Patch 6809792 (available through controlled release) was applied.
The fix for this issue is included in:
zxmirecdmsrvpvtb.pls 120.89.12000000.8
apicancb.pls 120.28.12000000.9
The fix is available in Patch 6879755 R12.ZX.A and Patch 6883407 R12.AP.A
9
Patch 6879755 R12.ZX.A ensures that the tax distributions get the right
accounting_date.
Patch 6883407 R12.AP.A ensures that when an invoice in a closed period is
canceled through Payment Void/Cancel Invoice action, the reversal ITEM
lines get the accounting_date of first day of next open period so it matches the
TAX reversal distributions. (These patches are available through controlled release.
Please contact support for assistance with obtaining the patches.)
12. Why is the Inclusive and Exclusive Tax

Calculation Incorrect?
Cause: The set up of EBTax was not complete on the instance.
The EBTax had been set up partially on an upgraded instance. This was
causing conflicts.
-- To implement the solution, please execute the following steps::
1. Go into the responsibility: EBTax manager

2. Navigate to home then configuration
Follow the seven-point action plan to set up EBTax detailed in Note 554492.1
Setting Up Geography Hierarchy and Address Validation in 12.
13. Why isn't it possible to Apply Offset Tax in an AP

Transaction?
Cause: The cause of the issue is an incomplete setup for the offset tax.
1. When creating a main tax, it should be made available for

transactions. Since tax is recoverable, ensure that you have
associated a recovery rate to it.
Important point :- DO NOT CHECK THE ALLOW OFFSET
TAX FLAG FOR THIS PARENT TAX.
2. For Offset Tax Allow tax applicability check box at Party Tax
Profile level is not the direct relevant reason for Offset Tax
Calculations. We need to confirm Allow Offset Taxes
checkbox only.
In order to have the right setup on this specific tax code Offset type,
this will be the process:
10
1. Set up the offset tax and enable these settings:
• Select a tax source of /Create a new tax/.
• Use the tax currency of the original tax.
• Check the Set as Offset Tax box.
• Enter a primary recovery type that you defined for offset
taxes.
• Make the tax available on transactions.
2. Set up the tax status for the offset tax. Do not set the Allow
Tax Rate Override option.
3. Set up a 100% tax recovery rate for the offset tax using the
recovery type that you defined in step 1.
4. Set up the tax rate for the offset tax:
• Enter a negative rate amount.
• Enter the tax recovery rate.
• Do not set the Allow Ad Hoc Rate option.
5. Set up the original tax, Perform the related set up for the
original tax: tax jurisdiction, tax status, and tax recovery rate
(if the tax is recoverable).* *Make the tax available on
transactions.
6. Set up the tax rate for the original tax, and enter the offset rate
code.
7. Allow offset tax calculation in Configuration Owner Tax
Option Check Off Set Tax basis also.
8. Allow offset taxes in Party Tax Profile, Not check Set for Self
Assessment /Reverse Charge
9. Please Note: do not create Tax Jurisdiction for Offset Tax. Tax
Jurisdiction should be derived based on original Tax.
14. How will the AR-Prepayment note sent to the

customer match to the incoming cash but only the
incoming cash will be taxable?
If the question is how AR Deposits- currently on which no tax is calculated-
will apply to an invoice with tax, then the answer is that the AR Deposit is
treated as an advance payment and applied to the invoice, conceptually like a
regular cash receipt would be.
If the question is about deferred tax, then it is handled through accounting (as
in 11i). The invoice will have tax lines some or all of which may be set to defer
the liability to the point of payment (i.e., application of cash). Till the time the
deposit is applied the tax amount on the invoice will be accounted in an
11
interim account.
15. Is there new functionality because the cash value

has to be shown in fully by the Customer, but the
VAT has to be paid to the tax authority?
The liability to the Tax Authority only occurs after the goods and services are
invoiced to the customer. In some countries the calculation of the tax rate is
then fixed at the date of prepayment and not recalculated based on the date of
the invoice, which is the case in other countries.
16. Is E-Business Tax another "add-on" product or is

it something mandatory throughout
implementations?
EBTax is mandatory throughout the implementation although the automated
migration scripts will handle 11i to R12 setup so there should be no change to
current 11i setup if you just want to continue with the 11i approach i.e. it will
be backwardly compatible but is different functionality to the solutions in 11i.
12

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ORACLE APPLICATIONS

R12-Frequently Asked Questions

Oracle Solution Services India Pvt Ltd,

Safe Harbor Statement..................................................................................................3

Safe Harbor Statement

Oracle Training Materials – Usage Agreement

1. Oracle Corporation (“Oracle”) is pleased to allow its business partner (“Partner”) to

3. Oracle disclaims any warranties or representations as to the accuracy or completeness of

In RUP5 environment customer cannot update the TAX AMOUNT

Summary: - Customer upgraded his TEST instance (a clone of PROD) from

2. Is it possible to create a conditional exception for

Ans(Suggestion) is as follows:- I understand that in your business case nature

Please note Transaction Fiscal Classification need to be entered manually in

1) Create a main tax and it should be made available for

The 11i way :-

1) When a tax code with tax type as USE was associated in AP

The R12 way :-

1) Users would configure SELF ASSESSED TAX, which is the

4. What's the required setup for Self Assessed Tax?

Tax is created with Tax Type = Use.

"Self Assed Tax

5. What is the flag "Enable Tax to be Applicable" used

Make Tax Available for Transactions: Selected

New tax codes show only the option:

Make Tax Available for Transactions: Selected

There are 2 flags for migrated taxes. LIVE_FOR_PROCESSING_FLAG and

LIVE_FOR_APPLICABILITY_FLAG is the “Enable Tax to be Applicable” flag.

LIVE_FOR_PROCESSING_FLAG is the *“Make live for transactions flag*”

There is currently no use of tax accounts at first party legal establishment

7. Why does Validate Invoices that Use E-Tax Error

8. Why isn't Tax Compounding Calculation Working?

Cause: Tax Rules have been set at the wrong level

-- Query the desired combination of:

-- Now Review Rule Order

The lowest number takes precedence

9. Why isn't Create Accounting Creating a Tax Line if

Cause: Unpublished Bug 6350100 - Zero amount Non-recoverable distribution

The fix for this bug is included in apetxutb.pls 120.66.12000000.9 or higher,

See Note 463862.1 for more information.

10. Why does an Unexpected Error Occur During Tax

See Note 472911.1 for more information.

11. Why can't Tax on Invoice be Accounted? An

See Note 558169.1 for more information.

12. Why is the Inclusive and Exclusive Tax

1. Go into the responsibility: EBTax manager

See Note 567044.1 for more information.

13. Why isn't it possible to Apply Offset Tax in an AP

1. When creating a main tax, it should be made available for

See Note 473674.1 for more information.

14. How will the AR-Prepayment note sent to the

15. Is there new functionality because the cash value

16. Is E-Business Tax another "add-on" product or is

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LIVE_FOR_PROCESSING_FLAG is the “Make live for transactions flag”