r12 e Business Tax

Copyright © 2007, Oracle. All rights reserved.

Oracle E-Business Tax Overview

Release 12 Migration

Copyright © 2007, Oracle. All rights reserved.1 - 2

Objectives

After completing this module, you should be able to:

• Describe and use the new features in Release 12 of Oracle E-Business Tax

• Set up the new features in Release 12 of Oracle E-Business Tax


Agenda

• Oracle E-Business Tax (eBTax) Description

• Business Needs that eBTax Meets

• Key Concepts

• Architecture

• Process Flow

• User Interface

• Upgraded and New Features


Agenda



• Key Concepts

• Architecture

• Process Flow

• User Interface



What is Oracle E-Business Tax (eBTax)

Oracle E-Business Tax (eBTax) is a new product that:

• Provides the infrastructure for tax knowledge management

• Provides tax service to all E-Business Suite business flows

• Uses a global system architecture

• Is configurable and scalable

• Is a single point solution

• Is a one-application interface


Agenda



• Key Concepts

• Architecture

• Process Flow

• User Interface



Business Requirements Met by eBTax

• Sales and Use Tax in Procurement

• Self-Assessed Tax in Payables

• Multiple Registrations

• Deferred Tax in AP

• Enhanced Handling of Tax on Freight

• Enhanced Exemptions and Exceptions

• Multiple Inclusive, Compounding

• Quantity Based Rates in Procurement


Business Needs Solutions

Need for Automation

• Seeding of basic tax content setup for some countries

• Service integration and data upload from Vertex and Taxware in the United States

• Integrity checks when defining tax content setup

Constant Changes in Tax Laws and Regulations

• Most of tax content setup is date effective • Tax Rules flow makes it easy to change

existing rules and/or create new ones• Tax Simulator allows simulation of tax setup,

rules, transactions entry and respective tax rules results

Business Need Solution

Need for Local Compliance

• Tax Registrations, Tax Reporting Codes• Tax Lines capture all relevant information

used to determine applicable taxes• Tax Reporting templates can be modified and

extended



Information Fragmentation

• Tax Lines capture all relevant information used to determine applicable taxes

• Oracle E-Business Tax fully integrates and makes use of common infrastructure available within E-Business Suite such as:

• TCA’s Geography Model• TCA’s Party Classification Model• Legal Entity Model• Inventory Item Categorization Model• Accounting Event Classes

Deferred Tax in Payables• Tax services for payments transactions can

be enabled at Configuration Owner Tax Options flow

Business Need Solution

Tax on Freight • Tax services for applicable transactions with freight can be enabled at Configuration Owner Tax options flow



Sales and Use Tax in Procurement

• Complete Sales and Use Tax setup hierarchy can be defined in Regime to Rates flow

• Tax services for applicable transactions can be enabled at Configuration Owner Tax Options flow

• Tax rules can apply to generic or specific transactions

• Tax Jurisdictions can be defined for very precise geographical areas where taxes are applicable

Duty Tax Handling

Business Needs Solution

Tax on Inter-company Movements

• Tax setup allows creation of Quantity Based tax rates

Cash and Accrual Basis Reporting for Tax

Tax Lines will capture necessary information Tax Reporting allows specific selection

• Tax services for applicable transactions can be enabled at Configuration Owner Tax options flow



Multiple Tax Registrations• New Tax Registrations flow allows multiple tax

registrations for the same party and/or party site

Tax Reporting Codes

Business Needs Solution

• Any number of Tax Reporting Types and Codes can be defined and associated to various entities within Oracle E-Business Tax


Agenda



• Key Concepts

• Architecture

• Process Flow

• User Interface



Key Concepts: Tax Authority

TaxAuthority

Tax Regime TaxTax

Jurisdiction

Secretaria da Receita Federal (Brazil)

Canadian Customs and Revenue Agency (Canada)

HM Customs and Excise (U.K.)

California State Board of Equalization

Tax Authority:Tax Authority: A government entity that regulates tax A government entity that regulates tax law, administers, and/or audits one or more taxes.law, administers, and/or audits one or more taxes.


