Oracle Applications White Paper Oracle Financials Release 12 Setups for 2010 EU VAT Package —Solution Based on Tax

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Anand Naik Desh Deepak, Amit Jain, and Nigel Chapman 1.2 07-Dec-2009 27-May-2010

..............................................................3 Setup in Bill Presentment Architecture (BPA) ..............................................................................................11 5.....................4 2.................................................................................................. TRANSACTION PROCESSING IN RECEIVABLES AND PAYABLES FOR INTRA EU SERVICES ..14 7...................... SETUP IN E-BUSINESS TAX AND BILL PRESENTMENT ARCHITECTURE (BPA) .................................3 1. EUROPEAN SALES LIST (ESL) REPORT ....................8 5....................................................................................................................................................................2 Setup in E-Business Tax for Payables ................1 Setup in E-Business Tax for Order-to-Cash Transactions ....................................... INTRODUCTION ..............................................................................................2 Payables (Procure to Pay Flow)...1 Page 2 of 18 .....................3 2......................14 6........................................................................... SOLUTION SUMMARY ...................................................................................14 6............................................................................ 2010 ...................................................15 8.............................1 Changes Addressed in this Note....................8 5..........1 Scope .................................................................................................. SUMMARY OF CHANGES IN EU VAT PACKAGE EFFECTIVE JANUARY 1.......................................6 4.. SAMPLE SCENARIO..........................7 5...................4 3............................Contents 1..................................................................................................................12 6...............................18 Oracle Financials Release 12 Setups for 2010 EU VAT Package My Oracle Support Doc ID 974979........................................................................................................... IMPORTANT POINTS AND PATCH DETAILS......................................................................1 Receivables (Order to Cash Flow) .............

Introduction 1. effective January 1. 2010.1.1 – offers a solution based on Tax Rates Doc ID: 1107453.1 – offers a solution based on Tax Rules . It also includes the required setups in Oracle Financials Release 12. Note: There are two similar documents that provide setup scenarios for EU VAT 2010: o o Doc ID: 974979.1 Scope This document includes the summary of changes for the European Union Value Added Tax (EU VAT) provisions.

eu/LexUriServ/LexUriServ.eu/LexUriServ/LexUriServ. This will undoubtedly have an impact on all businesses. For other EU countries. educational events. These are the most far-reaching changes to VAT law since the introduction of ‘Single European Market’ in 1993.2 Legal Messages Legal message specifying that the customer of such services must self-assess the relevant tax. cultural. is where the customer is established and not where the supplier is established (as is before January 1. should be included in the existing ESL report for Goods. and so on. for tax determination in a Business-to-Business (B2B) transaction.do?uri=OJ:L:2008:044:0011:0022:EN:PD F http://eurlex. short term hiring of means of transport.3 European Union Sales Listing (ESL) for Services As of January 1 2010. should be printed on Receivables (Intra EU Services) Invoices.europa. For Business-to-Customer (B2C) supply of services.europa. the general rule for place of supply continues to be the place where the supplier is established. restaurant and catering services carried out on board a ship. 2. for some EU countries. the ESL report should be separately produced to show only such Services. There are exceptions to the new rule described above for certain types of services. Oracle Financials Release 12 Setups for 2010 EU VAT Package My Oracle Support Doc ID 974979.2. as well as.europa.1. 2.1. passenger transport services. 2010). their compliance and reporting obligations.do?uri=OJ:L:2008:044:0001:0006:EN:PD F http://eurlex.1 Changes Addressed in this Note 2. It also includes ancillary services. 2010 EU VAT changes are introduced to modernize and simplify rules relating to cross-border supply of services and recovery of input tax. if services are supplied in another EU Member State.1. Companies have to rethink their service flow.eu/LexUriServ/LexUriServ. they are taxable in the recipient’s country. 2. Document Reference Title COUNCIL REGULATION (EC) No 143 2008 of 12 February 2008 COUNCIL DIRECTIVE 2008 8 EC of 12 February 2008 COUNCIL DIRECTIVE 2008 9 EC of 12 February 2008 Author EU Commission Link http://eurlex. Hence. Examples include: services provided for immovable property. The exact text of the message may be defined by the countryspecific legislation. The summary of important changes in the VAT package is described below. services transactions. which supply and/or purchase services across EU countries.1 Place of Supply The new rule for ‘Place of Supply of Services’. which are subject to reverse charge arrangements in the customer’s Member State.do?uri=OJ:L:2008:044:0023:0028:EN:PD F EU Commission EU Commission It is recommended that customers exercise due diligence and discuss these changes with their tax advisors. Summary of Changes in EU VAT Package effective January 1. aircraft or trains within the EU.1 Page 4 of 18 .

