Professional Documents
Culture Documents
E Business Tax (EB Tax) Setps
E Business Tax (EB Tax) Setps
E-Business Tax provides a single point solution for managing your transaction-based tax requirements. E-Business Tax uniformly delivers tax services to all E-Business Suite business flows through one application
interface. As a global system architecture, E-Business Tax is configurable and scalable for adding and maintaining country-specific tax content.
Tax Authority=>A goverment entity that regulates tax law,administers, and/or audits one or more taxes
Tax Regime=>The set of Tax rules that determine the treatment of one or more taxes administered by tax authority.That is the set of laws and regulations that determines the treatment of one or more taxes.
Tax status=>The taxable nature of a product in the context of a transaction for a tax
Tax rates=>The rates specified for a tax status for a given time period. The tax rate is expressed as a percentage, a value per unit quantity, or a fixed sum per transaction.
Tax Jurisdiction=>A geographical area where a tax is levied by a special tax authority
Determine Place of Supply – Determines the location where a transaction is considered to have taken place for a specific tax.
Determine Tax Applicability – Determines the taxes that apply to a given transaction.
Determine Tax Registration – Determines the tax registration status for the applicable taxes of the parties involved in the transaction.
Determine Tax Status – Determines the tax status of each applicable tax to use on the transaction.
Determine Tax Rate – Determines the tax rate for each applicable tax status to use on the transaction.
Pre-Requisites
1. Navigate to Tax Manager->Parties->Party Tax Profiles and Query for the following:
Party Name: Vision Operations (Name of the OU you wish to setup for tax)
If this is checked, then the OU is set to use the subscription from Legal Entity. The regime is then subscribed (in a later step) to the First Party Legal Entity rather than the Operating Unit Owning Tax Content.
This is a one time setup and the value cannot be toggled. So enable this only after you determine you want to use this setup.
In our case its Checked and therefore we need to set our Tax Regime up against First Party Legal Entity and NOT against the Operating Unit
Steps
2. Enter Regime Code,Name and Country Name.Then Click on “Show Controls and Defaults”.
3. Enable “Allow Override and Entry of Inclusive Tax Lines”,”Allow Tax Exemptions” & “Allow Tax Exceptions”.Also enter the other default values and click Continue Button.
4. Enter your operating unit in Party Name.If it prompts to select Party Type, select “First Party Legal Entity” in our case.
If ‘Use Subscription of the Legal Entity’ was unchecked then Party Type would have been “Operating Unit Owning Tax Content”
Also select ‘Configuration for Taxes and Rules’ as “Common Configuration” & Effective date.Then click Finish button.
Step 2: Create Tax
Enter the details as shown in below screenshot and then click on Show Controls and Defaults
2. Enter the following information under Show Controls and Defaults section :
3. Click Apply button
Note: Enter Tax Regime created in step 1 & Tax created in step2
3. Click apply so it comes to Create Tax Rate page and then click Apply button again.
1. Navigate to Tax Manager->Tax Configuration->Taxes, query Country & the tax we had created before and click on Go button.
4. Enter the Operating Unit and Tax Expense & Tax Recoverable/Liability account
5. Click Apply button so it will come to Tax Accounts page and click Apply button again.Again once more click Apply button.
2.Click the pencil icon in the Set Default column to change any of the defaults defined.Update the defaults as follows:
Step 8: Make Tax Available for Transaction
1. Navigate to Tax Manager->Tax Configuration->Taxes,query Country name,Tax Regime Code & Tax and click Go button.Then Click on Update icon.
2. Enable the Check-box ‘Make Tax Available for Transactions’ and click Apply button.
Note:It might throw warning “This tax does not have an exchange rate type. Are you sure you want to enable this tax?”,click Yes button for this since we know we didn’t enter an exchange rate type.
Testing
1. Create an invoice with Ship-To location at line level containing an United States location.Save the invoice after entering the distribution details and click on Calculate Tax Button.Now you can see the Tax line
Click on Tax Accounts to enter the Expense and liability account details
Enter the Tax Expense Account. If this is left blank the expense account for ITEM line will be used.
The Tax Recoverable/Liability is the Use tax Liability Account to be used.
6. Define Tax Rules
Oracle provides a seeded set of Tax Rules which can be used by the user for tax calculation. For any transaction made the tax determination process uses these tax rules to decide the taxes which will apply and the amount of tax which
has to be applied for a transaction.
Prerequisites for setting up the Tax Rules:
Step1:
To decide whether use tax applied on any transaction within Payables module a tax classification code called USE TAX APPLICABLE will be made. A tax classification code is similar to a tax rate code with a tax rate of 0%.