Key Concepts: Tax Regime

TaxAuthority

Tax Regime TaxTax

Jurisdiction

Tax Regime:Tax Regime: The set of tax rules that determine the treatment of one or more taxes administered by a tax authority.

RICMS - Regulamento do ICMS


Canadian Goods and Services Tax


UK VATHM Customs and Excise (U.K.)

California Sales TaxCalifornia State Board of Equalization


Key Concepts: Tax

TaxAuthority

Tax Regime TaxTax

Jurisdiction

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

CMSRICMS - Regulamento do ICMS


GSTCanadian Goods and Services Tax


UK VATUK VATHM Customs and Excise (U.K.)

State Sales TaxCalifornia Sales TaxCalifornia State Board of Equalization


Key Concepts: Tax Jurisdiction

TaxAuthority

Tax Regime TaxTax

Jurisdiction

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

São PauloCMSRICMS - Regulamento do ICMS


OntarioGSTCanadian Goods and Services Tax


UKUK VATUK VATHM Customs and Excise (U.K.)

California (State)State Sales TaxCalifornia Sales TaxCalifornia State Board of Equalization


Agenda



• Key Concepts

• Architecture

• Process Flow

• User Interface



Architecture Overview

Tax Administration Services

Tax Content Services

Tax Determination Services

Partner Tax Services Interface

Partner Tax Content Interface

Tax Services Request Manager

Tax ServicesTax ContentTax Partner

Services

Oracle E-Business Tax

Content Repository

Record Repository

E-Business Suite

Transaction Tax DataTransaction Data


Agenda



• Key Concepts

• Architecture

• Process Flow

• User Interface



Processing Taxes for Transactions

Purchasing

Receivables

Payables

Sales

…

Single Interface for Transactions

Transparent Integration with Tax Partner Services

DetermineRegimes

ApplicableTaxes

Tax Status& Rate

TaxableBasis

CalculateTax

Amount

TaxTransactions

Parties

Places

Products

Processes

Taxes,Rules


Tax Determination Services Example

Tax Regimes

are identified

based on the

countries of the parties

involved

A default value or a rule indicates the Place of Supply



A default party type value or a rule

determines from which party to evaluate tax

registration status

Party classification can be used as a tax determining factor in

any rule type



Product Classification can be used as a tax determining factor in

any rule type

(Qty * Unit Price) is the default seeded

Taxable Basis formula, but other formulas can be

defined



(Tax Rate * Taxable Basis) is

the default seeded Tax

Amount formula, but other

formulas can also be defined


Agenda



• Key Concepts

• Architecture

• Process Flow

• User Interface



User Interface


Agenda



• Key Concepts

• Architecture

• Process Flow

• User Interface



Upgraded and Redesigned Features

• Tax Definition Hierarchy

• Tax Configuration Ownership

• Tax Defaulting Hierarchy

• System Options for Tax

• Tax Groups

• Tax Jurisdiction Handling

• Tax Compounding

• Tax Inclusiveness

• Tax Recovery

• Tax Rounding


Upgraded and Enhanced Features

• Profile Options for Tax

• Tax Overrides

• Offset Taxes

• Party Tax Attributes

• Tax Registrations

• Tax Exemptions

• Tax Exceptions

• Tax Formulas

• Global Descriptive Flexfields (Tax Related)

• Transaction Tax Upgrade


Tax Definition Hierarchy

• Tax Setup “Backbone”

• Also known as “Regimes to Rates” flow

• Mainly comprised of Regime, Tax, Status and Rates, but also Tax Jurisdictions and Tax Recovery Rates

• Parent-Child Relationships form a Hierarchy which is easy to visualize, navigate and maintain

• Setup can normally be shared across all applicable applications, Legal Entities and Operating Units


Tax Configuration Ownership

• 11i Tax Codes, Tax Groups, System Options and Defaulting Hierarchy are defined in the context of an Operating Unit with data replicated for different OUs

• Though R12 target entities support data sharing across OUs, the upgrade process creates a tax setup in the context of Content Owner that is equivalent to OU. This ensures no data loss during upgrade.

