Oracle Financials Cloud

Tax

Vinit Poddar
Product Management Director
Oracle Development
Agenda

• Overview

• Transaction Tax

• Withholding Tax

• Additional Features
Basic Configuration
Regime

US Sales Tax
Canadian Goods and Service Tax
India Goods and Service Tax

Tax

State Sales Tax

Basic Configuration County Sales Tax
City Sales Tax

Tax Status Jurisdictions

Standard California
Reduced Nevada
Exempt SFO
Interstate Los Angeles

Tax Rate

STD (10%)
STD-USE (12%)
STD-RENTAL (18%)

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 Determining Factors

Place / Location Process /

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

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Advance Configuration
Regime Determine Tax
Regimes
US Sales Tax
Canadian Goods and Service Tax
Indian Goods and Service Tax Determine Candidate
Taxes

Tax Determine Tax

Advanced Applicability
Basic Configuration State Sales Tax
County Sales Tax Configuration
City Sales Tax Determine Place of Supply
/ Tax Jurisdictions

Tax Status Jurisdictions

Determine Tax
Registration
Standard California
Reduced Nevada
Exempt SFO Determine Tax Status
Interstate Los Angeles

Exemptions
Determine Tax Rate
Exceptions

Tax Rate Determine Taxable

Basis
STD (10%)
STD-USE (12%)
STD-RENTAL (18%) Calculate Taxes

Determine Recovery
Rate
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Security Model Security Reference Manual for Financials

Tax Accountant
Prepares and files tax returns and reports for an enterprise,
User including country, federal, state, and local corporate, payroll,
and transaction taxes

Tax Administrator
Sets up technical areas and the integration with tax service
providers
Job Role Duty Role
Tax Specialist
Maintains tax configuration, especially the variable entities that
Security Context require periodic updates, such as tax rates and tax jurisdictions
Data Business Unit
Access
Data Access Set Tax Manager
Ledger
Cost Organization Defines the tax policies and most efficient tax configuration.
Asset Book Sets up relatively stable entities that seldom require updates,
such as tax regimes and taxes

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Enterprise Structure

InFusion Corporation

InFusion US Ledger InFusion UK Ledger

[USD, Corp COA, US GAAP] [GBP, Corp COA, IFRS]

InFusion US1 LE InFusion US2 LE InFusion UK LE

[BSV = 101] [BSV = 102] [BSV = 201]

InFusion US1 InFusion US2 InFusion UK

Business Unit Business Unit Business Unit

InFusion UK IO
Inventory Org

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Agenda

• Overview

• Transaction Tax

• Withholding Tax

• Additional Features
 Use Case Scenario

• Product Type = Electronics; Bill From = UK; • Product Type = Electronics; Bill From = UK;
Registration Status = Registered Registration Status = Non – Registered
– VAT Tax: 5%, Surcharge – 10% – VAT Tax: 5% (Self Assessed), Surcharge – 10% (SA)

• Product Type = Electronics; Bill From = Outside UK; • Product Type = Electronics; Bill From = Outside UK;
Registration Status = Registered Registration Status = Non – Registered
– VAT Tax: 20% – VAT Tax: 20% (Self Assessed)

• Product Type = Consumables; Bill From = UK; • Product Type = Consumables; Bill From = UK;
Registration Status = Registered Registration Status = Non – Registered
– VAT Tax: 1%, Surcharge – 10% – VAT Tax: 1% (Self Assessed), Surcharge – 10% (SA)

• Product Type = Consumables; Bill From = Outside • Product Type = Consumables; Bill From = Outside
UK; Registration Status = Registered UK; Registration Status = Non – Registered
– VAT Tax: 5% – VAT Tax: 5% (Self Assessed)

• Party Type = Government

– VAT Tax: 0%

• Intended Use = Resale • Intended Use = Consumption • Type of Purchase = Fixed Asset
– Recoverable: 100% – Recoverable: 0% – Recoverable: 0%

