EBTax & Calculation in AP 14-Feb-12

Overview of E-Business Tax and Tax Calculation in
Oracle Payables
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<Insert Picture Here>
Overview of E-Business Tax and Tax Calculation in

Oracle Payables
Reddy Vardhan
Principal Support Engineer
Proactive Support
Reddy.vardhan@oracle.com
Agenda
• What is Ebusiness Tax <Insert Picture Here>
• Tax Configuration
• Tax Rules
• Configuration Owner Tax Options
• Payables Tax Calculation
• Manual Tax Entry
• Self Assessed Taxes
• Inclusive Taxes
• References

Oracle E-Business Tax
Definition
• New Product
• Infrastructure for Tax Knowledge Management
• Global System Architecture
• Configurable and Scalable
• Single Point Solution
• Tax Service to all E-Business Suite Business Flows
• One Application Interface

Ebusiness Tax Setup

E-Business Tax
Regime to Rates Flow
Operating
Tax Tax Tax Tax
Tax Unit Tax
Regime Jurisdiction Status Rate
Accounts
US Sales Tax State Sales Tax California State Standard 7.25% 01.005.004.033
Sales Tax
County Sales San Mateo County Standard 1.0% 01.005.004.033
Tax Sales Tax
City Sales Tax Belmont City Standard 0% 01.005.004.033
Sales Tax
Note: The above data examples were introduced just to illustrate the business flow and do not represent the complete tax setup for the country

Tax Setup – Tax Regime 1
Navigate to Tax Managers -> Tax Configuration -> Tax Regime.
Click on Create on the above form to create a new Regime.

Ta Setup – Tax Regime 2
1. Enter the Tax Regime Code, Name.

2. Enter the Country Name that Regime will be attached
3. Based on your requirement, select any of these flags.

Tax Setup – Tax Regime 3
4. Enter a party name to subscribe this regime either to OU or LE

based on your requirement.
5. Select either Common Configuration, Common Configuration
with party Overrides or Party Specific Configuration.
6. Enter an Effective-date (same or after Regime’s Effective date)

Tax Setup – Regime to Rate Flow

Tax Setup – Tax Regime - Tax
Click on ‘Create Tax’ to create the corresponding Tax for that

Regime.
A Tax can also created from the Tax Configuration menu.

Tax Setup – Tax 1
1. Enter required details here.

2. The flag ‘Make Tax Available for Transactions’ will need to be
checked after we finish all the Tax setup.

Tax Setup – Tax 2
Based on requirement, make sure to check the flags you need.

If Tax Recovery is required, you need to check this flag “Allow Tax
Recovery”
Check the flag ‘Allow Tax Rate Rules” if you wish to use Tax Rules

Tax Setup – Tax Regime – Tax Status

Tax Setup – Tax Status
1. Enter the required details on the Tax Status form.

2. Make sure to set at least one Tax Status as ‘Default Tax Status’.
3. Check flag ‘Allow Tax Rate Override’ to allow entry of Manual Tax
Lines
Tax Setup – Tax Jurisdiction 1
Next step in Tax Setup, create the Tax Jurisdiction that the Tax
Regime will be attached.
The Tax Jurisdiction can be created from the Tax Configuration menu
- > Tax Jurisdiction

Tax Setup – Tax Jurisdiction 2
1. Enter the Tax Jurisdiction name and other details here to link the
Tax Jurisdiction to Tax Regime/Tax Rate.
2. Select the Geography Name that this Tax Regime will be in effect.
3. Make sure to select at least one Tax Jurisdiction as Default
Jurisdiction.
Tax Setup – Tax Regime - Rate

Tax Setup – Rate 1

Tax Setup – Rate 2
1. Enter the Tax Rate code, Tax Jurisdiction that this Tax Rate code
will be linked.
2. Enter the Rate percentage and Effective From date.

Tax Setup – Rate Details 1
Enter details here for Reporting Purpose.

Make sure to check the flag ‘Internet Expenses Enabled’ if you want
the ability to Tax Internet Expenses Invoices.
Tax Setup – Rate Details 2
Set at least one Tax Rate
in the Tax Regime/Tax as
Default Tax Rate. Make
sure to enter the effective
from date for this Default
Tax Rate.
Also, you can set the flag

‘Adjustment for AdHoc
Accounts’ if you want to
adjust the Taxes on the
Fly.

Tax Setup – Tax Rules

Update Tax
Once you completed tax rules go back to Tax form and then
enable the Tax by checking the flag ‘Make Tax available for
Transactions’.

Configuration Owner Tax Options
1. Make sure to create the Configuration Owner Tax Options with

the flag ‘Allow Tax Applicability’ checked.
2. Also, the Regime Determination set has to be “Determine
Applicable Regimes” for new Tax setup to take effect.

Automatic Tax
Calculation
AP Invoice Workbench

Tax Calculation – Header and Lines
1. Enter Header information on AP Invoice Workbench.

2. Enter Line details
3. Enter distributions

Tax Calculation – AP (ship-to)
4. Enter or change Ship-to Location if you want to ship to a different

location than the supplier’s default location

Tax Calculation – “Calculate Tax”
5. Click on “Calculate Tax” once you confirm all the details are entered
correctly.
6. You can also click on ‘ Tax Details”, this will take you to the Tax
Details form and shows calculated tax.

