13/1/2019 Document 1062897.

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Copyright (c) 2019, Oracle. All rights reserved. Oracle Confidential.

Case Study: How to Switch From an Upgraded Tax Regime to a New Tax Regime - Canada
HST example (Doc ID 1062897.1)

In this Document

Abstract
History
Details
Why Switch?
Options
Evaluating the Impact
Step 1 - Update the tax profile
Step 2 - Set up the new Regime to Rate Flow
Step 3 - Set up New Tax Rules
Step 4 - Update the Configuration Tax Options
Step 5 - Update Parties (Suppliers/Customers)
Step 6 - Test
Summary
References

APPLIES TO:

Oracle E-Business Tax - Version 12.0 and later

Oracle Payables - Version 12.1.3 and later
Oracle Purchasing - Version 12.2.4 to 12.2.4 [Release 12.2]
Information in this document applies to any platform.

ABSTRACT

The objective of this note is to present, in case study format, an example of how to migrate from an upgraded tax regime to a
freshly configured tax regime in E-Business Tax.

For this case study we have chosen to focus on a triggering event that we expect will impact many customers, the Canadian
tax law changes related to HST uptake in British Columbia and Ontario provinces.

This note will guide you through the steps you might follow to make this transition. The note leverages a second case study,
Note 577996.1 titled Case Study: Setup R12 E-Business Tax for Canada: Includes 2010 HST Changes.

HISTORY

Author: Patrick McBride

Create Date 12-Feb-2010

DETAILS

Why Switch?

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As discussed in Note 810443.1 'Troubleshooting and Overview of the E*Business Tax R12 Upgrade for Order to Cash',
significant limits exist on what can and cannot be modified on an upgraded tax regime.

Some of those limits include:

Restrictions on creating new tax rules
Restrictions on creating new tax jurisdictions
Restrictions on creating new taxes

These limitations often make it difficult to use an upgraded a tax regime for extended periods of time. Tax law changes or
expansions into new regions covered by different tax laws often force customers to fully implement E-Business Tax by creating
a new taxing regime and disabling the old regime.

Fortunately for customers who find themselves in this situation or who elect to make the switch and implement a new regime
at the point of migration, several benefits exist to configuration a new regime in E-business tax. At the top of that list is a
significant increase in flexibility with respect to the creation of tax rules. In release 12, tax rules can be configured such that a
clerical user rarely has to consider what tax is applicable when entering an invoice. Release 12 also provides a framework
where a single tax regime can be created and cover the whole Credit to Cash and Procure to Pay solution. Upgraded regimes
typically result in two taxing regimes being created as a result of the separate tax solutions that existed in 11i.

Options

There are two options to consider when switching from the upgraded tax regime and calculation method.

Option 1 is to modify the upgraded regime. This can be done by changing the configuration tax options on that regime from
STCC to Determing Tax Regime. This setting change disables the upgrade calculation rules and allows you to implement new
taxes, rates, rules. Making this change will also disable tax calculations based upon your 11i rules and logic thus you will need
to make significant changes to your setup and add in your tax rules.

Option 2 is the recommended option and that is to end-date your upgraded regime and replace it with a freshly configured
regime.

This case study focuses on this second option. Again as discussed in Note 810443.1 elements such as exemptions, tax
registrations and other data on your migrated regime will not be transitioned to the new regime. You should factor this into
your decision if you have a large number of impacted setup.

Evaluating the Impact

To get started we must first evaluate the impact of this change:

Logical Impact
BC is charging a non-standard HST rate of 12% while all other provinces charge 13%.
PST and GST must no longer be applied as of June 30th to effected provinces
HST should begin to be applied as of July 1st
(Lot' s more - refer to Revenue Canada and Provincial taxing authorities for details on specific legal requirements)

Setup Impact
New Regime to Rate flows must be defined
Jurisdictions must be defined
Configuration Tax Options must be defined
Tax Rules must be defined
Customer/Vendor (Party) Tax Profiles may require updating

Step 1 - Update the tax profile

Update the tax profile for your Canada Operating Unit to set an end-date for the upgraded regime. In Tax Manager navigate
Parties > party tax profiles > Operating unit owning tax content. Select the Operating unit then click update. Choose the
configuration tab and set an effective to date on the upgraded regime.