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Tax Rules - Registration

Default – Bill from Party

If Registration Status of the Bill-

Not Equal To Registered Then Bill-To Party
From Party

Determining Factor Operator Value

Registration Status

Class Qualifier Name Condition Set

Bill-To
Bill-From Registration Party
Registration
Party Status

Determining Factor Set

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Result
Self Assessed Tax ü Offset Tax vs Self Assessed Tax

• Supplier not • Backward • Does not • Tax for

Offset

Use
Self Assessed

Reporting Only
registered compatible generate any reporting
• Supplier Tax approach for distribution purpose only
Registration Self in Payable • No
Status Assessed tax Invoice accounting
• First Party • Carries • No impact
Registration, negative Accounting • Create Tax
set as self- rates Impact with Tax for
assessed • Reduces or • Only reporting
• Also knows completely supported purposes
as Reverse offsets tax for migrated only
Charge liability taxes
• Create Tax • Tax defined
with Offset with tax type
Tax enabled as “Use Tax”

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Tax Rules – Tax Applicability

Default – Not Applicable

If Product Inventory linked of

Is not blank Then Tax is Applicable
the Item Tax Category

Determining Factor Operator Value

Tax Applicability

Class Qualifier Name Condition Set

Product Applicable
Item Tax
Inventory Level 1
Category
Linked
Determining Factor Set

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Result
Product Fiscal Classification - Levels

Product Code and Tax Rate Product Fiscal Classification

Category Code Category Name Tax rate No. of Levels - 2
AA1902 Pasta 18% Level Starting No. of
AA1905 Wafers 18% Position Character
BB2102 Baking Powder 12% 1 1 2
BB2106 Snacks 12% 2 3 4

If Product Classification Code Equal To AA Then Tax Rate is 18%

Determining Factor Operator Value

Tax Rule

Tax Rate
Class Qualifier Name Condition Set

Product 18%
Inventory Level 1 Product Fiscal
Linked Classification
Determining Factor Set

18
Result
Product Fiscal Classification

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Product-Based Fiscal Classification ü Product Fiscal Classification Whitepaper

• Product fiscal classification types and codes

ü Use this classification to group items for tax determination and reporting purposes. This functionality uses the
Oracle Fusion Inventory catalog and item functionality and therefore, you can only use it when this functionality
is installed.

• Product category fiscal classification codes

ü Use this classification where Inventory is not installed. It helps classify transaction lines for tax determination
and reporting purposes.

• Intended use fiscal classifications

ü Use this functionality for tax determination and reporting purposes. Use this classification where transaction
lines need to be classified based on the intended use of the product defined on that item.

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Tax Rules – Place of Supply

Default – Bill from

Then Place of Supply is

If Country of the Bill-From Party Not Equal To UK
Bill-To

Determining Factor Operator Value

Place of Supply

Class Qualifier Name Condition Set

Bill-To
Bill-From
Geography Country
Party

Determining Factor Set

Result
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Tax Rules – Recovery Rate

Default – 100% Recoverable

If Transaction Input Factor of

Equal To Consumption Then Recovery is 0%
Intended Use

Determining Factor Operator Value

Recovery Rate

Class Qualifier Name Condition Set

0%
Transaction Intended Recoverable
-
Input Factor Use

Determining Factor Set

Result
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Tax Rules – Recovery Rate

Default – 100% Recoverable

If Line Account Equal To Asset Clearing Then Recovery is 0%

Determining Factor Operator Value

Recovery Rate

Class Qualifier Name Condition Set

0%
Line Recoverable
Accounting -
Account

Determining Factor Set

Result
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Tax Rules – Rate

Default – 5% VAT

If Country of the Bill-From Party Equal To United Kingdom Then Tax Rate is 1%
And Product Inventory Linked Equal To Consumables VAT

Determining Factor Operator Value

Tax Rate

Class Qualifier Name

Condition Set

Bill-From
Geography Country 1% VAT
Party

Product
Item Tax
Inventory Level 1
Category
Linked
Determining Factor Set
Result
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Tax Rules – Rate