Tax Calculation – Tax
7. If all the setup has been done correctly, the tax will be calculated
based on the tax rate we setup for that particular jurisdiction.
8. Click on “Tax Details” which shows detail Tax information.

Tax Calculation – Tax Details

Tax Calculation – Distributions
9. Also, click on ‘All Distributions” to make sure the distributions are

accounted correctly as per the tax setup.
10. Here the ‘Nonrecoverable Tax” shown is accounted to item line as
we have not defined the “Tax Expense” account in Tax Setup.

“Manual” Taxes

Manual Taxes – COTO setup
- The flag ‘Allow Tax Applicability’ determines the automatic tax

calculation for related Event Class.
-If the business requirement is to enter only manual taxes, this ‘Allow
Tax Applicability flag should be unchecked.
-Also the flag ‘Allow Entry of Manual Tax lines’ should be checked.

Manual Taxes - AP Workbench

Manual Taxes – Tax details
1. Enter/Select Tax Regime Code

2. Enter/Select Tax
3. Enter/Select Tax Jurisdiction, Tax Status
4. Enter Tax Rate Name, Tax Rate, Tax Amount.

Manual Taxes – Tax details
5. Select Place of Supply

6. The flag ‘Manually Entered’ will be automatically checked for
manual taxes.

Manual Taxes – Tax entered
7. The tax line will be saved as shown

Manual Taxes – Lines
1. Select ‘Tax’ from Type

2. Enter Tax Amount
3. Enter/Select all other Regime to Rate details
4. Save, the manual line will be saved

Manual Taxes – Lines Final
5. Once saved, the tax lines will be saved as shown

“Inclusive” Taxes

Inclusive Taxes – Regime setup
1. Set the field ‘Allow Tax Inclusion’ to “Standard Inclusive

Handling”
2. If you want to override the calculated Inclusive Taxes, check
the flag ‘Allow Override and Entry of Inclusive Tax lines’

Inclusive Taxes – Tax setup
3. Select ‘Special Inclusive Handling’ in the “Allow Tax Inclusion”

field in Tax

Inclusive Taxes – Invoice Entry

Inclusive Taxes – Tax Calculation
The tax details will no be shown at

the lines level
To view the tax details, click on Tax

Details form
Also review the General Tab to check

the item and tax amount.

“Self Assessed” Taxes

Self Assessed Tax - Concept
• Applicable when goods are purchased from a unregistered seller
• Purchaser responsible for calculating and remitting the tax to the
relevant tax authority.
• Also known as “Reverse Charge” or “Use Tax”
• For Example :-
ABC procures goods from XYZ ( Unregistered Seller) worth $ 1,000
Normal tax rate :- 15%
It is ABC’s responsibility to calculate tax
ABC will pay XYZ - $ 1,000 (Invoice Amount)
ABC will pay Tax Authority - $ 1,50 (Tax Amount)

Self Assessed Taxes – FPLE setup
1. Navigate to Parties -> Select First Party Legal Establishment, enter

the Party name -> Click Go
2. Click on “Update Tax Profile” to create the Registration for the
related Tax

Make sure the flag ‘Set for Self/Assessment / Reverse Charge’ is

checked for First Party Legal Establishment.

1. Enter Regime Code that you want the Taxes to be Self Assessed
2. You may also enter Tax, Tax Jurisdiction code
3. Set the Tax Registration Status to ‘Registered’

Self Assessed Taxes – Supplier Site
setup
Navigate to Parties -> Third Party Site -> Enter the Supplier you want
the taxes to be self Assessed -> Click Go
Once retrieved, click on update to create the Registrations

Self Assessed Taxes – Supplier Site
setup
1. Enter Regime Code that you want the Taxes to be Self

Assessed
2. You may also enter Tax, Tax Jurisdiction code
3. Set the Tax Registration Status to ‘Not Registered’

Self Assessed Taxes – Supplier setup
Navigate to Parties -> Third party -> Select the Supplier -> Create
the Registration for the Supplier and set the Registration Status
as ‘Not Registered’

Self Assessed Tax - Configuration
For SA tax we are interested in suppliers or supplier sites

registration status. So user should configure following type
of rule under the rule type Registration status :-
If Bill From ( Supplier PTP) = Not Registered or

If Ship From ( Supplier site PTP) = Not Registered ( this
condition only if required)
Then take Registration status of Bill To ( First Party legal
Establishment)

Self Assessed Tax – Calculation Logic
If supplier ( or site) is registered then normal tax will be

calculated. However if the supplier ( or site) does not have
registration details then it will treated as unregistered and in
that case rule will get triggered because of which tax engine
will look at registration status under the PTP of First party
legal Establishment. Since there “Set for Self Assessed” is
checked tax will be correctly calculated as self assessed

Self Assessed Taxes – Rules Setup
Navigate to Tax Configuration -> Tax Rules -> Retrieve the Tax
Regime Code -> Tax for which the Self Assessed Tax Rules need to
be setup
The Tax Rule should be setup under “Determine Tax Registration”

