Oracle E-Business Tax: Regime to Rate Flow in Oracle R12

In Oracle Release12, there has been some very significant changes, one among them being how we define tax. E-Business Tax is now a single point where we define our taxes for all the sub-ledger modules. In this article I will try to do a sample Tax setup using the Regime to Rate Flow of Oracle E-Business Tax in the Tax Manager responsibility.

Creating a Tax Regime

In Oracle E-Business Tax, a Tax Regime is the system of regulations for the determination and administration of one or more taxes.

1. Navigate to the Create Tax Regime:

• Navigation: Tax Configuration Tax Regimes

• Click the Button “Create”

2. Enter a new tax regime based on the following information:

Tax Regime Code: US VAT TAX

Name: US VAT TAX

Regime Level: COUNTRY

Country Name: United States

Parent Regime Code: Blank

Effective From: 08-sep-2010

Effective To: Leave Blank

Used to group Regimes: Unchecked

3. Expand the Controls and Defaults region

Allow Tax Recovery: Checked

Allow Override and Entry of Inclusive Tax Lines: Unchecked

Allow Tax Exemptions: Checked

Allow Tax Exceptions: Checked

Tax Currency: USD

Minimum Accountable Unit: 0.01

Rounding Rule: Nearest

Tax Precision: 2 (default)

4. Click on Button “Continue”

4. Enter tax regime configuration options:

Party Name: Vision Operations (Note: Select the Operating Unit and legal entity owning Tax Content party type)

Configuration for Taxes and Rules: Common Configuration with Party Overrides

Configuration for Product Exceptions: Party-Specific Configuration

Effective From: 01-JAN-1950

Effective To: Leave blank

5. Click on Button “Finish”

6. You will get the message “The tax regime was successfully created”

DEFINING TAXES

Creating a Tax

1. Navigate: Tax Configuration Tax Regimes

2. Search for the Tax Regime you created above using the filter criteria of Country as “United States” and Tax Regime Code as “TESTREGIME1”

3. Click on button “Go”

4. Click on icon “Regime to Rate Flow”

5. Click on button “Create Tax”

6. Create a new Tax as per information mentioned below:

Tax Regime Code: US VAT TAX

Configuration Owner: Global Configuration Owner

Tax Source: Create a new tax (defaults)

Tax: US VAT TAX

Tax Name: US VAT TAX

Tax Type: VAT

Effective From: 01-JAN-1950 (defaults)

Effective To: Leave blank

Geography Type: COUNTRY

Parent Geography Type: COUNTRY

Parent Geography Name: United States

Tax Currency: USD (defaults)

Minimum Accountable Unit: 0.01 (defaults)

Rounding Rule: Nearest (defaults)

Tax Precision: 2 (defaults)

Exchange Rate Type: Blank

7. Click on “Show Controls and Defaults”

8. Enter the details as per information mentioned below

Allow Override and Entry of Inclusive Tax Lines: Unchecked

Allow Tax Rounding Override: Unchecked

Allow Override for Calculated Tax Lines: Checked

Allow Entry of Manual Tax Lines: Checked

Use Legal Registration Number: Unchecked

Allow Duplicate Tax Registration Numbers: Unchecked

Allow Multiple Jurisdictions: Unchecked

Tax Accounts Creation Method: Create Tax Accounts (defaults)

Allow Tax Exceptions: Checked (defaults)

Allow Tax Exemptions: Checked (defaults)

Tax Exemptions Creation Method: Create Tax Exemptions (defaults)

