E-Business Tax_ Setup With Example

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ORACLE E-BUSINESS SUITE, R12

E-BUSINESS TAX

Prepared by: Rabindra Kumar

Changes History

Issue No Date Change

0.1 16-Apr-12 Draft


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Table of Contents

1. Overview 32. Key Concepts 3

3. Pre Requisite of Tax Setup 54. Tax Setup Steps 55. Business scenario to integrate E-Business tax with Receivables 6


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1. Overview: In release 12 E-Business Tax has been introduced to provide an improvedTax solution to customers.

Ebusiness Tax provides a repository to store tax information and record tax events.

Individual applications (for e.g. Receivables, Purchasing) avails the tax services provided

by Ebusiness Tax to create/update/display tax information for its transactions. Thetax services that can be availed from Ebusiness Tax are listed below.

a. Define Tax Content

b. Determine Taxc. Manage Tax

d. Record Tax

e. Report Tax

f. Reconcile Tax

Architecture has been built considering country specific tax requirements and

applicability of rules for determining taxes. Based on the tax laws of a specificcountry, the transaction tax rates may vary by jurisdictions, products or product

category, how the product will be used, type of transacting parties, type of

transactions, the place of supply etc. Various rules are applicable for determining

the appropriate tax on a specific transaction.

The Tax Setups including rules are based on requirements used by the Tax Rules

Engine, which will create/update Tax Lines. These lines are later reported usingEbusiness Tax Reporting features.

2. KEY CONCEPTS:

Tax Regime: A Tax Regime contains the set of tax rules that determine thetreatment of one or more taxes that have been grouped together for administration

or other purposes.

For e.g. US Sales Tax Regime in US with State, County and

City/District taxes.

Tax: A classification of a charge imposed by a government through a fiscal or tax

authority.

For e.g.: State, County and City/District sales/use taxes in US and Standard VAT,

Additional VAT, and Perception VAT in Argentina.


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Tax Status: Tax Status is the taxable nature of a product or service in the context

of a transaction for a tax.

For e.g. Zero Rated, Standard Rated etc.

Tax Rate: The rate specified for a tax status in effect for a period of time; the tax

rate can be expressed as a percentage or as a value per unit quantity.

For e.g. Sweden Standard Rate VAT is 25% or US California State Sales/Use Tax

Standard Rate is 7.25%

Tax Jurisdiction: A geographic area where a tax is levied by a specific taxauthority.

For e.g. The Jurisdiction for the US California County Sales Tax for ImperialCounty is Imperial County.

Party Tax Profile: Holds all party tax related information. For e.g. Party Profile

for Establishments, Party Profile for Suppliers and Sites or Party Profile forCustomers and Sites.

Registrations: The registration of a party with a tax authority that confers taxrights and imposes certain obligations. For e.g. ESA78211646 (VAT - Spain),

SE123456789012 (VAT - Sweden) etc.

Fiscal Classifications: Provides for the definition of tax fiscal classifications. Afiscal classification is a way that a tax authority classifies each part of a

transaction.

Party Fiscal Classification: A classification used by a tax authority to categorizea party for a tax. For e.g. Brazil Establishment Type (e.g. Commercial, Industrial,

Manufacturing)

Product Fiscal Classification: A classification used by a tax authority tocategorize a product for a tax. For e.g. Brazil Product Nature (e.g. electronicgoods, dairy goods, professional fees, non-professional fees).

Intended User Fiscal Classification:The purpose for which a product may beused.

For e.g. Brazil Intended Use (e.g. Commercialization, Consumption,Industrialization)

User defined Fiscal Classifications:A user defined Transaction FiscalClassification Type.

Document Fiscal Classifications:A classification used by a tax authority tocategorize the documents associated with a transaction for a tax.


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Fiscal Classifications:Transaction Business Category: A business classificationused by Oracle to identify and categorize an external transaction into a Tax

transaction.

3. Pre Requisite of Tax Setup:

Setup Geography Hierarchy Structure & Details through Trading CommunityManager

Setup a Legal Entity, Establishment, Ledger and Operating Unit

Associate the Operating Unit with the Legal Establishment

Replicate Seed Data for your operating unit.

