How to Setup Condition Sets and Determining Factor Sets for Tax Rules in R12 E-Business Tax To

(EBTax) (Doc ID 1111553.1) Bottom

In this Document

Goal

E-Business Tax Information Center > Tax Rules > Note 1111553.1

Solution

1. What is a Tax Determining Factor?

2. What is a Determining Factor Set and How is it Used?

3. What is a Condition Set and How is it Used?

4. How do I create a Determining Factor Set?

a. Navigate to the Form

b. Define the Determining Factor Set

5. How do I create a Condition Set?

a. Navigate to the Form

b. Define the Condition Set(s)

References

APPLIES TO:

Oracle E-Business Tax - Version 12.0.0 to 12.2 [Release 12.0 to 12.2]

Oracle Payables - Version 12.2.4 to 12.2.4 [Release 12.2]
Information in this document applies to any platform.

GOAL

E-Business Tax Information Center > Tax Rules > Note 1111553.1

This note explains what a "Determining Factor Set" and "Condition Set" are in the context of R12 E-Business Tax
and shows how you can create one to support your tax rule creation process.
SOLUTION

1. What is a Tax Determining Factor?

A tax determining factor is an attribute that may be used by rules you create in the E-Business Tax (EBTax) engine
to calculate taxes for a specific transaction. The EBTax rule engine allows implementers to create any number of
custom tax rules that reference the tax determining factors and that satisfy the unique needs of a specific business
operating within a taxing jurisdiction.

Determining factors exist in a range of categories or types (Determining Factor Classes). Within each of class exist
a Qualifier, Factor Name and Factor Value. This is best understood with an example as shown below:

1. Determining Factor Class = Geography (This is the "type" of factor we have available to us)
2. Class Qualifier = Ship To, Bill To, POA, POO, Ship From, Ship To (These are the levels that we can select to be
evaluated).
3. Determining Factor Name = Country, Province, City, County, etc. (These are the geography types you have defined
in TCA)
4. Determining Factor Value = Canada, Ontario, Toronto, etc (these are the actual values associated with the factor
name we selected above.

To learn more about tax determining factors and to see examples of a wide variety of tax rules created with the
different determining factors, please read Note 1108463.1 How Tax Determining Factors Work with Tax Rules in
R12 E-Business Tax.

2. What is a Determining Factor Set and How is it Used?

A Determining Factor Set is a grouping of tax determining factors created for use as part of a Tax Rule. When
creating a Determining Factor Set you specify which factors are to be evaluated within your rule. The E-Business
Tax Rule engine then extracts the values for each of these determining factors when the rule is executed.

A Determining factor set identifies the Determining Factor Class, Class Qualifier and Determining factor name.

For example:
Determining Factor Class: Geography
Class Qualifier: Ship To
Determining Factor Name: Country

3. What is a Condition Set and How is it Used?

Tax Condition Sets identify the conditions placed upon all or some of the determining factors specified in a
Determining Factor Set.

For Example (continuation of the prior example):

Determining Factors from Set: Geography Ship To Country
Operator: Equal To
Value/From Range: Canada

Tip: Create your determining factor set so that it includes all factors that must be considered for a given tax. You can then
create 1..n condition sets using the same determining factor set. Each condition set can specify which of the determining
factors should be evaluated and the tax rule can identify unique outcomes for each condition set. See the example below
for more details
4. How do I create a Determining Factor Set?

There are two methods to create a determining factor set. You can either create the set manually or you can use the
"Guided Rule Entry" which will dynamically create the set for you as part of the flow.

This example will focus on Manual Creation as it more clearly demonstrates the process and the structure of a
determining factor set.

a. Navigate to the Form

Responsibility: Tax Managers

Navigation: Advanced Setup Options > Tax Determining Factor Sets > Create

b. Define the Determining Factor Set

 Tax Determining Factor Set: Enter a unique identifier that describes the set. Consider in your naming convention if
you intend to re-use the determining factor set for multiple tax rules, multiple regimes or multiple ledgers.
 Name: Provide a descriptive name to your determining factor set. If possible attempt to provide a name that
conveys the elements within the determining factor set or the intended usage of the determining factor set.
 Set Usage: Select Tax Rules for the scenarios covered in this Note
 Ledger: Enter a ledger if you intend to use an account segment from your invoice line as a determining factor for
tax calculation.
 Regime Code: Specifiy a Regime if you wish to restrict usage of the set to a single regime.

