Transaction Taxes

in Payables

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 Objectives

After completing this module, you should be able to:

• Describe how transaction taxes are calculated for
invoices
• Insert manual tax lines and update transaction tax lines
• View tax summary and details
• Identify key reports
• Understand set up options

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 Overview of Transaction Taxes in Payables

Payables leverages E-Business tax to setup, calculate,

and manage transaction taxes such as:
• Sales
• VAT
• Excise
• Customs Duty
• Environmental
• Offset
• Recoverable Tax

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 Overview of Tax Calculation on Invoices

Recalculate Taxes

View Tax Change Validate

Enter Click
Lines and Tax Driver Invoice
Invoice Calculate
Distributions
Tax

Calculates
Tax
Calculates
Tax
E-Business Tax

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 Viewing Tax Amounts on Invoices

Invoice Total Tax

Header Self Assessed Tax

Invoice Exclusive Tax

Lines Inclusive Tax

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Working with Transaction Taxes in Payables

Update
Enter manual tax lines Employ taxes
tax lines with deferred
recoverability

Exclude tax Self-assess

from discounts taxes

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 Entering Manual Tax Lines

To enter manual tax lines, enable the following options for

the configuration owner or event class:
• Allow Entry of Manual Tax Lines
• Allow Manual Tax Only Lines (optional)

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 Entering Manual Tax Lines

To manually enter tax details for Item, Freight,

Miscellaneous, or Prepayment lines, complete the
following fields:
• Tax regime
• Tax
• Tax status
• Tax rate
• Tax amount
• Place of supply (supplier site)

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 Entering Tax Only Lines

If you are entering a Tax Only line on an invoice:

• Ensure that line Type = Tax
• Enter the tax amount in the Amount field, not the Tax
Amount field
• Complete all of the fields required for manual tax lines,
plus these additional fields:
– GL date
– Tax jurisdiction

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 Updating Tax Lines

To update tax lines, enable the following options for the

configuration owner or event class:
• Allow Entry of Manual Tax Lines
• Allow Recalculation for Manual Tax Lines
• Tax Line Override Impacts Other Tax Lines

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 Updating Tax Lines

You can update the following fields for calculated tax lines:
• Tax Status
• Tax Jurisdiction
• Tax Rate
• Tax Amount
• Percentage Rate or Quantity Rate
• Self Assessed option
• Inclusive option

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 Exclude Tax from Discounts

To exclude tax from discounts, enable the Exclude Tax

From Discount Calculation Payables Option

Invoice Amount

-Total Tax Amount

Discountable Invoice Amount

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 Self-Assessed Taxes

Enable the following option in the Party Tax Profile:

• Set for Self Assessment/Reverse Charge option
You can enable this option at the following levels:
• Regime
• Regime, Tax
• Regime, Tax, Tax Jurisdiction

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 Taxes with Deferred Recoverability

Level Allow Tax Default Tax Accounts

Recovery Recovery
Settlement
Regime Deferred
Tax Deferred •Tax Expense
•Recoverable Tax
•Interim Tax
(used for
Accrual Based
accounting only)
Tax Status Deferred
Tax Rate Deferred

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 Taxes with Deferred Recoverability

DR CR
Item Expense 1000.00
Liability 1100.00
Recoverable Tax 55.00
Non-Recoverable Tax 45.00

Once the invoice is paid, the

deferred recoverable tax amount,
55.00, is credited and debited to
the Deferred Recoverable Tax
account.

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 Considerations for Taxes on Prepayments

To calculate taxes on Prepayment Invoices, enable the

following option for the Prepayment event class:
• Allow Tax Applicability
Tax calculation is affected by how the Applied Amount
Handling option is set up. You can set this option as:
• Recalculated
• Prorate

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 Tax Variances

• Tax Exchange Rate Variance (TERV)

• Tax Invoice Price Tax Rate Variance (TIPV)
• Tax Rate Variance (TRV)
• Tax Quantity Variance (TQV)

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 Tax Tolerances and Tax-Related Holds

To define tax tolerances:

• Enable the Allow Override for Calculated Tax Lines
option for the configuration owner or event class
Tax Tolerances define the limits of user override
If an invoice exceeds the Tax Tolerances, then a Tax-
Related Hold is applied during Invoice Validation

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 Tax Lines Summary and Tax Details

You can use the Tax Lines Summary and Tax Details
windows to view, enter, and change the tax lines and
distributions for an invoice.

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 Tax Distributions and Allocations

Use the Tax Distributions window to review and update

tax distributions. You can review tax distributions and,
if applicable, update the tax recovery rate on a tax
distribution.

Use the Allocate Summary Tax Lines page to review

and allocate your manual summary tax lines to specific
transaction lines.

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Tax Amount Verification During Invoice Validation

During Invoice Validation, E-Business Tax automatically

verifies that you have correctly entered all tax drivers on
an invoice. If tax exceptions exist, one or more tax holds
are placed on the invoice.

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 Setting Up Taxes in E-Business Tax

Tax
Authority

Tax Tax Tax

Tax
Regime Jurisdiction Status

OU Tax
Accounts

Tax Recovery
Rate Rate

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 US Sales Tax Example

Tax Tax Tax Tax Tax Operating Unit

Regime Jurisdiction Status Rate Tax Account
CA State California Standard 7.25% 01.005.004.033
Sales Sales State Sales
Tax Tax Tax
County San Mateo Standard 1.0% 01.005.004.033
Sales County Sales
Tax Tax
City Belmont City Standard 0.0% 01.005.004.033
Sales Sales Tax
Tax

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 UK VAT Example

Tax Tax Tax Tax Status Tax Rate Recovery

Regime Jurisdiction Rate
UK VAT UK VAT UK VAT Standard 17.5% 100%

Inter-EU 15% 100%

Reduced 5.0% 100%

Zero Rated 0.0%

Exempt 0.0%

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 Offset Taxes

Existing Oracle Payables implementations that use Offset

Taxes can setup and manage Offset Taxes in E-Business
Tax.
• Ensure that the Set as Offset Tax option is enabled for
the tax.
For new taxes and new implementations, use E-Business
Tax’s Self Assessed tax feature instead.

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 Setting Up Tax for Suppliers

Party Tax Profile

Main Information
Tax Registrations
Classifications
Third Party – Tax Reporting Codes
Suppliers
Account Tax Details
(migrated data only)

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 Suppliers Subject to Income Tax
Reporting

To define a supplier as subject to income tax reporting

requirements:
• Enter a Taxpayer ID
• Enable the Federal option and select an Income
Tax Type (1099 MISC Type).
• Enable the State option, if applicable
• Enable the Allow Withholding Tax option

If you enter a purchase order for a 1099 supplier, then

Oracle Purchasing retains the Income Tax Type
information at the purchase order line level.

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 Financials Options

Tax

Member State
VAT Registration
Number

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 Payables Options: Payment

Payment

Exclude Tax
from Discount

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 Summary

In this module, you should have learned how to:

• Describe how transaction taxes are calculated for
invoices
• Insert manual tax lines and update transaction tax lines
• View tax summary and details
• Identify key reports
• Understand set up options

Copyright © 2007, Oracle. All rights reserved.