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1 Copyright © 2020, Oracle and/or its affiliates

Safe harbor statement

The following is intended to outline our general product direction. It is intended for information
purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any
material, code, or functionality, and should not be relied upon in making purchasing decisions. The
development, release, timing, and pricing of any features or functionality described for Oracle’s
products may change and remains at the sole discretion of Oracle Corporation.

2 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Managing Transaction Taxes
Overview of Oracle Fusion Tax

Annapurna Chittilla Isaac William

Principal Product Manager Senior Applications Architect

June, 2020
Objective

• Obtain an Overview of the Oracle ERP Cloud Tax

• Understand the Regime to Rate Flow and the Rules Concept
• Understand the Tax Calculation of Underlying Transactions

4 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Agenda

• Fusion Tax - Overview

• Common Key Transactions and Integrations Supported
• Key Features Supported for Transaction Taxes and Withholding
• Regime To Rate Flow – Overview
• Tax Rules - Concept
• Organizing Your Tax Requirements
• Tax Rules – Analysis
• Understanding the Tax Calculation:
• Product Based Tax Rates
• Self Assessed Tax
• Compounding Tax

5 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

 Tax Product Development Journey
Historical Summary

• Oracle ERP Cloud tax partner calculation

infrastructure for AR/AP released
• Incremental,
• Dedicated native transaction
phased release of
tax application ready for the • Oracle ERP Cloud Brazil transaction tax and
key India GST and
Cloud (Fusion Tax) fiscal document features released
related business
• Early adoption pilot Fusion Tax flows
• Oracle ERP Cloud tax partner calculation
customers implemented on
infrastructure with OM, Procurement released
premise before Cloud transition • Tax partner
later calculation
solution validation
for OM,
• Central Fusion Tax global enterprise Procurement
solution for O2C, P2P implemented released
universally in Oracle ERP Cloud
• Tax Rapid Implementation feature released
to drive implementation efficiency
• Support of Withholding Taxes centralized
with Transaction Taxes in Fusion Tax

2011 2012-2014 2016-2018 2019+

6 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

 Global Tax Management
Universal Tax Compliance Capabilities

Tax Tax Tax

Content Calculation Reporting

• Out-of-the-box design • Normal transaction data • Generic reporting extracts

delivers automated tax automatically applies relevant available
content upload taxes where applicable • Standard feature reports meet
• Tax content can be defined • Taxability exceptions and rules common global needs
and uploaded by can be used to apply unique • Country-specific reports
implementers, partners, or business needs available
users
• Tax results can always be • Report extensibility supported
• Model supports global country simulated prior to ‘live’ to build custom reports if
configuration and tax rules transaction processing needed
• Initial Content + Content
Updates Supported

7 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Fusion Tax
Solution Overview

Centrally Maximize Enable Total

Manage ROI Compliance Flexibility

Single Point Solution Across Procure to Pay, Configuration and Pre-defined Content:
Order to Cash flows Transaction Repository Jumpstart Implementation
• Single Solution for • Central Global • Global Compliance & • Automated Import:
Global Tax Needs Application for Fusion Reporting Predefined Tax content
• Facilitate Global • Global Tax • Single Source of Truth • Oracle
Operations, Enables Configuration for Configuration / • Partners
Immediate and • Enforcement of Global Reporting
Incremental Entry • Implementers
Tax Legislations • Minimizes Compliance
into newer markets Risk • Users
• Common Infrastructure in
Place

8 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Tax Partner End-to-End Tax Solution Flow
Summary Overview

Oracle ERP Cloud Tax Partner Cloud

Flexible Tax Content and Tax Reporting Features can be used without Tax Calculation Services

Oracle Applications Oracle Content Server

Global Tax ERP Integration
Tax Content
Tax Content Upload Partner Service Repository
Receivables Payables Content

Oracle Tax
Tax Partner Report Extracts
Tax Partner Reporting Tax Returns
Reporting
Order
FDC
& Returns Export Outsourcing
Management Data