Responsibility & Navigation:
Tax Managers – Tax Configuration – Tax Rates – Create
Step2:
Create Geography Hierarchy:
The various zipcodes which will be used in the tax rules have to be setup in the geography hierarchy in the trading community architecture.
Responsibility & Navigation:
Trading Community Manager à Administration à Geography Hierarchy
Query for country United States in the below screenshot
Click on View Details tab
Enter the various County details or enter a default county for the state as shown below. Click on View Details
Enter the different cities for the county and click on View Details to enter the zip code for each city.
Enter the zip codes which will be used for tax calculation with the code type as “Tax Geography Code”. Click on Apply after creating/updating any changes
The tax condition set is made from the tax determining factor set. In the above screenshot we have made a tax condition set for balancing segment CIP and postal code 62201 using the determining factor set made in the above set.
TAX RULE SETUP
Responsibility & Navigation:
Tax Managers – Tax Configuration – Tax Rules
The following tax rules will be setup for use tax calculation:
1. Determine Tax Applicability: Since the tax US_USE applies only for use tax we make this tax applicable only if the tax classification code in the invoice for an ITEM line is “USE TAX APPLICABLE”
2. Determine Tax Rate – This rule will derive the use tax rate for the invoices using the determining factor set and condition set. While making the tax rule we enter the determining factor set and the condition set made in the previous
steps as shown in below screenshot.
For each condition set there will be a different tax rate which will be applied.
Example:
As shown in above screenshot there are 4 condition sets:
1. COND_CIP_62201 – This means that the balancing segment is CIP and ship to postal code is 62201. If the invoice satisfies these two conditions and the tax classification code is USE TAX APPLICABLE the tax rate used will be
USE_CIP_62201.
1. COND_AMC_63103 – This means that the balancing segment is AMC and ship to postal code is 63103. If the invoice satisfies these two conditions and the tax classification code is USE TAX APPLICABLE the tax rate used will be
USE_AMC_63103.
For all the other rules the default values have been used.
7. Concept of Self Assessed Tax
A self-assessed tax is a tax calculated and remitted for a transaction, where tax was not levied by the supplier but is deemed as due (and therefore needs to be paid by the purchaser).
In such cases the purchaser is responsible for calculating and remitting the tax. Self-assessment is also known as reverse charge or use tax in certain tax regimes.
When self-assessment applies to a tax line, E-Business Tax creates the recoverable and/or non-recoverable distributions, and Payables creates an additional accounting distribution to record the liability for the self-assessment.
You can set the self-assessment option:
• At the tax profile level to default to the tax registrations that you create for this party.
• At the tax registration level.
• On an individual tax line.
E-Business Tax applies self-assessment to Payables invoices received by the first party according to the tax registration setting of the Set for Self Assessment/Reverse Charge option. The specific tax registration record that E-Business
Tax uses is derived either from Determine Tax Registration rules or from the default tax registration.
We have setup the self assessed tax feature at the Tax Registration level.
Navigation: Tax Managers – Home – External Dependencies – Create First Party : Legal Entity and Establishments
Query the Legal Entity -View Details – Establishments Tab – Query Establishment (which is the OU here) – Registrations – Create Tax Registration
Since we are using the self assessed tax feature only for use tax invoices we set up this option for the tax US_USE only. Other taxes will not have this flag checked.
8. Invoice Creation and Use Tax calculation
Invoice can be created in base table or interface table with the tax classification code as USE TAX APPLICABLE. Use the correct ship to location and balancing segments in the invoice.
The tax rules will be triggered on validation of the invoice in base tables and the use tax line will be generated.
Since we are using the self assessed tax feature there will not be any tax displayed on the invoice line, the tax details will be visible in the Tax Details form. They will also not be stored in ap_invoice_lines_all table; instead they will be
stored in zx_lines table with the trx_id which will be the invoice_id of the invoice.
Tax lines form indicating the use tax details.
Case Study – 2
Business Requirement: Calculation of SALES TAX in AP for Invoices made from source ERS based on Supplier site pin code
The requirement of client was as follows:
There were many invoices created in AP using the ERS source i.e create the PO and Receipt in Purchasing module and then run the “Pay on Receipt” program to generate the invoice in interface tables with source as ERS.
The standard Payables Open Interface Import program will then import these invoices into base oracle.
Sales tax applies on some of these ERS transactions based on the zip code of supplier site.
For instance: An ERS invoice with a supplier site A having zip code 63301 has a tax rate of 10% to be applied where as supplier site B having zip code 62284 has a tax rate of 6% to be applied.
Since the ERS invoice which is inserted into the interface table consists of only ITEM line we needed to insert one more TAX line with the correct amount. Additionally the total invoice amount also has to be corrected to include the tax
amount.