2.do).2. 2. In the case of continuous supply of services.eu/taxation_customs/vies/vieshome. Businesses established in any EU country have to submit claims for overseas VAT electronically on a standardized form.2 Changes Not Addressed in this Note 2. Where no invoice or other accounting document is issued or payment is made during the year.4 Tax Point Date The tax point date is deemed to be earlier than when the service was completed or when payment was made. 2010 to replace the current paper-based system.1 VAT Number Validation The VAT number for the parties involved in the supply of services should be validated periodically against the VIES system (http://ec.1 Page 5 of 18 .2.1. the time of supply is the end of each calendar year. the tax point is linked to the end of each billing or payment period. 2. This system allows VAT registration numbers to be validated for all EU countries.2 VAT Refunds/Claims A new electronic VAT Refund procedure will be introduced across the EU effective January 1.europa. This information has to be submitted to their tax authority rather than to the member state of refund Oracle Financials Release 12 Setups for 2010 EU VAT Package My Oracle Support Doc ID 974979.

Create a template in BPA to print Tax Invoice Date on Receivables invoice header. 5.1. Solution Summary Requirement Setup Summary Explained in Sections Identify Intra EU services transaction lines and display it on the European Sales Listing (ESL) Report.1 Print tax date on Intra EU services Receivables invoice. Create Tax Reporting Code for legal message and associate it to a zero-rated Tax Rate Code. Associated Offset Tax gets automatically calculated.1. 5. Specify this Reporting Code as a selection parameter for ESL report to display the Intra EU services invoice lines. 5. 5. 5. Ensure applicable Tax is calculated for Intra EU services invoice line.2 Oracle Financials Release 12 Setups for 2010 EU VAT Package My Oracle Support Doc ID 974979. Self Assessed Tax can be configured instead of Offset Tax.3 and 6.3.1.2 Create reverse charge on Intra EU services Payables invoice.1. Payables Flow Create or use upgraded/existing Regime to Rate flow set up of the applicable Tax and associated Offset Tax. Ensure this Tax Rate Code is determined for the Intra EU services invoice lines. Receivables Flow Create Tax Reporting Code for Intra EU services and associate it to a zero-rated Tax Rate Code.1 Page 6 of 18 .3 and 6.2. Create a template in BPA to print the legal message on Receivables invoice/lines.1. 6. Ensure this Tax Rate Code is determined for the Intra EU services invoice lines.1.3.1 and 7 Print country-specific legal message on the Receivables invoice for Intra EU services. Alternatively.3 5.1.2 and 6. 5.1. Enter Tax Invoice Date on such services Receivables invoice.

Oracle Financials Release 12 Setups for 2010 EU VAT Package My Oracle Support Doc ID 974979. let us take an example of a Business-to-Business (B2B) transaction for services provided by a Seller in the United Kingdom to a Buyer in Germany.4.1 Page 7 of 18 . Sample Scenario For the ease of understanding the setups required for the EU VAT 2010 changes.

Select Define List of Reporting Codes checkbox. These codes are available as selection parameters for filtering transactions in the ESL report. Specify Minimum and Maximum Length of Reporting Codes.e. Services and Triangulation Reporting Codes for United Kingdom Oracle Financials Release 12 Setups for 2010 EU VAT Package My Oracle Support Doc ID 974979. Enter appropriate Tax Reporting Type Code and Name.1 Page 8 of 18 . Value entered in ‘Description’ column is printed on the ESL report. If entered. the seller in the United Kingdom has to perform the following setup steps: 5. Any other Reporting Type Use should not be selected for Intra EU Transaction Type.. • • The following is a screenshot for creating sample Intra EU Transaction Type Reporting Codes—i. Regime and Tax are not mandatory parameters. Note: Reporting Codes for Triangulation transactions may not be required for all EU countries. Enter appropriate Tax Reporting Codes and as per users requirements.1 Create ‘Intra EU Transaction Type’ Tax Reporting Codes i) ii) iii) iv) v) vi) vii) viii) ix) Navigate to E-Business Tax –> Defaults and Controls –> Tax Reporting Types –> Create. Select Tax Reporting Type in the Reporting Type Purpose drop down.1 Setup in E-Business Tax for Order-to-Cash Transactions To identify Intra EU services (B2B) transactions. Reporting codes would be specific to that Regime and Tax. Enable Reporting Type Use for Tax Rate. Setup in E-Business Tax and Bill Presentment Architecture (BPA) 5.1.5. Follow codification requirements of each country while defining the Reporting Codes and Description.