Oracle Tax
Transaction Data Transaction Calculation Request Calculation
PRC /Response (Real-Time + Batch
Data Transaction
Support)

Oracle Tax Partner Service

handling Partner Tax Results
9 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20
Tax Reporting & Compliance Benefits
Flexible Offerings & Approaches
• Launch:
Tax Reporting • On demand by individual user session

Generic Common • Automatically on a desired schedule using

Reporting Seeded the Oracle ERP Integration Service
Extracts Reports
• Period-specific or incremental report data can be
reviewed using flexible parameters / filters
• Reporting infrastructure provides capabilities to
Country / Custom/ report by diverse dimensions:
Region Seeded Tax Partner
• tax box allocation rules
Reports Reports
• registration numbers
• tax point basis
• reporting types/codes
• country or regional dimensions
• etc.
10 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20
Common Key Transactions and Integrations Supported
• Domestic and cross-border transactions
• Outbound and inbound consignments
• Inter-company transactions
• Internal Material Transfer
• Global Procurement
• Domestic and international drop shipments
• EU
- Imports, intra-community, domestic purchases
- Exports, Intra-community, domestic sales
• India
- Bill-only, Ship-only Transactions
- Advance Receipts
11 Copyright © 2020, Oracle and/or its affiliates
Fully Integrated with Fusion ERP
• Seamless O2C and P2P integrations
• Fiscal Document Integration (Brazil)
• Tax Fiscal Document Integration (India)
External Transactions
• Tax calculation, recording, accounting and
reporting for:
- Purchase and Sales Transactions
- Purchase and Sales Journals
24-Jun-20
 Key Features Supported for Transaction Taxes and Withholding
For Transaction Taxes and Specific to Transaction Specific to Withholding
Withholding Taxes Taxes
• Compounded taxes, Tax-on-tax
• Self assessed taxes/ reverse charges • Choice of invoice or payment-time
• Product-based tax rates withholding
• Configure Tax point basis and date
• Quantity-based tax rates • Taxable and tax amount thresholds by
• Deferred Recovery for Domestic
• Tax rates based on amount range (Rate Purchases (India) period, supplier, product classification
Schedules) • Choice of including transaction tax
• Recovery for Imports (India)
• Party exemptions amounts in withholding base
• Taxable Basis Formula: Value Addition
• Taxable, tax amount thresholds by tax, (Brazil) • Automatic generation of tax authority
jurisdiction invoices
• Taxable Basis Formula: Price Threshold
• User-definable rules for taxability and (Brazil)
recoverability
• Registrations
◦ Multiple registrations: for first & third parties
◦ Validate registration numbers (Validation
incorporated for more than 35 Countries)
• Product and party classification schemes
◦ US commodity codes, EU commodity codes,
UNSPC codes, import versus export codes
◦ Standard SIC code, GICS codes, …
12 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20
Regime To Rate Flow – Overview

Level at which similar taxes governed by common tax rules or laws are grouped
Regime together

Tax Charge imposed by a government through a Fiscal or Tax authority

Tax
Geographical area tax is levied by a specific tax authority
Jurisdiction
Taxable nature of a product or service; way to group different tax rates under a single
Tax Status tax like STANDARD, REDUCED, EXEMPT Etc.

Tax Rate Rate specified for a tax status for a period of time

Tax Recovery
The rate of Input Tax that is allowed to be recovered against Output Tax.
Rate

13 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Tax Definition Hierarchy
Implementing a New Tax - Regime to Rates Flow

Operating
Unit Tax
Accounts

Tax Recovery
Tax Regime Tax Tax Status Tax Rate
Jurisdiction Rate

Standard 20.0% 100%

Reduced 5.0% 100%
GB VAT GB VAT GB VAT
Zero Rated 0%
Exempt 0%

Flow
Optional Flow

Note: The above data examples were introduced just to illustrate the business flow and do not represent the complete tax setup for the country
Fusion Tax Rules - Concept

Rules

Yes
Tax Engine Rules Rules always
take precedence
over defaults
Defaults
Tax Rules
No