Allow Tax Recovery: Unchecked

FOR TAX ACCOUNTS

1. CLICK ON THE TAX ACCOUNTS

2. GIVE THE LEDGER AND CREATE

3. GIVE THE OPERATING UNIT - Vision Operations

4. GIVE THE TAX ACCOUNTS-

Tax Expense: 01-210-7710-0000-000

Tax Recoverable/Liability: 01-000-2220-0000-000

8. Click on button “Apply” and return back to Tax Accounts page.

9. Click the button “Apply”, to return to the Update Tax page.

10. Click the button “Apply”, to return to the Taxes page.

You will get the message “The tax was successfully updated

DEFINING TAX STATUS

1. NAV- TAX CONFIGURATION/TAX STATUS

2. GIVE THE REGIME CODE – US VAT TAX

3. GIVE THE TAX - US VAT TAX

4. TAX STATUS CODE- US VAT TAX STATUS

5. TAX NAME – US VAT TAX STATUS

6. Check as Default Tax Status: Checked

7. EFFECTIVE TO-

CREATING TAX JURISDICTION

1. Navigate: tax Configuration Tax Jurisdiction

2. Click on button “Create”. Enter the Tax Jurisdiction details based on information mentioned below:

Tax Jurisdiction Code: Us vat tax jurisdiction

Tax Jurisdiction Name: Test Us vat tax jurisdiction

Tax Regime Code: US VAT TAX

Tax: US VAT TAX

Geography Type: Country

Effective From: 01-JAN-1950

Effective To: Leave Blank

Geography Name: Country

Precedence Level: 300 (defaults)

Collecting Tax Authority: Blank

Reporting Tax Authority: Blank

Set as default Tax Jurisdiction: Yes (defaults)

Default Effective From: 01-JAN-1950

Default Effective To: Leave blank

TAX RECOVERY RATES

NAV- Tax configuration – tax recovery rates

1.Click on create

2.Give the tax regime code –US VAT TAX

3.Congiguration owner – Global configuration owner

4.Give Tax – US VAT TAX

5.Tax recovery rate code – US VAT TAX RECOVERABLE

6 . Rate type- Recovery

7.percentage recovery rate – 50

8. Effective from and to -

9. Check the Allow Ad Hoc Rate box to let users override the default recovery rate on individual tax lines.

CREATE TAX RATES

1. Nav – Tax configuration – tax rates

2. Click on icon “Create Tax Rate”. Enter the Tax Rates based on information mentioned below:

Tax Regime Code: US VAT TAX(defaults)

Configuration Owner: Global Configuration Owner (defaults)

Tax: US VAT TAX (defaults)

Tax Status Code: US VAT TAX STATUS(defaults)

Tax Jurisdiction Code: US VAT TAX JURISDICTION

Tax Rate Code: US VAT TAX RATE

Rate Type: Percentage (defaults)

Percentage Rate: 10

Effective From: 01-JAN-1950 (defaults)

Effective From: Leave blank

CLICK ON RATE DETAILS TO ENABLE FOR THE IEXPENSES

1. Click on icon “Rate Details”. Enter the Tax Rate Details based on information mentioned below:

Tax Rate Name: US VAT TAX RATE

Tax Rate Description: give some thing

Internet Expenses Enabled : Checked

5. Click on the button “Apply” to return to the Create Tax Rate page.

6. Click on the button “Apply” to return to the Regime to Rate Flow page

7. You will get the message “The Tax Rate has been successfully created.”

DEFINING THE TAX RULES

The tax rules very complicated and once the tax rules is defined again we cannot do any edits ,if it is done also it won’t get effected in the transaction

Rule CA GST CA HST CA PST

Direct Tax Rate Determination

Blank Blank Blank

Determine Place of Supply

Ship to, use bill to if ship to is not found

Ship to, use bill to if ship to is not found

Ship to, use bill to if ship to is not found

Determine Tax Applicability

Applicable Applicable Applicable

Determine Tax Registration

Ship From Party Ship From Party Ship From Party

Determine Tax Status CA GST STANDARD CA HST STANDARD CA PST

Determine Tax Rate CA GST STANDARD RATE CA HST STANDARD RATE CA PST STANDARD RATE

Determine Taxable Basis

STANDARD_TB STANDARD_TB STANDARD_TB

Calculate Tax Amounts STANDARD_TC STANDARD_TC STANDARD_TC

← Guided Tax Rule Entry - The guided tax rule entry provides a five-step flow that lets you build determining factors and tax conditions as you create the tax rule.