Rule Type

1. Enter the Rule Code, Name and Effective From Date

2. You may also enter other details based on your requirement

3. Under the Party Tab, Select Registration Status

4. Enter Ship From Party (Supplier and Supplier Site) in Party Type
5. Select Operator as ‘Equal To’
6. Select ‘Not Registered’ in the Value
7. Then Select the Registration to Bill to Party (First Party Legal

Establishment)
8. Click on Continue and Enable the Tax Rule

Self Assessed Taxes – Rule

Self Assessed Tax - Invoice Entry
1. Navigate to AP Invoice workbench form and enter the invoice

header and line details
2. Click on Calculate Tax
3. As the Supplier is set ‘Not Registered’, the SA rule will trigger and
Self Assessed Tax will be calculated.

Self Assessed Tax – Tax Details
4. The Tax line will not be shown at Lines level

5. Click on Tax Details to view the Taxes calculated
6. The flag ‘Self-Assessed’ will be checked automatically verifying
that the tax is calculated as ‘Self-Assessed’

References

References:
• Oracle EBusiness Tax User Guide
• Oracle EBusiness Tax Implementation Guide
• My Oracle Support > Note 1336674.2: Information Center:
E-Business Tax Release 12 and later
• My Oracle Support > Note 1383309.2: Information Center:
Oracle EBusiness Tax – Payables related

Thank You

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Overview of E-Business Tax and Tax Calculation in

© 2012 Oracle Corporation – Proprietary and Confidential

The following is intended to outline our general

© 2012 Oracle Corporation – Proprietary and Confidential

Overview of E-Business Tax and Tax Calculation in

• What is Ebusiness Tax <Insert Picture Here>

© 2012 Oracle Corporation – Proprietary and Confidential

© 2012 Oracle Corporation – Proprietary and Confidential

Ebusiness Tax Setup

© 2012 Oracle Corporation – Proprietary and Confidential

© 2012 Oracle Corporation – Proprietary and Confidential

Navigate to Tax Managers -> Tax Configuration -> Tax Regime.

Click on Create on the above form to create a new Regime.

© 2012 Oracle Corporation – Proprietary and Confidential

1. Enter the Tax Regime Code, Name.

© 2012 Oracle Corporation – Proprietary and Confidential

4. Enter a party name to subscribe this regime either to OU or LE

© 2012 Oracle Corporation – Proprietary and Confidential

© 2012 Oracle Corporation – Proprietary and Confidential

Click on ‘Create Tax’ to create the corresponding Tax for that

A Tax can also created from the Tax Configuration menu.

© 2012 Oracle Corporation – Proprietary and Confidential

1. Enter required details here.

© 2012 Oracle Corporation – Proprietary and Confidential

Based on requirement, make sure to check the flags you need.

© 2012 Oracle Corporation – Proprietary and Confidential

© 2012 Oracle Corporation – Proprietary and Confidential

1. Enter the required details on the Tax Status form.

© 2012 Oracle Corporation – Proprietary and Confidential

© 2012 Oracle Corporation – Proprietary and Confidential

© 2012 Oracle Corporation – Proprietary and Confidential

© 2012 Oracle Corporation – Proprietary and Confidential

Enter details here for Reporting Purpose.

Also, you can set the flag

© 2012 Oracle Corporation – Proprietary and Confidential

© 2012 Oracle Corporation – Proprietary and Confidential

© 2011 Oracle Corporation – Proprietary and Confidential

1. Make sure to create the Configuration Owner Tax Options with

© 2011 Oracle Corporation – Proprietary and Confidential

© 2012 Oracle Corporation – Proprietary and Confidential

1. Enter Header information on AP Invoice Workbench.

© 2012 Oracle Corporation – Proprietary and Confidential

4. Enter or change Ship-to Location if you want to ship to a different

© 2012 Oracle Corporation – Proprietary and Confidential

© 2012 Oracle Corporation – Proprietary and Confidential

© 2012 Oracle Corporation – Proprietary and Confidential

© 2012 Oracle Corporation – Proprietary and Confidential

9. Also, click on ‘All Distributions” to make sure the distributions are

© 2012 Oracle Corporation – Proprietary and Confidential

© 2012 Oracle Corporation – Proprietary and Confidential

- The flag ‘Allow Tax Applicability’ determines the automatic tax

© 2012 Oracle Corporation – Proprietary and Confidential

© 2012 Oracle Corporation – Proprietary and Confidential

1. Enter/Select Tax Regime Code

© 2012 Oracle Corporation – Proprietary and Confidential

5. Select Place of Supply

© 2012 Oracle Corporation – Proprietary and Confidential

7. The tax line will be saved as shown

© 2012 Oracle Corporation – Proprietary and Confidential

1. Select ‘Tax’ from Type

© 2012 Oracle Corporation – Proprietary and Confidential

5. Once saved, the tax lines will be saved as shown

© 2012 Oracle Corporation – Proprietary and Confidential

© 2012 Oracle Corporation – Proprietary and Confidential

EBTax & Calculation in AP 14-Feb-12

EBTax & Calculation in AP 14-Feb-12