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Case Study: Setup R12 E-Business Tax (EBTax) for Canada: Includes 2010 HST Changes (Doc
ID 577996.1)
In this Document
Purpose
Scope
Details
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
(Back to top)
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
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APPLIES TO:
PURPOSE
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. Also added to this note are the Nova Scotia HST rate increases (added June 21, 2010)
SCOPE
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 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.
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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.
DETAILS
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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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.
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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)
For Canada, you must minimally define a geography type of "Province" under the country "Canada".
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
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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 Bug 7150723 If you have a need to import historical
data a data fix will be required until this UI defect is resolved.
@Data Fix: to be run after the customer creates all the provinces in TCA and before they create jurisdictions
@update hz_geographies
@set start_date = '&date'
@WHERE GEOGRAPHY_TYPE = 'PROVINCE'
@and country_code = 'CA'
Tax Relevancy:
1) Geographies must be defined in order for a Jurisdiction to be created in E-Business Tax
2) Tax calculation uses the geography structure to identify relevant jurisdictions when calculating taxes and
evaluating tax rules such as place of supply rule.
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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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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.
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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 12Legal 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 main legal establishment feeds the Bill From in AR and the Bill To / Ship
to in AP. This address is 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 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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Once an operating unit is defined it must be linked back to the parent Legal Establishment record.
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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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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.
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Some Examples:
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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
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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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For more details on the tax profile options and how the influence taxes, refer to Note 466575.1
eBTax: Allow Manual Tax Lines Yes Available to support data conversion
eBTax: Allow Override of Tax Classification Yes Available if rules wish to be created based upon tax codes
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Code
eBTax: Allow Override of Tax Recovery Yes Can lock down at lower levels if needed
Rate
eBTax: Inventory Item for Freight (Oracle Freight Enter the Item created in step 3i In order to assess tax on
Order Management only) Freight Charges as per Revenue Canada
eBTax: Invoice Freight as Revenue (Oracle Yes In order to assess tax on Freight Charges as per Revenue
Order Management only) Canada
eBTax: Read/Write Access to GCO Data Yes Allows for taxes to be defined at Global Configuration level
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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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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.
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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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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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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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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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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, 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.
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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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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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Approval Limits: Must be set in order for a user to enter and/or approve an invoice adjustment
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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.
(Back to top)
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4 Tax Setup
Tax Setup is performed under the Tax Managers responsibility added in step 3
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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.
Tax Precision 2 2
Compounding Precedence 1 2
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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
Example: In Canada, depending upon the province, a transaction may have HST, GST and/or PST applied.
Tax Regime Code CA GST AND HST CA GST AND HST CA PST
Tax source Create a new Tax Create a new Tax Create a new Tax
Tax Name Federal Goods and Harmonized Sales tax Provincial Sales Tax
Services Tax
Tax Precision 2 2 2
Compounding Precedence 1 2
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Tax Accounts Creation Method Create Tax Accounts Create Tax Accounts Create Tax Accounts
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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 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
Tax Regime CA GST AND CA GST AND CA GST AND CA GST AND CA GST AND CA GST AND CA PS
Code HST HST HST HST HST HST
Tax Name CA GST CA GST Zero CA GST CA HST CA HST Zero CA HST CA PS
Standard Exempt Standard Exempt Stand
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.
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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
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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 to back-date the jurisdiction start dates if this fix has not
been applied and your LOV for the Geography will return no rows.
Field Value Value Value Value Value Value Value Value Valu
Tax CA AB CA BC CA BC CA MB CA NB CA NL CA NS CA NT CA N
Jurisdiction
Code
Tax CA GST CA GST CA GST CA GST CA GST CA GST AND CA GST CA GST CA G
Regime AND AND HST AND HST AND HST AND HST HST AND AND HST AND
Code HST HST HST
Geography Province Province Province Province Province Province Province Province Provi
Type
Parent Country Country Country Country Country Country Country Country Coun
Geography
Type
Parent Canada Canada Canada Canada Canada Canada Canada Canada Cana
Geography
Name
Geography AB BC BC MB NB NL NS NT NU
Name
Precedence 1 1 1 1 1 1 1 1 1
Level
Collecting
Tax
Authority
Reporting
Tax
Authority
Effective 01-Jan- 01-Jul- 01-Jan- 01-Jan- 01-Jan- 01-Jan-2001 01-Jan- 01-Jan- 01-Ja
From 2001 2010 2001 2001 2001 2001 2001 2001
Effective 30-Jun-
To 2010
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Geography Name BC MB ON PE QC SK
Precedence Level 1 1 1 1 1 1
Collecting Tax
Authority
Reporting Tax
Authority
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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.