←

← Expert Tax Rule Entry - The expert tax rule entry provides a concise, three-step entry flow that makes use of determining factor sets and tax condition sets that you have previously defined

STEPS TO PRACTICE

1. Select the Determine place of supply

2. And click on the Guided rules

Note – For defining the place of supply better to go for the guided rule, where it give the clear explanation

The window appear asking about the general information

1. Give the Rule name and code – US VAT TAX RULE

← 2. If this tax rule applies to specific transactions only, select the event class category for this tax rule:

o Event Class - The tax rule applies to transactions of the application that you select. You can apply the tax rule either to a Payables or Receivables application, or to a source application that feeds data into Payables or Receivables for tax processing.

o You can optionally apply the tax rule to one event class only within the application.

o Tax Event Class - The tax rule applies to transactions of the tax event class that you select.

2. If this tax rule applies to a specific geographical location only, enter the geographical information:

o Enter the transaction location type to consider for this tax rule. E-Business Tax uses the geography of the location type to evaluate the rule applicability.

o If you use a TCA master reference geography type, enter the parent geography type and parent geography name.

o Enter the geography type and name to use for this tax rule. You can enter a TCA master reference geography type or a tax zone.

1.Give the factor name as tax classification code ,if it should for fiscal classification then select the Fiscal classification ,the operator as equal to

1. Set the operator to use for the tax condition:o Equal To/Not Equal To - Either the condition is equal to a single value, or the condition excludes a

single value.

o Equal To/Not Equal To Determining Factor - Either the condition is equal to a class qualifier of the determining factor class, or the condition excludes a class qualifier of the determining factor class.

o Range - The condition is equal to a range of values, any one of which makes the condition true.

2. Enter the value or range of values for the tax condition:

o If the operator is Equal To/Not Equal To, enter a determining factor name value in the Value/From Range field.

o If the operator is Equal To/Not Equal To Determining Factor, enter a class qualifier of the determining factor class in the Value/From Range field.

o If the operator is Range, enter the determining factor name value range in the From and To fields.

2 The value will be your tax code which is defined - US VAT TAX RATE IEXP

3 Click on next

Place of supply

Note -The description is from the guide

This process identifies the applicable place of supply and associated tax jurisdiction for each candidate tax. The place of supply, or situs in the United States, is the location type where the supply of goods or services is deemed to have taken place for a specific tax. If E-Business Tax cannot find a tax jurisdiction for the location that corresponds to the place of supply location type, then the tax does not apply and it is removed as a candidate tax for the transaction.

For example, the place of supply for UK VAT on goods is generally the ship from country. Thus, the place of supply of a sale or purchase within the UK is the UK itself. However, if a UK legal entity supplies goods from its French warehouse to a German customer, then the place of supply will not find a jurisdiction for UK VAT in France, and therefore UK VAT does not apply.

The result of the process is a list of applicable taxes per transaction line.

1. Consider the Determine Place of Supply tax rule of the first candidate tax.2. Use the location type derived from the tax rule for the tax. The possible location types are:

o Bill From

o Bill To

o Point of Acceptance (Receivables transactions only)

o Point of Origin (Receivables transactions only)

o Point of Payment

o Ship From

o Ship To

Use Bill To as Ship To, if Ship To is not found

3.select as per requirement and click on next

1. Enable the tax rule for use on transactions.

Note - We have a enable option, enabling the option is mandatory for usage of rules

If the option is not enables the tax rule is not usable, enabling this rule for tax determination

2. Enter the rule order, the rule order name should be Numeric

3. Click on next

1. Give the determining factor set name and code

Set up tax determining factor sets to group together related tax determining factors. You create determining factor sets for:

Tax rules, to associate with rule types for tax determination. You use tax determining factors as building blocks in the creation of tax conditions.

Regime determination, to identify tax regimes and candidate taxes on transactions. You use location type determining factors only to identify the eligible locations on the transaction.

A tax determining factor is an attribute that contributes to the outcome of a tax determination process, such as a geographical location, tax registration status, or a fiscal classification. Tax determining factors are categorized into logical groupings called determining factor classes, such as Accounting or Geography.