Setup Responsibilities for the your Operating Unit

Setup Mandatory Responsibility Level Profile Options

4. Tax Setup Steps:

Define Tax Regime: Tax regime is a single system of taxation as defined by aset 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.

Define Tax: A tax represents a distinct charge that can be applied to atransaction.

Define Tax Statuses:A tax status is the taxable nature of a product in thecontext of a transaction and a specific tax on the transaction. You define a taxstatus to group one or more tax rates that are of the same or similar nature.

Define Tax Jurisdictions: The incidence of a tax on a specific geographicalarea. A tax jurisdiction is limited by a geographical boundary that encloses a

contiguous political or administrative area, most commonly the borders of acountry. Often this is represented by a state, province, city or a county tax

jurisdiction. In E-Business Tax, a tax jurisdiction can use the geography setup

from your TCA geography hierarchy to identify a tax rate.

Define Tax Recovery Rates: Define recovery rates for taxes.

Define Tax Rate:At least one tax rate is required for each tax status. AdditionalTax Rates may be needed at the Jurisdiction Level if the tax rate applicable forthe tax is unique for a particular jurisdiction.

Setup Default Tax Rules: Tax Rules are evaluated by the rule engine for eachenabled tax within a tax regime. Rules use a combination of defaults plus 1..Nnumber 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


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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 rate to apply (if applicable).

Make Tax Available For Transactions:Enable each tax for transactionprocessing.

Setup Configuration Owner Tax Options: Enable the configuration option forapplication. The tax regimes that you create identify the taxes and the set of

regulations that make up each tax requirement. Configuration options identify therelationships between parties and tax regimes to reflect the tax requirements of

each party. Use configuration options to associate legal entities and operating

units with their applicable tax regimes. The association between a party and a taxregime includes these definitions:

5. Business scenario to integrate e-Business tax with receivables:

Create tax regime:1. Select responsibility Tax Manager.

2. Navigate to Tax Configuration > Tax Regimes3. Create record with below details


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Create Tax:

1. Select responsibility Tax Manager2. Navigate to Tax Configuration > Tax3. Create record with below details4. Please dont check the checkbox for Make tax available for

transaction.


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Create Tax Status:

1. Select responsibility Tax Manager.

2. Navigate to Tax Configuration > Tax Statuses.

3. Create record with below details.


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Create Tax Jurisdiction:1. Select responsibility Tax Manager.


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2. Navigate to Tax Configuration > Tax Jurisdictions3. Create jurisdictions for all three taxes. See the screen shots.


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Tax Rates: Specify the tax rates.1. Select responsibility Tax Manager.2. Navigate to Tax Configuration > Tax Rates3. Create record with below details.


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4. Setup default tax rate for every below records.


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Define Rate Rules:1. Select responsibility Tax Manager.2. Navigate to Tax Configuration > Tax Rules.3. Create record with below details


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Make tax available for transaction:1. Select responsibility Tax Manager.2. Navigate to Tax Configuration > Tax3. Search for all three taxes.4. Update them to make them available for transactions.


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Setup Tax Account:Set up default tax accounts for the taxes in a taxregime to post the tax amounts derived from your transactions. The taxaccounts you define serve as default accounting information for taxes, taxrates, tax jurisdictions, and tax recovery rates.


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1. At tax level:Apply it for all three taxes.


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2. At Tax Jurisdiction Level:Attach tax account with all taxjurisdictions.


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At Tax Rate Level:Attach tax account with all tax rates.


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Configure Application Owner Tax Option:1. Select responsibility Tax Manager.2. Navigate to Default and Control->Configuration Owner Tax Options.3. Create as below


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Create a customer for address defined above.1. Select Receivable Responsibility.2. Navigate to Customer->Customer3. Create a customer and address for FL.ORANGE.ORLANDO.


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Create an invoice transaction and verify the automatic created tax:1. Select Receivable Responsibility.2. Navigate to transaction->transaction.3. Create an invoice transaction for above customer.4. Enter the line detail and save.

5. Verify that taxes are generated automatically for taxes created onabove steps.


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E-Business Tax_ Setup With Example

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