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OAUG Tax Management SIG presents:

Oracle E-Business TaxExtreme Hacks

Session 1 - Monday Sept 16, 2013 11 a.m. EDT

Session 2 - Thursday Sept 19, 2013 11 a.m. EDT

2013 Fiteni Enterprises Inc 1

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AGENDA

Introduce the WebinarIntroduce the Presenter(s)

Hack 1 - Gross-up approach to Canada HST RITC reporting via GL

Hack 2 - Automate accrual of taxes on supply when not billed by supplier


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WHAT IS AN EXTREME HACK?

In Oracle, we define an Extreme Hack as pushing the

boundaries of the standard functionalityby using

the current tech stack for a given release to develop

server side code, report and forms Personalizations,Descriptive Flexfields, Preferences, Profiles in a

manner that is sustainable over the long term.


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Presenters

Extreme Hacks #1 Sept 16 11am EDT

Alex FiteniFiteni Enterprises

Tax SIG Chair & Moderator

And later this week .

Extreme Hacks #2 Sept 19 11am EDT

Andrew BohneteBiz Answers eBTax SIG EU Chair


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BIO

Alex Fiteni CMA CPA

President, Fiteni Enterprises Inc

OAUG Co-Chair of Oracle Tax Management SIG

Currently assists clients in assessing taxcompliance needs and configuring eBTax to meetrequirements

Prior to building his private practice, Alex was the

Director of Oracle Applications Development forOracle E-Business Tax and Globalizationsmodules.


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Partially Recoverable Tax Scenario

Requirement

The total HST Recoverable must be recorded in a GST/HST as a full ITC

recovery in the Ledger

The PVAT portion must be recorded separately as a deduction on the claim

statement for 8%

The client wants to show this in separate accounts and net them off when

the payment is remitted.

For a 100.00 taxable value the calculation would be as follows:

HST Input Tax Credit by default is 100% 13.00

PVAT non-recoverable portion to reduce the HST ITC is -8.00

Net recoverable tax portion (GST 5%) is 5.00


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Tax Solution Options

Option #1 Reporting the RITC from the Financial Tax Register Reportusing Non-recoverable report style

ProsUses the standard calculation and reporting functionality

ConsDoes not reflect the non-recoverable portion passing throughthe tax asset & liability accounts for GL only reporting

Option #2 Use Sub-Ledger Accounting to add a gross-up rule (ademonstration of this method is out of scope)

ProsAccounting will reflect the exact GL Accounts to be used

ConsThe additional journal lines will not show in the AP InvoiceDistributions window

Option #3 Gross Up the Tax Rate and recovery and use Offset tax

ProsStandard functionality and reporting in GL supported

ConsDistorts the nominal tax rates used in the calculation


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Gross Up Tax Accounting via eBtax

eBtax Configuration Overview

The Ontario RITC is grossed up by the amount to be recovered 13 + 8% = 21%

The Recoverable apportionment (allocation) is then calculated with respect to the5/21 for the recoverable amount.

Finally, an Offset Tax Code is used to accrue a negative amount for the 8% that willbe charged back to the Item Expense line GL Account.

e.g.

Item expense 100.00 Item Line Acct

Supplier Invoice Amount -113.00 Trade Payable

HST Input Tax Credit by default is 100% 13.00 Item Line Acct

Offset PVAT calculated on ON HST ITC is -8.00 Item Line Acct

PVAT Accrued 8.00 GST Accrual Acct

Net recoverable Tax Amount 5.00 GST Recov. Acct


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Overview of Tax Set Up

eBTax HIERARCHY STANDARD TAX OFFSET TAXREGIME CA GST HST RGM

TAX CA GST HST TAX CA GST HST OFST TAX

GL Account for Ledger &

Operating Unit

Default Tax

Recovery/Liability

Accounts

New account setups for

each

STATUS CA GST HST STD STT CA GST HST OFST STT

RATE CA ON HST RITC RTE CA ON HST OFST RTE

% 21.0 -8.00

GL Account Supplier Trade Payable (for Tax Paid

Invoices)