Default – 5% VAT

If Bill From Party Classification

Equal To GOV Then Tax Rate is 0% VAT
of VAT Party Type

Determining Factor Operator Value

Tax Rate

Class Qualifier Name Condition Set

0% VAT
Party Fiscal VAT Party
Bill From
Classification Type

Determining Factor Set

Result
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 Party Fiscal Classification

Use party classifications to classify your customers, suppliers, first-party legal entities, and first-party legal reporting
units for tax determination and tax reporting

• Classification Categories – Create a classification category with the table name as “HZ_PARTIES”

• Classification Codes – Codes to classify the parties in order to configure the tax rules

• Run Classification Hierarchy Generation – Run for the classification category created

• Party Assignment - Assign the classification code to the parties

• Tax Rules – Create tax rules using the factor class as “Party Fiscal Classification”

ü Party Fiscal Classification Example

ü Party Fiscal Classification Code

ü Party Fiscal Classification - EBS

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 Use Case Configuration
VAT Tax
UK_VAT Regime
(Country : United Kingdom) • Jurisdiction : UK
• Tax Status : Standard
• Tax Rate : 0%, 1%; 5%; 20%

Tax Rules
– Tax Registration Rule (Def: Bill From)
- Tax Rate Rules
• If (Bill From <> ‘Registered’); Registration Status = Bill ◦ If (Product Type = Electronics), Bill From = UK; Tax
to Rate = 5%
◦ If (Product Type = Electronics), Bill From <> UK;
– Tax Applicability Rule (Def: Not Applicable)
Tax Rate = 20%
• If (Product Type is not null); Result = Applicable
◦ If (Product Type = Consumables), Bill From = UK;
– Place of Supply Rule (Def: Bill From) Tax Rate = 1%
• If (Bill From Country <> ‘UK’); Result = Bill To ◦ If (Product Type = Consumables), Bill From <> UK;
– Recoverability Rule (Def: 100% Recoverable) Tax Rate = 5%
• If (Intended Use = Consumption); Result = 0% ◦ If (Party Fiscal Classification = GOV); Tax Rate =
Recovery 0%
• If (Line Account = Asset Clearing); Result = 0%
Recovery

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Use Case Configuration
Surcharge Tax
UK_VAT Regime
(Country : United Kingdom) • Jurisdiction : UK
• Tax Status : Standard
• Tax Rate : 10%
• Taxable Basis : UK_SUR
Tax Rules

– Tax Registration Rule (Def: Bill From)
• If (Bill From <> ‘Registered’); Registration Status =
Bill to
– Tax Applicability Rule (Def: Not Applicable)
• If (Product Type is not null), Bill From = UK; Result =
Applicable
- Place of Supply Rule (Def: Bill From)
◦ If (Bill From Country <> ‘UK’); Result = Bill To
- Recoverability Rule (Def: 100% Recoverable)
◦ If (Intended Use = Consumption); Result = 0%
Recovery
◦ If (Line Account = Asset Clearing); Result = 0%
Recovery

- Tax Rate Rules

◦ None

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Tax Formula, Exemptions, Exceptions

Taxable Basis Formula ü Tax Formula Whitepaper

Used to determine what is the amount on which the tax is to be calculated.

• Line Amount, Prior Tax, Assessable Value, Quantity

Tax Calculation Formula

Used to determine the calculation methodology that is applied to derive the basic tax amount on a transaction line.

Tax Exemption
ü Tax Exemption Whitepaper
• Full or partial exclusion from taxes or surcharge.

• Applied on party tax profile

Tax Exception
ü Tax Exception

Used to apply special tax rates to the products.