Regime and Tax are not mandatory parameters.2 Create ‘Legal Justification’ Tax Reporting Codes i) ii) iii) iv) v) vi) vii) Navigate to E-Business Tax –> Defaults and Controls –> Tax Reporting Types –> Create. Enter appropriate Reporting Code and Legal Justification Text.1 Page 9 of 18 . Here are the screenshots for creating Legal Justification Reporting Type and Code. Note: Legal Justification Text (of maximum 240 characters) is printed on the invoice as per the template created in BPA. Enter appropriate Tax Reporting Type Code and Name. Select Legal Justification Message Type in the Reporting Type Purpose dropdown.1. No other reporting type use should be selected.5. Reporting codes would be specific to that Regime and Tax. Date Type should be Text and Define List of Reporting Codes checkbox are automatically selected. Oracle Financials Release 12 Setups for 2010 EU VAT Package My Oracle Support Doc ID 974979. If entered. Reporting Type Use is automatically enabled only for Tax Rate.

3 Associate ‘Intra EU Transaction Type and Legal Justification’ Reporting Codes to Tax Rate Code i) ii) iii) iv) v) vi) Navigate to E-Business Tax –> Tax Configuration –> Tax Rates.1. Only one effective Legal Justification Reporting Type can be associated to a tax rate. Enter the appropriate Regime. Configuration Owner. Navigate to Rate Details -> Legal Justification Message Reporting Codes -> Specify the Legal Justification Reporting Type Code and Reporting Codes created Section 5.1 Page 10 of 18 . Oracle Financials Release 12 Setups for 2010 EU VAT Package My Oracle Support Doc ID 974979.1. Navigate to Rate Details -> Tax Reporting Codes -> Specify the Tax Reporting Type Code and Reporting Codes created for Intra EU Transaction Type in 5. Tax and Status information.1. Specify Tax Rate Code and Percentage Rate as zero (existing/upgraded Tax Rate Code can also be updated).2 above (UK-INTRA-EU-SERVICES).1 above (UK-INTRA-EU-SERVICES).5.

2 Setup in E-Business Tax for Payables Buyer of services (in Germany) must create a reverse charge on the Payables invoice line for such Intra EU services.Here’s a screenshot showing the association of the Intra EU Transaction and Legal Justification Reporting codes to Zero-Rated Tax Rate Code. 5. This can be achieved by calculating Offset Tax associated to the applicable German Tax or by configuring the Self Assessed Tax setup for German Tax.1 . Steps for Creating Input Tax Rate Code i) Configure Regime to Rate flow for the applicable tax in supplier (Germany) country (existing/updated Regime to Rate can also be used). This is a screenshot of the association of Intra EU Transaction and Legal Justification Reporting codes to Zero-Rated Tax Rate Code. Page 11 of 18 Oracle Financials Release 12 Setups for 2010 EU VAT Package My Oracle Support Doc ID 974979.

5.ii) Specify the Tax Rate percent (19% or the applicable Tax Rate). instead of Offset Tax. iii) Create the set up for associated Offset Tax. Here’s a screenshot of a Sample Template to Print the Tax Invoice Date on the Invoice Header. Seller (in United Kingdom) must create a new template or modify the existing template in BPA as follows.1 Page 12 of 18 . v) When the applicable tax is calculated. Steps for Creating Templates to print ‘Country Specific Legal Messages’ and ‘Tax Invoice Date’ on Receivables Invoice: Navigate to Bill Presentment Architecture -> Template Management -> Create a new template that contains the following content (existing/upgrade template can also be modified): • Tax Invoice Date at the Header region. Oracle Financials Release 12 Setups for 2010 EU VAT Package My Oracle Support Doc ID 974979. • Legal Message at the Footer region (and if required on the Lines). specify the tax Rate percent equal to negative of the actual Tax Rate (-19% or the applicable Tax Rate). iv) For the Offset Tax Rate Code.3 Setup in Bill Presentment Architecture (BPA) Appropriate legal message and tax date must be printed on Intra EU services (B2B) transactions Receivables invoice. Self Assessed tax can be configured to create a reverse charge on the Payables invoice line. associated Offset Tax automatically gets calculated. vi) Alternatively.