• Configuration Ownership is defined at the Tax Regime level and is a new feature offered in R12


Practice 1 Overview: Creating a Regime to Rate Tax Model

This practice covers the following topics:

• Creating a Tax Regime

• Creating a Tax

• Creating a Tax Status

• Creating a Tax Rate

• Creating a Tax Jurisdiction


Tax Defaulting Hierarchy

• 11i Tax Codes/Group codes that are used on taxable lines are upgraded as Tax Classification Codes lookups

• 11i Tax Codes associated with defaulting hierarchy sources (Customers, Suppliers, Items, Accounts, etc.) are maintained as Tax Classification Codes

• 11i Defaulting Hierarchies from AR/AP/PO/PA system options are upgraded as ‘Tax Classification Code’ defaulting hierarchy in Application Tax Options in the context of OU and application product (AR/AP/PO/PA).


System Options for Tax

• 11i Financials System Options for Tax such as Rounding Rule, Precision, Minimum Accountable Unit, Default Tax Code, Default Recovery Rate, etc. are upgraded to Configuration Owner Tax Options and Tax Attributes

• 11i Payables System Options for Tax such as Enforce Tax from Account, Enforce Tax from Reference Document, etc. also upgrade to Configuration Owner Tax Options and Tax Attributes


Tax Groups

• Tax group codes are upgraded only as tax classification codes

• 11i Tax Group Constraints are upgraded to Condition Sets

• 11i Tax Codes Conditions and Exceptions are upgraded as Conditions and Exceptions at Process Results level


Tax Jurisdiction Handling

• Location Values are upgraded to TCA’s Geography model as legislative geography elements (state/county / city/postal code) and Tax Zones (a combination of geographical elements) .

• The upgrade process creates Tax Jurisdictions in the context of Tax Regime, Tax, and Tax Zone.

• The upgrade process creates tax rates as Jurisdiction Rate Codes (codes associated with rate %) in the context of Regime, Tax, Tax Status, and Tax Jurisdiction.


Practice 2 Overview: Creating Tax Zones


• Creating a Tax Zone Type

• Creating a Tax Zone


Tax Compounding

• For every tax code defined in AR, the upgrade process checks the compounding precedence defined for the tax code across different tax groups and assigns the compounding precedence to the corresponding Tax Regime and tax.

• The upgrade process also defines the taxable basis formula to indicate which taxes are to be compounded. – For the taxable basis formula, the upgrade process

creates taxable basis determination rules to indicate when such a formula is applicable


Tax Inclusiveness

• The Upgrade process carries the AP system option level inclusive tax flag to each Tax under AP OU equivalent content owner to indicate whether tax support inclusiveness.

• The Supplier level inclusive tax flag is upgraded to party tax profile in the context of ‘Third Party’ party type and Supplier associated TCA party.

• The Supplier site level inclusive tax flag is maintained ‘as is’ and it is displayed in the context party tax profile that is equivalent to supplier associated TCA party site.


Tax Recovery

• Recovery Rate % is upgraded to eBTax by creating Recovery Rate codes in the context of Tax Regime and tax that is associated with tax (rate) code to which recovery rate % is associated in 11i.

• Recovery rate codes in eBTax also carry the context of recovery type. The upgrade process stamps recovery type as ‘Standard’ for each recovery rate code

• 11i Recovery Rules are upgraded as Recovery rate determination rules indicating recovery rate code as result of the rule.


Tax Rounding

• Rounding options in 11i are upgraded as rounding attributes for the Party Tax Profile associated to these 3rd parties

• Rounding Rule and Allow Tax Rounding Override setup are available at Regime and Tax levels

• Depending upon the event class, the rounding party hierarchy is stamped during the upgrade. The Default Rounding Level is also available at this level.


Tax Overrides

• Responsibility Level Profile Options such as Allow Override of Customer Exemptions are maintained ‘as is,’ and Allow Override of Tax Codes are upgraded as Allow Override of Tax Classification Codes profile option

• A new flag, “Allow Override of Inclusive Tax Lines” supported at Configuration Owner Tax Options level provides the choice to control the override for different event classes.


Offset Taxes

• Both offset and regular tax codes are upgraded under the same Tax Regime but different taxes. – The offset flag is stamped for taxes that have offset rate

codes upgraded from 11i.

• The association of regular rate codes and offset rate codes is upgraded ‘as is’ to eBTax.