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Transaction-Based Fiscal Classification
ü Transaction Fiscal Classification Whitepaper

• Transaction business category

ü Use this classification to classify a transaction line to define the type of transaction
• Transaction fiscal classification
ü Use this classification to group transaction business categories to minimize tax rules setup and
maintenance
• Document fiscal classification
ü Use this classification to relate documents to a transaction that affect the tax applicability or
determination of transaction taxes on the transaction
• User-defined fiscal classification
ü Use this classification to classify transaction lines where none of other classification is
appropriate

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 Category Based PO Tax

• For non item (Category) based PO

Ø Create Tax determining factor set using factor class as “Transaction input factor” and factor name as
“Purchasing Category”

Ø Create Tax condition set for each of the purchasing category for which category based purchasing will be done

Ø Create Tax rules

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Implementation Experience
Challenges
Tax legislations are Complex
Time consuming to implement
Constantly Changing
Compliance risk on expansion
Tax Users are no Application experts
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Tax Rapid Implementation
• Simple workbook to define common tax configuration
• 3 Sheets,~7-20 attributes each, uses common lingo, in-
built validations and documentation
• Partners can jumpstart tax implementation in minutes
• Download existing configuration: update, add for
changes and upload revised spreadsheet for changes
to take effect
• New Legal Entities automatically enabled for tax of the
relevant geography tax profile
• Tax Managers can focus on their core competency
without the overhead of gaining application expertise
Tax Rapid Implementation
1

Tax Configuration Workbook

Download from Manage Tax Regimes

Upload & Enable

“Generate CSV File to Upload” button creates files for upload.
On successful completion, enable taxes for transactions

Organization Specific, Sensitive Configuration

Download Tax Implementation Workbook for Tax Accounts, First
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Party Registrations, Business Unit Subscription to regimes
Thank You

34 Copyright © 2021, Oracle and/or its affiliates | Confidential: Restricted

Agenda

• Overview

• Transaction Tax

• Withholding Tax

• Additional Features
 Withholding Tax
ü Withholding Tax Overview
Withholding Tax ü Withholding Tax Compliance Whitepaper

Payables Withholding
Tax Tax Rules

Configuration Configuration

• Create Withholding Tax Supplier • Create Withholding Tax Supplier

• Manage Tax Reporting and Withholding • Configuration Owner tax Option
Tax Options
• Tax Rules
• Manage Tax Code
• Create Withholding Tax Classification
(Tax Groups)
• Create Withholding Tax Calendar

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Withholding Standard Tax Classification Code Method

When to use it, How to use it

When to use it How to use it

• Backward compatible method
• Very convenient for simple cases
• Few tax rates
• One tax rate / combination of rates
per supplier site
• Enable Withholding Tax for the Supplier
• Specify the WHT TCC at Supplier Site
• Select WHT STCC as the method for Regime
Determination on WHT Options

When not to use it Note:

• Rates different by State / City etc.
• Applicability depends on type
product, type of party etc
• When BU WHT Rates are defined, WHT TCC codes
of are automatically created and visible on AP Invoice
lines
• When Global Config Owner rates are defined, a tax
rule condition with the specific WHT TCC must be
created

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Use Case Scenario – Withholding Tax

Interest Withholding Royalty Withholding

• Rates applied at the supplier site • Rates applied at the supplier site

• Rates – 20% • Rates – 30%

• Applicable if Total Supplier billing for a • Applicable irrespective of the invoice amount
month > £20,000 and total supplier billings

• In certain cases, both Withholdings will be applicable (20% Interest and 30% Royalty)

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 Withholding Tax Computation Example (Percentage Tax)

Threshold Set up (Document, Amount Exceeds) Threshold Set up (Document, Total Line Amount)
Threshold Threshold Minimum Threshold Threshold Minimum
Taxable Basis Tax Rate Taxable Basis Tax Rate
Basis Type Value Basis Type Value
Document Taxable Amt 5,000 Amount Exceeds 20% Document Taxable Amt 5,000 Total Line Amt 20%

Withholding Tax Computation Withholding Tax Computation

Effective Tax Effective Tax
Doc No Doc Amt Taxable Amt Total Tax Amt Current Tax Amt Doc No Doc Amt Taxable Amt Total Tax Amt Current Tax Amt
Rate Rate
1 4,000 - - - 0% 1 4,000 - - - 0%
2 16,000 11,000 2,200 2,200 20% 2 16,000 16,000 3,200 3,200 20%