15 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Fusion Tax Rules - Concept

16 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Organizing Your Tax Requirements
The Five P’s of Transaction Data

Normal transaction data drives the global tax determination process:

1. Who am I and what are my tax obligations? (First Party).
• Corporation, government or exempt organization, consumer servicer, etc.
Who are my customers and suppliers? (Third Party)
• Large/small scale, exporter, importer, etc.
2. Where do I operate? (Places)
• Countries or other locations where we operate, buy from or sell into
3. What is the type of business I conduct? (Process)
• Manufacturing, trading, services, etc.
4. What products do I buy or sell? (Products)
• Steel, plastic, pharmaceuticals, services, computer technology, etc.
5. What is the intended use of the product or services I buy? (Purpose)
• Consumption, use in production, reselling, etc.

17 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Common Tax Drivers
Based on the Five P’s of Transaction Data

Party Related Place / Location Process / Product Related Purpose Related

Related Transaction Related
• First/ Third Party • Geographies • Document • Product • Transaction
Classification Classification Classifications Business Category
• Tax Zones
• Registration • Transaction (Inventory) • Intended Use
Status Business • Product Category • Account
Category (Non-Inventory) • User-defined
• Tax Classification • Product Type fiscal classification
Code
• User-defined
fiscal
classification

18 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

 Fusion Tax Rules - Analysis
Rule to Derive the Tax Applicability

If Country of the Bill-From Party Equal To France Then Tax is Applicable

Operator Value
Determining Factor

Condition Set Tax Applicability

Class Qualifier Name

Applicable
Bill-from
Geography Country
party
Determining Factor Set Result

19 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

 Fusion Tax Rules - Analysis
Rule to Derive the Tax Rate

If Product Classification Code Equal To 1704 Then Tax Rate is 6%

Operator Value
Determining Factor

Condition Set Tax Rate

Class Qualifier Name

BR_IPI_1704_RATE
Product Product
Inventory Level 1 Fiscal
Linked Classification Determining Factor Set Result

20 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Streamlined Global Tax Determination Process
Overview and Tax Rule Types

Determination Supports Taxability Rules and Exceptions When defaults are not enough…
Area
Define place of supply rules to determine the jurisdiction for each tax in case of cross border
Place of Supply Defaults, rules
transactions or multi-jurisdiction taxes

Applicability Defaults, rules Define applicability rules to define when one or more taxes are applicable

Registration Defaults, rules Define registration rules to drive self-assessment, rounding, and derive registration number
Tax Status Defaults, rules Define tax status determination rules to derive the tax status. E.g.: “Reduced”, “Standard”, …
Define rate determination rules to derive a tax rate
Defaults, rules
Define product exceptions that discounts or replaces the tax rate derived with a special rate
Tax Rate Exceptions
Define Third Party / Third Party Site level exemptions that discounts or replaces the tax rate
Exemptions
derived with a special rate
Define taxable basis formulas to handle compounded taxes, tax-on-tax or to add specific base
Taxable Basis Defaults, rules
modifiers; or to directly use the assessable value as the taxable basis
Tax Calculation Defaults, rules Define a tax calculation formula to add or subtract prior tax

Define recovery rate determination rules using intended use, product classifications, etc., to
Tax Recovery Rate Defaults, rules
determine what percentage of the tax is recoverable

21 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Understanding the Tax Calculating
Product Based Tax Rates - Scenario

• Tax calculation based on item selected during invoice creation

Nomenclatura Comum do Expected

Mercosul (NCM) Code Product Description Tax%
HS Code Of sweets without cocoa products
1704 (including white chocolate). 6
170490 Others 6
17049010 White chocolate 6
17049090 Others 15
Tractor (except the position of cars tractor-
8701 8709). 0
870195 Greater than 130 kw 0
Tractors specially designed for dragging logs
87019510 (log skidder) 0
87019599 Others 5

22 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Understanding the Tax Calculating
Product Based Tax Rates – Tax Setup Details

• Tax Regime to Rate Setup Details:

Tax Recovery
Tax Regime Tax Tax Status Tax Rate
Jurisdiction Rate

BR_IPI_STD_RATE
(10%)
BR_STATUS_IPI BR_IPI_1704_RATE BR_IPI_STD_RR
BR_REGIME BR_IPI BRAZIL
(6%) (100%)
BR_IPI_8701_RATE
(0%)

23 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Understanding the Tax Calculating
Product Based Tax Rates – Required Setups

Inventory Side Setup Tax Side Setup

Create Product Fiscal Classification

Create Catalog
Create the Country Default Controls
(Primary Inventory Category Set)
Create Categories
Under the Catalog
Create Tax Rate Rules

Assign the
Categories to the Create Product Fiscal Classification
Items Based Exceptions

24 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Understanding the Tax Calculating
Product Based Tax Rates – Expected Tax Rates on a Transaction

• When a Receivables Invoice is created, with the Items as below:

Item Product Description Rule Evaluated Applied Tax Rate Rate%

Test Item (No Category Assigned) Default Tax Rate BR_IPI_STD_RATE 10

HS Code Of sweets without cocoa BR_IPI_1704_RATE
1704 products (including white chocolate). Tax Rate Rule 6
17049090 Others Tax Exception BR_IPI_1704_RATE 15
Tractor (except the position of cars
8701 tractor-8709). Tax Rate Rule BR_IPI_8701_RATE 0
87019599 Others Tax Exception BR_IPI_8701_RATE 5

25 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Demo

Product Based Tax Rates

26 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Understanding the Tax Calculating
Self Assessed Tax - Scenario

• Applicable when goods purchased from unregistered sellers

• Purchaser responsible for calculating/remitting tax to relevant tax
authority
• self-assessed tax is also used to model intra-EU purchases as an
alternative to offset tax.
• Scenario: There are 2 Suppliers, one is Registered and one is Not Registered. The
tax is to be Self Assessed for the Non Registered Supplier.

Supplier Supplier Name Registration First Party to

Status Self-Assess?
Supplier1 AT&T Universal Card Registered No
Supplier2 Advanced Network Devices Not Registered Yes

27 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Demo

Self-Assess Tax

28 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Understanding the Tax Calculating
Compounding Tax – Scenario

• Scenario: Two taxes, Tax1 and Tax2, are applicable on a transaction,

where Tax 2 is applied on line amount + Tax 1

29 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Understanding the Tax Calculating
Compounding Tax – Tax Setup Details

• Tax Regime to Rate Setup Details:

Tax Recovery
Tax Regime Tax Tax Status Tax Rate
Jurisdiction Rate

FUS_COMP_TAX1- FUS_COMP_TAX1_ FUS_COMP_TAX1 FUS_COMP_TAX1

UES FUS_COMP STD-UES _STD_RATE10- _REC60-UES
JURIS1-UES UES (60%)
(Compounding
(10%)
FUS_COMP_REGI Precedence – 1)
ME-UES
FUS_COMP_TAX2- FUS_COMP_TAX2_ FUS_COMP_TAX2 FUS_COMP_TAX_
UES FUS_COMP STD-UES _STD_RATE10- REC40-UES
(Compounding JURIS2-UES UES (40%)
Precedence – 2) (20%)

30 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Understanding the Tax Calculating
Compounding Tax – Taxable Basis Formula Based on Prior Tax

31 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Understanding the Tax Calculating
Compounding Tax – Taxable Basis - Tax Setup

32 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Understanding the Tax Calculating
Compounding Tax – Verify the Transaction

33 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Understanding the Tax Calculating
Compounding Tax – Verify the Transaction

34 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Summary

• Brief history and overview of the Oracle ERP Cloud Tax

• Regime to Rate Setup and the Rules Concept
• The Tax flow of underlying transactions with some business
scenario like Product Based Tax Rates, Self Assessed Tax,
Compounding Tax.

35 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

 Questions & Answers

36 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20

Thank You

37 Copyright © 2020, Oracle and/or its affiliates 24-Jun-20