LE.000.00000.Accrual.000000.00000

RECOVERY CA GST ON HST RITC

REC

CA GST HST OFST REC

% 23.81 0

Recovery GL Account LE.000.00000.Recovery.000000 Item Charge Account


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How it works

Tax components and steps to make it work Pre-Requisites Tax Regime, Tax, Status and Rates for

the Tax Jurisdiction(s)

Additional set Up for the Gross Up Create a Tax Recovery Rate for the ratio of GST to grossed up

PVAT i.e. 5/21 or 23.81%

Create a Tax Rate Code for the grossed up rate

Assign the Tax Recovery Code to the Tax Rate Code

Create an Offset Tax, Status and Rate for 8%

Create an Offset Tax Recovery Rate for 100% Create a Tax Rule to invoke the new Tax Rate Code

(e.g. a Determine Tax Rate Rule to test the value for the given TaxClassification Code)


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Offset Tax


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Offset Status


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Offset Tax Rate Code


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Offset Tax Rate Details


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Offset Tax Recovery Rate


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Benefits of Hack

Requirement

The design achieves the expected results and tax

reporting can be performed out of the GL

Configuration

All of the configuration is within eBtax

Maintenance

Updates are required for the Standard, Offset and

Recovery Period Rates


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Automating Unbilled Tax Accruals

1. Requirement

Some suppliers are not required to bill taxes in Jurisdictions in which they do

not have a permanent establishment, significant presence , a sales threshold

or Nexus (US).

e.g. Supplier is Registered in Jurisdiction 1, but not Jurisdiction 2

Invoice Item amount 100.00

Tax amount Jurisdiction 1 5% 5.00

Amount billed 105.00

Ship to indicates a second Jurisdiction also has a tax

Jurisdiction 2 7% 7.00

The Legal Entity is Registered in Tax Jurisdiction 2 and must accrue the tax.

2013 OAUG Multi-National SIG 2013 Fiteni Enterprises Inc 18

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In R12 there are two options available Self-Assessed TaxAllow Self-Assessed Tax flag

Supplier / Siteeach tax must be set to self-assessedmanually on the Tax Line in Payables Workbench

Legal Entity Establishmentall taxes for all suppliers are

self-assessed all the time Offset TaxAllow Offset Tax flag

Supplier / Site - all taxes are treated with an offset tax

Legal Entity Establishmentall taxes are offset

Automated Tax Registration and Offset Tax with TaxRules Supplier / SiteAllow Offset Tax & Tax Registrations

Legal entity EstablishmentTax Registrations

Tax Rule based on Tax Registration switches in Offset Tax

Tax Solution Options in R12

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Self-assessed tax feature creates additionaltax lines based on a choice made to re-

assign a tax already calculated by eBtax.

The supplier / site must be set to Allow Self-

Assessed Tax.

The user must review each tax and choose to

make the specific tax self-assessed by checking

the relevant flag.

Self-Assessed Tax Option


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The supplier tax must allow offset taxes

The supplier is identified with a registration record for each

GST & PST tax and whether they are registered or not.

The AP clerk prepares the invoice for data entry

The end users add the Item line amounts, GL Account,

Purchase Category and Ship To Location.

The invoice is reviewed by the invoice validation process

and tax is calculated.

If the supplier is not registered for the Ship To Location TaxJurisdiction, the tax is changed from a default Tax Rate Code to an

Offset Tax rate Code, thus generating the tax accrual needed if the

supplier did not bill the tax.

Offset Tax Method


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Each supplier billing for goods and services to aCanadian Legal Entity must be registered with a

Tax Registration Status for each tax in Canada

The Tax Registration Status determines if the

supplier will bill the tax or not.

REGISTEREDthe tax is expected to be billed by and

included on the invoice by the supplier

NOT REGISTEREDthe specified tax is not expected tobe billed by the supplier and will have to be accrued for

later payment too the relevant tax authority.

How it works - Registrations


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Each Tax in the Canadian Tax Regime will require a new TaxRate Code with an Offset tax Code that mirrors the rate

assigned.