Each determining factor class contains one or more determining factor names that constitute the contents of the class. Some determining factor classes also contain class qualifiers. A class qualifier provides a more specific classification of a determining factor class, such as accounting flexfield segments or the transaction locations of a geography or party (Ship From, Ship To).

2. Give the condition name and code

Set up tax condition sets to group together the tax conditions that constitute a tax rule. You can set up tax condition sets in advance and apply them to a tax rule, or you can set up a tax condition set during tax rule creation.

The tax condition set is the logic of the tax rule. It specifies the factors to consider, and the resulting value that must exist for each factor, in order for the result of the tax rule to be true.

1. Each tax condition in a tax condition set consists of a tax determining factor (determining factor class/class qualifier/determining factor name), an operator, and a value. These examples illustrate the use of tax conditions

Note: Once you use a tax condition set to create a tax rule, you can no longer update the condition set

Click on finish

1.Click on the Plus simble you can see the out put of the rule

2.And select the Determine tax applicability

3. Click on the set default

Note- here we don’t require a guided or expert entry for the rules

The window appears

1.Select rule type as applicable ,by this option we are making it as applicable

2.And click on apply

Now determine the tax registration

1. Select the determine tax registration

2. Determine the party type to use to derive the tax registration for each applicable tax.

3. Consider the Determine Tax Registration tax rule of the first tax.

4. Either use the party registration derived from the tax rule, or the default party registration, if there is one. A rule identifies one of these parties from which to derive the tax registration:

a. Bill From Party

b. Bill To Party

c. Ship From Party

d. Ship To Party

e. Use Bill To, if Ship To is not available.

5. Identify the tax registration or registrations and stamp the transaction with the tax registration numbers.

E-Business Tax stamps the tax registration number of the first party legal establishment, and the tax registration number of the party or party site derived from the Determine Tax Registration tax rule.

← 1. Determine the party type to use to derive the tax registration for each applicable tax.

It is not mandatory to define the tax status and tax rate, because it is getting defaulted from the tax regimes and tax.

1. If it was required to define the screen are below with steps

Steps

1. Select the determine the tax status

2. And click on expert rule

3. The window appears

1. Give the rule code and name –US VAT TAX STATUS

2. And select the determining factor set ,which is defined in the determine place of supply

3. Click on next

1. Select the condition which is defined in the determine place of supply from the LOV

2. The result would be your status ,select from the LOV

3. Click on next

1. Enable the option

2. Give the rule order name ,

Note- rule order should be numeric

3. Click on next

The out put of defining the tax status will be like this

In the same way define the determine the tax rate

1. Give the rule code and name

2. Select your tax status code from the LOV

3. Select the determining factor set

4. Click on next

1. Give the condition set code and name

2. Here result will be your tax rate – US VAT TAX RATE

Note – the tax rate which is defined

3. Click on next

1. Enable the option

2. Give the rule order

Note –numeric value

3 . click on finish

The out put of the tax rate will be like this

The taxable is basis on the formula of the taxes, you can select the standard formula or you can define of your own

1. Click on set default

Select the formula type as standard ,if you have your own formula then the same you can find in the LOV values ,you can select that

Click on apply

The same calculate tax amounts is based on formula

1. Select the calculate tax amounts

2. Click on set default

1. Select the option from the LOV as standard

2. Click on apply

The out put will of the calculate tax amounts

And next screen shot is very important

Making Tax Available for Transactions

1. Navigate: Tax Configuration Taxes

2. Select the Tax created based on the following filter criteria:

Country Name: United States

Tax Regime Code- US VAT TAX

Tax: US VAT TAX

3. Click on button “Go”. Then click on icon “Update” on the “US VAT TAX”

4. Enable the Make Tax Available for Transactions

The tax is available for transactions only after eBTax validates the tax setup and rules.

The final out put of the tax defining

1. Open invoices form

2. Give the details of the invoice

1. Select the tax classification code which is defined and click on the calculate tax

The tax calculated