• The offset functionality is offered only for backward compatibility purposes in R12. Oracle E-Business Tax offers a more complete functionality called Reverse Charge/Self-Assessment of taxes


Party Tax Attributes

• Party Tax Profile records are upgraded for every TCA Party and Party Site. – Party Tax Profile records created during the upgrade hold

tax attributes for first as well as third parties.

• Tax attributes for first parties are carried to party tax profile in the context of LE or Establishment or they are stamped to each tax defined in the context of first party (OU) equivalent content owner


Practice 3 Overview: Creating a First Party Tax Profile


• Creating a Legal Entity

• Creating a First Party Tax Profile


Multiple Tax Registrations

• Tax Registration setup is upgraded as Default Registration Number and Default Registration Type for the Party Tax profile created for each correspondent party or party site

• If different tax registration numbers are associated with HR Location / AR System Option / Financial System Option levels for the same first party:– The HR location level registration number is carried to

‘first party’ party tax profile – The other two registration numbers are carried as

reporting codes of the ‘first party’ party tax profile.


Tax Exemptions

• The Use Customer Exemptions flag is upgraded to Application Tax Options in the context of AR OU and receivables application. – The same flag value is also carried to each Tax, Tax

Status, and Tax Rate code, providing more granular controls

• In 11i, if higher (state) level exemptions were applicable for lower level (County / City) level taxes, then during upgrade, Tax Exemption Creation Method is appropriately stamped on lower level taxes at ‘Tax’ Level


Tax Exceptions

• Tax Rate Exceptions are upgraded as Item Exceptions in R12. Exceptions UI flow is located under Products tab.

• 11i Exemptions that are defined without the context of party (customer) are also upgraded as Item Exceptions in R12

• In most cases, a product item (or fiscal classification) will have a tax exception by having a special (differentiated) tax rate assigned to it


Tax Formulas

• 11i tax codes that are defined with a Before/ After Discount/ Quantity taxable basis are upgraded to create a taxable basis formula. – The taxable basis formula is associated with tax rate

codes as default taxable basis formula, overriding the standard line amount taxable basis indicated at corresponding tax level.

• The Taxable basis formula created during the upgrade indicates that a discount needs to be applied prior to the tax amount computation.


Global Descriptive Flexfields

• During upgrade, tax codes are upgraded as tax rate codes, and GDFs are considered for deriving values for the associated Tax Regime/Tax /Tax Status.

• Tax code level GDFs that are used primarily for reporting are upgraded as reporting codes with reporting type as GDF segment name and they are created in the context of upgraded tax rate code.

• Third party LE related tax GDFs such as tax payer ids from Third Parties (Suppliers / customers / TCA Parties) are maintained ‘as is’.


Transaction Tax Upgrade

• Tax Lines in the context of AR transactions are upgraded to eBTax tax lines carrying AR transaction key

• AP tax distributions are upgraded to eBTax with item distribution allocation information, detail and summary tax lines are also created during the upgrade

• PO tax distributions are upgraded to eBTax with item distribution allocation information and detail tax lines are also created with shipment line allocation information


Practice 4 Overview: Creating Transactions with Applicable Tax


• Entering an Invoice in Payables

• Entering an Invoice in Receivables


New Features

• Content and Services Subscription

• Events and Configuration Owner Options

• Tax Jurisdictions

• Tax Rules

• Fiscal Classifications (Product, Party, Transactions)

• Tax Repository

• Tax Simulator

• Guided Configuration


Content and Services Subscription

• Regime Configuration Options allow the user to define for first party legal entities or Operating Unit: – Whether to centralize or decentralize the maintenance of

tax content – Whether to subscribe to Oracle E-Business Tax services

or to 3rd party tax vendors, per tax regime

• Example: UK VAT calculated by Oracle E-Business Tax and US Sales tax calculated by Vertex.