Threshold Set up (Period, Amount Exceeds) Threshold Set up (Period, Total Line Amount)
Threshold Threshold Minimum Threshold Threshold Minimum
Taxable Basis Tax Rate Taxable Basis Tax Rate
Basis Type Value Basis Type Value
Period Taxable Amt 20,000 Amount Exceeds 20% Period Taxable Amt 20,000 Total Line Amt 20%

Withholding Tax Computation Withholding Tax Computation

Effective Tax Effective Tax
Doc No Doc Amt Taxable Amt Total Tax Amt Current Tax Amt Doc No Doc Amt Taxable Amt Total Tax Amt Current Tax Amt
Rate Rate
1 4,000 - - - 0% 1 19,990 - - - 0%
2 16,100 100 20 20 20% 2 100 20,090 4,018 100 0.498%
3 10,000 10,100 2,020 2,000 20% 3 20,000 40,090 8,018 7,918 39.59%

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Withholding Tax Computation Example (Gross Schedule)

Threshold Set up
Threshold Minimum Apply Single
From Amount To Amount Tax Rate
Basis Value Tax Rate
- 10,000 0%
Period 20,000 No
10,000 10%

Withholding Tax Computation

Doc Total Taxable Current Tax Effective
Doc No Total Tax Amt
Amt Billing Amt Amt Tax Rate
1 7,000 7,000 - - - 0%
2 15,000 22,000 12,000 1,200 1,200 5.45%
3 5,000 27,000 17,000 1,700 500 10.00%

Threshold Set up
Threshold Minimum Apply Single
From Amount To Amount Tax Rate
Basis Value Tax Rate
- 10,000 0%
Period 20,000 Yes
10,000 10%

Withholding Tax Computation

Doc Total Taxable Current Tax Effective
Doc No Total Tax Amt
Amt Billing Amt Amt Tax Rate
1 7,000 7,000 - - - 0%
2 15,000 22,000 22,000 2,200 2,200 10%
3 5,000 27,000 27,000 2,700 500 10%
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Agenda

• Overview

• Transaction Tax

• Withholding Tax

• Additional Features
Integrations with Vertex ü Vertex Integrated Tax Offerings
ü Vertex Tax Solution
ü Tax Partners

46
 External Taxable Transactions ü Taxable Transaction - Working Example

ERP Cloud
External Applications

Tax
eCommerce Billing Configuration

Centralized Tax
Tax Tax Compliance
Tax Services Repository Reporting
Taxable
Transactions
Procurement Supply Chain
Management

Subledger General
Accounting Ledger

Tax on Journals Taxable Transactions

ü External Journals ü Sales and purchase transactions

ü Direct tax adjustments ü Transactions with and without tax

47
External Taxable Transactions

48
 Tax Reporting
ü Tax Reports

Tax Box Allocations and Reporting

All Books
• Implementing Financials for EMEA

• Using Financials for EMEA

• Implementing Financials for Asia/Pacific

• Using Financials for Asia/Pacific

• Using Analytics and Reports for Oracle Financials Cloud

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 Best Practice

ü Topical Essays

ü Financial Information Center (Doc ID 104.2)

ü Complying with Country Requirements using Financials Cloud

ü Global Catalog

50
Recent New Features

• First Party Tax Registration Number default on Invoices

• Tax exception application to Related Taxes (21D)
• Input Tax Rate Code Association for Payables Intercompany Invoices (22C)

ü Replay: What’s New in Cloud ERP Financials 23C

ü For a complete list of update-wise new features, visit Oracle Cloud Readiness

ü Feature Opt-in Matrix

ü Enable Offerings for Oracle Applications Cloud Release 13 Upgrade (Doc ID 2317112.1)

ü Cloud Applications Roadmap

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Thank You

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