PP Standard Tax Rate Code +7%

PP Offset Tax Rate Code7%

Tax Accounts are assigned at the Ledger/Operating Unit

level to accrue the tax to the relevant GL accrual account

A Tax Rule is required to examine the Registration Status of

the supplier and LE and switch the tax rate code from thedefaultbilled taxto the offset tax rate code method

during the tax calculation process.

How it WorksConfiguration


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Ship to is SK,

CA GST HST RGM, Tax is CA GST HST, If LE is REGISTERED

& Supplier is REGISTERED, continue with default CA GST

STD RTE Tax Rate Code

CA ST RGM, Tax is CA SK TAX, If LE is REGISTERED &

Supplier is NOT REGISTERED, switch to Offset Tax Rate

Code CA SK OFST STD RTE

Tax Conditions and results


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Offsets Eliminates manual intervention at tax line level

Shows up in GL Distributions

Supplier must be configured

Self-Assessed

Requires a decision on each tax line

Not shown in Invoice Distributions window

Pros and Cons


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Key Design Components include:

Supplier Configuration

Tax Configuration

Invoice Processing

Tax Reporting

How it Works


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Do not set any flags at the Site Level, only theSupplier level, same as the Tax Registrations

Allow Offset Tax at Supplier/Site Level


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One offset (negative) rate per tax

rate is required per core tax ratecode.

Create Offset Tax, Status & Rates

31

Add Offset Tax

Add Offset StatusAdd Offset Tax Rate Code

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One additional Standard Tax Rate Code matched with one> Offset Tax Rate to which is assigned one > Offset recovery rate code perProvince

Create additional Tax Rates for Offset


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Offset Tax Rate assignment

33

A new Tax Rate Code must be

different from the default

standard rate code to allow a

Tax Rate Rule based on Tax

Registration Status to switch

Tax Rate Codes

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DFS must include at minimum Registration Status

Ship To/Bill To Province

TCS must define Offset conditions only

Bill To Party = REGISTERED Bill From Party = NOT REGISTERED

Ship To SK or MB or BC (one TCS per province)

Ship to is NULL and Bill To is SK or MB or BC (oneTCS per province)

Determine Tax Rate Rule (one per PST Tax) If Condition is TRUE, then switch to CA pp OFST

STD RTE

Tax Rule Components


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Create Tax Determining Factor Set

Ensure minimum conditions are included

Determining Factor Set


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Tax Rules


Add Rate Rule

to each Tax

Add

conditions and

result for

condition if

TRUE

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What tax drivers does the tax scenario have

to include?

Buyer is Bill To Party (Legal Entity) is

REGISTERED for PST in SK

Seller is Bill From Party (Supplier) is NOT

REGISTERED for PST in SK

Ship To Location is SK Tax Rule will trigger Offset Tax Rate switch for

PST in SK only

Auto-Offset Taxes in Workbench


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Create tax scenario in Oracle Tax Simulator Review the Tax Rate Rule that obtained the result to ensure

all criteria are satisfied

Tax Simulator Rule Result


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GST is not affected by PST tax rule

PST based on default Ship/Bill To till rate level

Summary Tax Lines


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Tax Accounting for the negative accrual isidentified as a Recovery, so the tax accrualGL account is derived from the RecoveryAccount of the Recovery rate assigned to

the Offset Rate Code. Item Expense Acct Dr 100.00

Tax GST Rec Acct Dr 5.00

Tax SK PST Expensed Dr 5.00 Tax SK PST Accrual Cr 5.00

Trade Payables Cr 105.00

Tax Accounting and Automated Offsets


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Benefits of Hack

Configuration

Uses Standard Tax Functionality

Development

No custom development required

Maintenance

Tax Registration for each affected Supplier

Tax Registration for Legal Entity Establishment(s)

Maintain tax rates for Offset Tax Rate Codes


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Q&A

Contact Information

Extreme Hacks #1

Alex Fiteni CMA CPA

[email protected] +1-604-902-2782

Extreme Hacks #2

Andrew Bohnet

[email protected]

LinkedIn Group: Oracle Tax Management SIG
mailto:[email protected]:[email protected]

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