 Associate Tax Determining Factors: Select the Determining Factors that you wish to include in your determining
factor set. In the example below we have chosen two determining factors.

Each of the items selected as Tax Determining Factors above will include unique qualifiers and factor names. Examples of
the choices are shown below.

 Determining Factor Class: Select the determining factor class you intend to use for your tax rules (See Note
1108463.1 for more on each determining factor class and usage)

Class Qualifier: Select the Class Qualifier. Note that each class qualifier LOV will be different depending upon the
Determining Factor Class you selected
  Screenshot below shows the LOV you would see for the Class Qualifier for the "Geography" Determining Factor
Class

 Screenshot below shows the LOV you would see for the Class Qualifier for the "Accounting" Determining Factor
Class

Determining Factor Name: Select the determining factor name you intended to validate for the Class qualifier from the
prior screenshot.

 Determining Factor Name for the Geography "Ship To" qualifier (In this example the system is restricting the LOV to
valid geography types in TCA)

 If a determining factor is not always needed in tax conditions, set the required option toNo.

5. How do I create a Condition Set?

As mentioned in section 3, Tax Condition Sets allow you to select a portion (or all) of the determining factors and
to establish conditions that will be applied when incorporated into tax rules.

a. Navigate to the Form

Responsibility: Tax Managers

Navigation: Advanced Setup Options > Tax Condition Sets > Create

b. Define the Condition Set(s)

 Tax Condition Set: Enter a unique identifier that describes the condition set. Consider in your naming convention
what the conditions do and attempt to name accordingly.
 Name: Provide a descriptive name
 Determining Factor Set: Select the determining factor set that contains the determining factors you intended to
utilize.
 Ledger: Select a ledger if you plan to use an Accounting determining factor
 Country Name: Optionally restrict to a specific country

Specify which Conditions apply

  Check the checkbox next to any condition that this condition set should ignore. By ignoring conditions you can use
a single rule with one determining factor set but with many condition sets. Each condition set can then specify the
appropriate outcome for the conditions.
 Select the "Operator" you intend to use and a corresponding value. If you select "Equal to Determining Factor",
the application will compare two similar determing factors (ex: Not Equal To Determing Factor can have a result of
"Bill To Country" and thus the condition could say "if the ship-to country is not equal to the bill to country").

IMPORTANT NOTE: The latest rule engine (Note 1301356.1 What is the latest EBusiness Tax (EBTax) Rule Engine
Patch?) introduces the Null and Not Null operators to the list of value in R12. You should be aware of this operator when
defining tax rules. Be sure you have this applied prior to any setup.

For example, let's assume you operate in the EU and must use a different tax rate for transactions with non-EU countries. A
tax rule therefore mgiht evaluate to see if the ship-to address is outside of the EU. For example, the condition set might
state "If the ship-to is Equal "EU Tax Zone" then use the tax rate code Vat10.

The logic above will work fine (assuming your countries are in a tax zone as noted above) if your transaction has a ship to
address. The problem arises if no ship-to address was provided. In this case the system will skip this tax rule and taxes will
not calculate correctly. To catch the scenario where the ship-to is null you must create a second rule that evaluates the null
scenario.

If the Ship-To Address is null then use the tax rate code Vat10

This second rule ensures that situations where the value being evaluated is non-existent are handled correctly.

This patch is controlled by development. Please provide your business requirements that mandate this patch as part of a
service request logged to request that it be released to your organization.

In the example above we have chosen to create a condition set that evaluates only one of the two determining factors from
the determining factor set. If we had wished we could have evaluated both conditions in this one condition set (Treated as
an "And" condition). Alternately we could create a second condition set to evaluate the Accounting value.

For more on setting up Tax Determining Factors Sets and Condition Sets including examples, please
review Note <="" a="" style="font-size: 11px;">1108463.1>, How Tax Determining Factors Work in R12 E-
Business Tax.