Events and Configuration Owner Options

• Defined at Tax Regime level

• Defined for Legal Entities or Operating Units

• Configurations Options are:– Common– Common with Party Overrides and – Party Specific

• Common Configuration with Party Overrides is allowed for Tax and Rules but not for Product Exceptions


Tax Jurisdictions

• Jurisdictions are defined for a given geography, regime, tax and tax authority (the latter is optional)

• Tax jurisdictions can also be defined for areas inside city limits, which are usually indicated in the address

• Tax Zones are defined in TCA’s model but via Oracle E-Business Tax menu option

• Data upload routines used to upload US Sales Tax data from Vertex and Taxware populate data into both Geography Hierarchy and Tax Jurisdiction models


Tax Rules

• Tax rules are a powerful and flexible mechanism used to meet tax legislation requirements

• Tax rules are date effective

• Rules are defined by Rule Types:– Direct Tax Rate Determination– Determine Place of Supply– Determine Tax Applicability– Determine Tax Status– Determine Tax Rate– Determine Taxable Basis– Calculate Tax Amount– Determine Recovery Rate


Practice 5 Overview: Setting Up Tax Rule Defaults


• Creating Default Rules


Fiscal Classifications: Product

• Important tax determining factor for certain taxes

• Product Classifications can be inventory linked or non-inventory linked

• Inventory linked classifications are based on the Inventory’s Item Categorization model


Fiscal Classifications: Party

• Important tax determining factor for certain taxes

• Party Fiscal Classifications are fully integrated with TCA’s Party Classification model

• The association between party classification codes and parties can be performed in TCA or using Oracle E-Business Tax’s Party Classification flows


Fiscal Classifications: Transaction

• A classification usually defined by a tax authority, to categorize a transaction for a tax. There could be more than one by tax.

• For example, for Brazil, three classifications are required: – Transaction nature, such as free sample, demonstration,

consignment, donation; – Transaction classification, such as the sale of products

previously acquired, the sale of products that have been manufactured by the company; and

– Operation classification, such as ship from - ship to relationship, (e.g., intrastate sale).


Tax Repository

• Single source of transactional tax information (tax lines)

• Support for tax reporting, tax accounting and tax reconciliation processes

• Underlying infrastructure for users to view and/or modify (override) tax lines


Practice 6 Overview: Creating Tax Accounts


• Creating Tax Accounts


Tax Simulator

• Tax Simulator helps on audit trail with respect to which Tax Rules were satisfied in calculating a particular Tax

• Tax Simulator can act as a light-weight transaction for entering Purchase Orders, Invoices, Invoices matched against PO, etc.. that is integrated with Tax Lines User Interface

• It is a fast way to enter transactions with fewer validations to perform what-if scenarios on tax calculation


Practice 7 Overview: Reviewing Tax Configuration Results Using the Tax Simulator


• Entering a Payables Invoice Using the Tax Simulator


Guided Configuration

• Guides the user, step by step, during the configuration of the different types of tax rules available in the system. Users can also specify default values for most of those rule types

• Makes it easy to select default values for most tax rule types

• Generates all necessary setup behind the scenes


Profile Options for Tax

• Profile options are similar to those in 11i, however, more granular control can be achieved– For example, a profile option can be set to “Allow Manual

Tax Lines”. At the tax level, for a certain tax, manual creation can be disallowed.

• There is a new profile option, “Read/write Access to Common Configuration data” provided to restrict access to persons creating or modifying installation-level configuration


Upgrade Considerations

• 11i Tax Codes and Rates (AP Tax Codes and AR VAT Taxes) are upgraded as Regimes, Tax, Status and Rates

• 11i Tax Codes are also upgraded as Tax Classification lookups

• Tax Classification lookups are used in Direct Rate Determination Rules to reach the appropriate Tax Rate

• 11i Tax Type, plus the country of the owning operating unit, are used to name the R12 Tax Regimes (I.e. UK VAT)


Implementation Information

• Oracle E-Business Suite Release 12 Rapid Install is required for both new and upgrade customers.

• Procurement Options:– Download from Oracle E-Delivery.– Purchase CD/DVDs on the Oracle Store.

• Refer to Oracle MetaLink for:– Oracle Applications Release Notes – Installing Oracle Applications – Upgrading Oracle Applications

• Oracle Applications Documentation is available through the Online Documentation CD and Oracle MetaLink.


Summary

In this module, you should have learned how to:

• Describe and use the new features in Release 12 of Oracle E-Business Tax

• Set up the new features in Release 12 of Oracle E-Business Tax

r12 e Business Tax

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