Detailed setups performed for the same.
1. Define Tax Regime
Responsibility & Navigation:
Tax Managers – Tax Configuration – Tax Regime – Create
Define one tax regime for country United States as shown below:
2. Define Taxes
Define one tax called US SALES TAX under the tax regime created for United States
Responsibility & Navigation:
Tax Managers – Tax Configuration – Taxes – Create
Click on Apply to save the changes
3. Define Tax Statuses
Define one tax status for the tax regime and tax setup in the previous steps.
Responsibility & Navigation:
Tax Managers à Tax Configuration à Tax Statuses à Create
Click on Tax Accounts to enter the Expense and liability account details
Enter the Tax Expense Account. If this is left blank the expense account for ITEM line will be used.
The Tax Recoverable/Liability is the Use tax Liability Account to be used. Since this is a sales tax rate we enter the default account of 000 for the same.
6. Define Tax Rules
Oracle provides a seeded set of Tax Rules which can be used by the user for tax calculation. For any transaction made the tax determination process uses these tax rules to decide the taxes which will apply and the amount of tax which
has to be applied for a transaction.
Prerequisites for setting up the Tax Rules:
Step1:
To decide whether use tax applied on any transaction within Payables module a tax classification code called SALES TAX APPLICABLE will be made. A tax classification code is similar to a tax rate code with a tax rate of 0%.
Responsibility & Navigation:
Tax Managers – Tax Configuration – Tax Rates – Create
Step2: Create Geography Hierarchy:
The various zipcodes which will be used in the tax rules have to be setup in the geography hierarchy in the trading community architecture. Set up the zip codes to be used for the supplier sites where sales tax needs to be calculated
based on the step 2 in Point 6 in Case study 1.
Step3: Create Tax Determining Factor Sets
Responsibility & Navigation:
Tax Managers – Advanced Setup Options – Tax Determining Factor Sets – Create
The tax condition set is made from the tax determining factor set. In the above screenshot we have made a tax condition set for postal code 61548 and tax classification code SALES TAX APPLICABLE using the determining factor set
made in the above set.
TAX RULE SETUP
Responsibility & Navigation:
Tax Managers – Tax Configuration – Tax Rules
The following tax rules will be setup for use tax calculation:
3. Determine Tax Applicability: Since the tax US_SALES applies only for ERS Sales Tax we make this tax applicable only if the tax classification code in the invoice for an ITEM line is “SALES TAX APPLICABLE”
4. Determine Tax Rate – This rule will derive the sales tax rate for the invoices using the determining factor set and condition set. While making the tax rule we enter the determining factor set and the condition set made in the previous
steps as shown in below screenshot.
For each condition set there will be a different tax rate which will be applied.
Example:
As shown in above screenshot there are 4 condition sets:
1. COND_SALES_63119 – This means that if the ship from postal code is 63119 and the tax classification code in the invoice is SALES TAX APPLICABLE then the tax rate used will be SALES_63119.
1. COND_SALES_61548 – This means that if the ship from postal code is 61548 and the tax classification code in the invoice is SALES TAX APPLICABLE then the tax rate used will be SALES_61548.
For all the other rules the default values have been used.
7. Invoice Creation and Sales Tax calculation for ERS invoice.
Generate the ERS invoice in the invoice interface tables using the program Pay on Receipt program.
Update the following values for the ERS invoice in the interface table:
TAX CLASSIFICATION CODE – SALES TAX APPLICABLE
CALCULATE TAX AMOUNT DURING IMPORT – Set the flag to Y
ADD TAX TO INVOICE AMOUNT – Set the flag to Y
The calculate tax amount flag and add tax to invoice amount is set to Y so that the Payables Open Interface Import program would trigger tax rules and calculate the tax amount and also add the tax amount to the invoice amount. Hence
the invoice will be imported with the tax line and correct invoice amount.
Following is the update script for the same:
UPDATE apps.ap_invoices_interface
SET add_tax_to_inv_amt_flag = ‘Y’
AND calc_tax_during_import_flag = ‘Y’
WHERE source = ‘ERS’
UPDATE apps.ap_invoice_lines_interface
SET tax_classification_code = ‘SALES TAX APPLICABLE’
WHERE invoice_id IN (SELECT invoice_id
FROM apps.ap_invoices_interface
WHERE SOURCE = ‘ERS’)
Snapshots of ERS invoices in the interface table.
Invoice header in the interface table before it was processed.
After importing this invoice; the tax line has got generated based on the tax rule for Supplier site. The invoice amount has also changed from 1000 to 1073.50