Note: If an invoice has multiple lines with the same Tax Rate Code that has an associated Legal Justification Text.1 Page 13 of 18 .This is a screenshot of a Sample Template to Print the Legal Message on the Invoice Footer. If required. users can create a similar template for printing legal message at the line level. the message is only printed once. Oracle Financials Release 12 Setups for 2010 EU VAT Package My Oracle Support Doc ID 974979.

If such services transactions are imported. This is where you will enter the Tax Date 6. users must ensure that the relevant Tax Rate Code is available as a Tax Classification Code on each interface item line or as a Tax Rate Code on each imported tax line.1.1 Calculate Zero-Rated Tax Rate Code on Intra EU Services Invoice lines Users must ensure that the zero-rated Tax Rate Code (created in 5. Associated Offset Tax will automatically be calculated or the tax would be flagged as self assessed.1. However. to which Intra EU Transaction and Legal Justification Reporting Codes are attached) is determined for Intra EU services invoice lines during tax calculation. users must ensure that the relevant Tax Rate Code is available as a Tax Classification Code on each interface item line or as a Tax Rate Code on each imported tax line.1 Receivables (Order to Cash Flow) 6. users must manually enter the Tax Invoice Date by navigating to the Tax Information.1.2 Payables (Procure to Pay Flow) Users must ensure that the applicable Tax (created in 5.6.2 above) is calculated on the Payables invoice lines for such Intra EU services. This is a screenshot of the Additional Tax Determining Factors UI. 6. Oracle Financials Release 12 Setups for 2010 EU VAT Package My Oracle Support Doc ID 974979. The Tax Invoice Date is not defaulted from the Transaction Date or General Ledger (GL) date.1 Page 14 of 18 . If such services transactions are imported. users have an option to choose either of these dates as the Tax Date while extracting the ESL report. Transaction Processing in Receivables and Payables for Intra EU Services 6.3 above.2 Enter Tax Date on Intra EU Services Invoice On the Receivable invoice.

Customized report layouts can be built using the Tax Reporting Ledger (TRL) and Business Intelligence (BI) Publisher.Created in Section 5. Note: This is a XML based report in a generalized format.1 above).1. the report displays only cross border Intra EU transactions. Oracle will not deliver country specific electronic files. either as a separate report or included with the existing ESL Goods report. Steps for Extracting European Sales Listing Report for Intra EU Services Navigate to E-Business Tax -> Request -> European Sales Listing i) After entering the mandatory parameters. In both cases. ii) Users can also enter other Reporting Codes to include ‘Goods’ and ‘Triangulation’ transactions. Lastly. European Sales List (ESL) Report European Sales List (ESL) Report must show Intra EU supplies of services. users should specify the Intra EU Transaction Type Reporting Code created for the ‘Intra EU Services’ as a selection parameter for the report.7. to identify such services transactions. which are subject to reverse charge arrangements in the customer’s Member State. This is a screenshot of the ESL Report Parameters Oracle Financials Release 12 Setups for 2010 EU VAT Package My Oracle Support Doc ID 974979.1 Page 15 of 18 . specify the Intra EU Tax Reporting Type Code and Reporting Code (UK-INTRA-EU-SERVICES .