Note: Let's assume you set June 1st as the start date for this new regime (tax law changes July 1st). Use this as the start
date for all of your records instead of 01-Jan-2001 as noted in the case study. We recommend that you choose a start

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date prior to the beginning of the new tax regulations since some transactions may be processed from prior to the cutover
with the old rates but entered on or after the cutover date. This allows for the flexibility in using both the old GST/PST
model and new HST model for these records after July 1 as the setup will exist. It does require that you implement both
the old/new tax logic in your tax regime but accommodates the scenario described above.

As mentioned in Bug 12954839 the new regime cannot be backdated only future dated.

Note: Be careful with setting the 'Use Subscription of LE' flag on your operating unit tax profile as this might cause issues:

Errors such as 'FRM-40350 Query caused no records to be retrieved' will occur while attempting to create/query an invoice
based on old upgraded regime. Enhancement request 8619810 was created to remove this dependency.

Step 2 - Set up the new Regime to Rate Flow

Refer to Note 577996.1 - Section 4 on Tax Setup for instructions

For step 4.6 on the Tax Profile setup, this step can typically be skipped as a tax profile would normally already exist for the
upgraded regime.

Step 3 - Set up New Tax Rules

Refer to Note 577996.1 - Section 5 Tax Rules for examples and guidance

Step 4 - Update the Configuration Tax Options

Configuration Tax Options control how the system calculates tax, either through the upgraded tax logic or using the E-business
tax "regime determination method".

To make this switch:

Tax Managers (Responsibility)

Navigation: Defaults and Controls > Configuration Owner Tax Options
In the Configuration Owner box, pick the configuration owner level (LE or OU) where you have the regime subscribed (see
step 1 above). For this case study it is Operating Unit
Press GO
For each row returned, select "Update" and then enter an effective to date (The same one you entered in step 1)
Note that the Regime Determination Set = "STCC"

Once all configuration options have been updated with an effective to date, click Create and create new configuration owner
tax option values for each combination. Take care to select the appropriate checkbox values as per your business
requirements.

For Regime Determination Set, select "Determine Applicable Regimes"

DO NOT BACKDATE the effective end- date of the configuration tax options for the upgraded regime or the start date of
the new regime.

Step 5 - Update Parties (Suppliers/Customers)

Tax profiles may need to be modified for your supplies and/or customers. This is most often required if the following criteria
are true:
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1) You record tax registration information for your parties

2) You use the tax exemption feature in E-Business tax. Most customers in Canada simply use the Exempt tax rate and forgo
the use of the Tax exemptions. This is more often used in the US where a tax exempt reason code and tax exemption
certificate must be recorded along with an override tax rate.
3) Your tax rules were created to use party fiscal classifications or tax classification codes and you need to set default values
on your party records. For example, in section 5.2 of note 577996.1 we document a method to flag a record as being delivered
to a Canada address for immediate export (say to a port). In this case the tax classification code can be set to "Export" to
trigger alternate tax handling. R12 allows you to set a default so that the ship-to site defaults this value. This might be helpful
if you have a customer that will always be charged the zero rate when shipping to that address. You can optionally set this tax
classification code on the party site's party tax profile and then define application tax options in E-Business Tax to default this
onto invoice lines while entering an invoice.

Step 6 - Test

With these changes in place the upgraded tax regime will be used through the "Effective To" date at which point the new tax
regime and tax logic will be used. The configuration tax option change will also force the application to start using the newly
implemented tax logic for calculations instead of the migrated tax logic.

SUMMARY

REFERENCES

NOTE:577996.1 - Case Study: Setup R12 E-Business Tax (EBTax) for Canada: Includes 2010 HST Changes
NOTE:810443.1 - Overview of the R12 E-Business Tax (EBTax) Upgrade for Order to Cash
BUG:8619810 - ERRORS WHEN VIEWING TAX DETAILS OF TRANSACTIONS WITH MIGRATED TAXES
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