IMPORTANT: Review Note 735991.1 on setting up Tax recovery before you enable your tax for transaction
processing.
Tax Regime CA GST AND CA GST AND CA GST AND CA GST AND CA GST AND CA GST AND CA GS
Code HST HST HST HST HST HST HST
Tax Recovery CA GST STD CA GST CA HST STD CA HST BC CA HST CA HST STD CA HS
Rate Code REC RATE ZERO REC PROV REC PROV REC ZERO PROV FED REC FED R
RATE RATE RATE REC RATE RATE RATE
Recovery Standard Standard Sec Rec Sec Rec Sec Rec Standard Stand
Type Type1 Type1 Type1
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Effective To
Set as Yes
Default
Effective 01-Jan-2001
From
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."
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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 Most provinces that have adopted HST except for BC
where the Rate is 12% and Nova Scotia where the rate is 15%. 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
(15% rate assigned to Nova Scotia). 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, 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
HST HST HST HST
Tax Jurisdiction
Code
Percentage Rate 5 6 7 0 0 13 14
Default Recovery CA GST CA GST CA GST CA GST CA GST CA HST STD CA HST
Rate Code STANDARD STANDARD STANDARD ZERO REC ZERO REC FED REC STD FED
REC RATE REC RATE REC RATE RATE RATE RATE REC RAT
Allow Tax No No No No No No No
Exceptions
Allow Ad Hoc No No No No No No No
Rate
Tax Jurisdiction CA QC CA ON CA PE CA SK CA BC CA
Code
Allow Tax No No No No No No No
Exemptions
Allow Tax No No No No No No No
Exceptions
Allow Ad Hoc No No No No No No No
Rate
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Tax Accounts
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g. Define the Party Tax Profile for Legal Entity & Operating Unit
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)
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.
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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
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Setup defaults for each of the taxes defined in step 4b as shown below
Determine Place of Ship to, use bill to if ship to Ship to, use bill to if ship to Ship to, use bill to if ship to
Supply is not found is not found is not found
Determine Tax Ship From Party Ship From Party Ship From Party
Registration
Determine Tax Rate CA GST STANDARD RATE CA HST STANDARD RATE CA PST STANDARD RATE
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
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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:
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5) Apply
Default Primary Recovery Rate CA GST STANDARD CA HST 100 PCT FED REC CA PST STANDARD REC
Code REC RATE RATE 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.
Note: Bug 9762787 has reported a problem where the message below is displayed even when a tax rate has
been defined:
Row 1 Error - You must first define a tax rate for this tax.
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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
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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)
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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
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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.
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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
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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:
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
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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: The example in the note is not specific to this case study but the same flow/approach can be used for
Canada.
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
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.
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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.
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>
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
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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
8. Adjustments (Tax)
9. Adjustments (Non-Tax)
10. Tax Accounting
11. Tax Compounding
12. Tax Exemptions
13. Exports
14. Exception Rates
15. Miscellaneous Receipts
16. Receipt Applications
17. Tax Reporting
b. Payables
Community Discussion
Starting in July 2010, BC and Ontario will join 4 other provinces in using HS
documentation that will help all of you with this migration. Let us know if you
encountered? What questions have arisen? Also let us know if you have any
them into the documents that are created.
Note 577996.1 has been created as a case study on how one might go about s
ideas, gaps and suggestions so we can enhance this note further.
If we get a good response we will explore creating similar notes for EMEA and
44336 檢視 標記:
REFERENCES
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NOTE:1063491.1 - How to Setup a Taxable Basis Rule for Tax Compounding in R12 E-Business Tax (EBTax)
BUG:9762787 - CANNOT MAKE THE CA PST TAX LIVE WHEN ALLOW TAX RATE RULE IS CHECKED
NOTE:604280.1 - How To Add New Legal Entity Registration Code For Countries That Are Not Available In The List?
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