If Nearest is selected. Transaction Date and GL Date. namely. If Tax Date is not provided on the invoice. then to display data on the report. It should be kept null if goods transactions are not to be included in the report. List contains all Tax Reporting Type Codes defined in E-Business Tax. If No is selected. Users should specify the Reporting Code created for services here. Users could specify (if required) Reporting Code created for triangulation of goods or goods and services as necessary. Users can decide to produce a Detail or Summary listing. then the amounts are rounded down. but are related to transactions that are reported in a different period. List has four values. Enter a minimum accountable unit. Users must ensure that tax registration number is specified for the relevant Legal Establishment before entering such transactions. namely. Users should specify the Reporting Code created for goods here. Oracle Financials Release 12 Setups for 2010 EU VAT Package My Oracle Support Doc ID 974979. Select end tax date for the report. List contains two values. List contains all Reporting Codes defined under the Tax Reporting Type Code selected above. then no rounding is done. namely. If Up is selected.Report Parameter Trader VAT No. If Down is selected.1 above. List contains all Reporting Codes defined under the Tax Reporting Type Code selected above. Select the appropriate Intra EU Transaction Tax Reporting Type created in 5. then the amounts are rounded off to the nearest level. Up. Determine whether to show out of period adjustments and credit memos.1 Page 16 of 18 . List contains two values. If users select Both. Select start tax date for the report. Bill To and Ship To. Users could specify (if required) Reporting Code created for triangulation of goods or goods and services as necessary. Select Yes to separately display adjustments. Choose the site whose Country Code is to be displayed on the report when tax registration number does not have first two characters as the country code. List contains all Reporting Codes defined under the Tax Reporting Type Code selected above. List contains all Reporting Codes defined under the Tax Reporting Type Code selected above. Down and Nearest. List contains two values. Select No for adjustment to be included in the regular totals.1. This is the smallest unit used for the functional currency amounts. Yes and No. then the amounts are rounded up. Detail/Summary/Both Tax Date From Tax Date To Default for Tax Date (if Null) Site Reported Show Out of Period Adjustments and Credit Memos Rounding Rule Minimum Accountable Unit Tax Reporting Type Reporting Code-Intra EU Goods Reporting Code-Intra EU Services Reporting CodeAdditional 1 Reporting CodeAdditional 2 Description List contains registration numbers for all the First Party Legal Establishments. namely. system picks up value from that source which is selected in this parameter. which are created in the selected reporting period. No. This is used to filter and display data related to only that registration number. report generates two sections – one for summary and another for the detailed.

If they match the VAT member state code of the country/territory. Oracle Financials Release 12 Setups for 2010 EU VAT Package My Oracle Support Doc ID 974979. then the country code of the address for the site reported (ESL report selection parameter) is printed on the report.This is a screenshot of the Detail ESL Report This is a screenshot of the Summary ESL Report The report output has a column named ‘Country’. The value for this column is derived based on the first two characters of the tax registration number specified on the ‘Site Reported’ parameter. If the tax registration number specified for the site reported does not have the first two characters as country code or it does not match with the VAT member state code of the country/territory.1 Page 17 of 18 . then that is taken as ‘Country’. It is advised to always prefix the tax registration number with the country code.

iii) Note: There is a separate Note addressing the setups in Release 11. 2010.1: 9031051:R12.B and 9123675:R12.A R12.ZX. They will also allow the user to do the following: • Create Legal Justification Tax Reporting Type. It is recommended that customers exercise due diligence before making any changes to their existing setups. Important Points and Patch Details i) The setup described in this document is only a sample setup.10 (Refer to Note 961600.8. customers can refer to this Note and create appropriate setups accordingly.A and 9123675:R12. Oracle Financials Release 12 Setups for 2010 EU VAT Package My Oracle Support Doc ID 974979. Customers are advised to leverage the solution explained in this note to meet legislative obligations. • Extract Summary and Detailed ESL report in the format explained above.BPA. The details given in this document offers another way of configuring the setup for EUVAT 2010 changes with an emphasis on Tax Rates.5.1. • Create template in BPA to print Legal Message at footer/ line region of Receivables invoice. ii) The Setup described is mainly for identifying and reporting transactions related to Intra EU ‘Services’.B The patches will allow users to perform the above setups.BPA.0: 9031051:R12. For Intra EU ‘Goods’ or ‘Triangulation’. This note does not override the content of Doc ID 1107453. beginning January 1.1) iv) APPLY R12 PATCHES Users should apply the following Oracle patches for their releases: • • R12.ZX. There may be other ways of configuring the 2010 EU VAT requirements. • Create template in BPA to print Tax Invoice Date at the header region of Receivables invoice.1 Page 18 of 18 . which offers a solution based on Tax Rules.

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