R12 E-Business Tax ZX

Oracle E-Business Tax covers standard procure to pay and order to cash transaction taxes, with the exception of withholding taxes and those taxes handled by the Latin Tax Engine solution. In general the limited per module 11i setup has been changed to become a proper self-contained tax engine. With that however comes complexity to the extent that E-Business Tax almost can be regarded as a module in itself. Hopefully some best practices can be applied here so over time we will have a good template of standard solutions depending on type of business and geographical region. E-Business tax fully use the TCA and legal entity data model so all involved parties in tax reporting must be defined in TCA like HM Revenue and Customs and your reporting business unit must be defined as a legal entity too. E-Business Tax also introduces many new concepts like:

Tax Authority: organisation responsible for collecting taxes First Party Legal Entity: your organisations that have taxable transactions First Party Legal Establishment: your organisation having tax registration in order to report and settle taxes Tax Regime: Name of an area of tax like VAT in the UK Tax Zone: Grouping of Tax Regimes Tax Jurisdiction: The geographical boundary of a tax related to a tax regime Tax: Defines name of a tax within a Tax Regime like VAT Tax Status: Level of taxes within a tax regime like Standard, Reduced, Exempt and Zero Tax Recovery Rate: Rate of a recoverable tax like Full (100%) and None (0%) Tax Rate: Rate of tax applied to an transaction like Standard would have 14%, 17.5% and 15% depending on date Tax Rule: Rule which is applied to a transaction to provide for the tax calculation for: o Determine Place of Supply: Determine the location for transaction o Determine Tax Applicability: Determine what taxes apply to a transaction o Determine Tax Registration: Determine tax registration number for the transaction o Determine Tax Status: Determine the level of tax applicable o Determine Tax Rate: Determine the rate based on the tax level o Determine Taxable Basis: Determine the amount taxable o Calculate Tax Amounts: Determine the tax amount o Determine Recovery Rate: Determine the recovery rate

So quite an expansion of the 11i definitions in one form having a single line of tax code and tax rate

Anyway before doing a major setup exercise have a read of the note: in Note 463001.1 which may save you the setup for Europe.

An example of UK VAT to follow:

The section below is only tested on Vision which is not a live system.

Tax Regimes

Controls and Defaults

Associations All first party legal entities and operating units must be associated with the tax regime they are subject to.

Party Tax Profiles

Tax Authority This is the organisation to whom you must report and settle taxes.

First Party Legal Entity This is a organisation that creates taxable transactions.

- Configuration Options

First Party Legal Establishment This defines your organisation that reports and settles tax with the tax authority hence here you define you tax registration details.

- Tax Registration

Taxes
This is the name of the tax and how it is handled.

Controls and Defaults

Tax Statuses
These are names of tax levels so in the UK the STANDARD VAT is for all basic goods and services but a REDUCED rate is paid for fuel and power and ZERO would be paid for food and books. Do not put the actual rate in the name is you would in 11i as this will be defined in the Tax Rates section.

Tax Jurisdictions

Tax Recovery Rate

Tax Rate
This is rate of a tax status like STANDARD VAT would have been 14%, 17.5% and 15% over time.

Country Defaults
Setup the default tax configuration for a country.

Tax Simulator
Use this screen to simulate the tax setup without entering real transaction. This is very useful when changing the configuration on a live system. Be sure to assign the Oracle Tax Simulator responsibility to the user and use this rather than using the menu on the home page of Tax Administrator otherwise you will get this error:

So from the Oracle Tax Simulator responsibility use:

And you will see this:

When clicking \Tools\View Tax Log:

A concurrent job will be submitted. You may be get this error:

However this is not any issue just wait a bit and retry or just monitor the request in \View\Requests:

This report will show how the tax was calculated. This entry was written by Kent , posted on Tuesday September 08 2009at 01:09 pm , filed under E-Business Tax and tagged e-Business Tax, R12, Upgrade . Bookmark the permalink . Post a comment below or leave a trackback: Trackback URL.

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R12 EB-Tax setup

June 5, 2012 Leave a comment Taxes were defined under respective modules until 11i. Coming to R12, Taxes are into a new Architecture. They are defined under a Separate module called E-Business Tax. The Short name / Application Short name for EB-Tax is ZX. Please go through the below document on the navigations and how Taxes are defined in R12. In Oracle R12 a new module called E-business Tax has been introduced for maintenance of all tax related requirements of different geographical locations. Contrary to Oracle 11i where there each module had different setups for tax code and tax calculations; in Oracle R12 E-business tax module acts as a central repository for all tax setups and is integrated with all other modules. This document covers two specific scenarios where we used the E-business tax modules to set up tax and use the tax rules in the module to calculate tax based on different requirements.

BASIC TAX SETUPS IN E-BUSINESS TAX

These are the basic mandatory tax setups to be performed in the E-Business Tax Module in R12 to enter Tax lines manually or calculate taxes for any transaction. 1. TAX REGIME: Tax Regime is setup for the taxes in each country and a geographic region where you do business and where a separate tax applies. A tax regime associates a common set of default information, regulations, fiscal classifications and registrations to one or more taxes with same tax requirement. 2. TAXES: Tax is classification of a charge imposed by a Government through a fiscal or a tax authority. Each separate tax in a tax regime includes records for statuses, tax rates and rules used to calculate and report tax requirements

3. TAX STATUS: Tax Status is the taxable nature of a product or service in the context of a transaction for a tax. 4. TAX JURISDICTION: A geographic area where a tax is levied by a specific tax authority.

5. TAX RATE: The rate specified for a Tax status in effect for a period of time; the tax rate can be expressed as a percentage or as a value per unit quantity 6. TAX RULES: E-business tax uses the tax setups along with the tax rules to decide which taxes apply to a transaction and how to calculate the tax amount for each tax that applies to a transaction.

Case Study 1
Business Requirement: Calculation of USE TAX in AP Invoices based on Ship To Location Zip code and Balancing Segment of Chart of Accounts. The requirement of client was as follows: Use tax was calculated in an AP Invoice based on the combination of the balancing segment in the chart of accounts and the zip code of a ship to location. In 11i different sales tax codes were setup for each combination of balancing segment and ship to location. An offset tax code was attached to each of the sales tax code. For an invoice where use tax was applicable the user would enter the sales tax code (which has been attached to an offset tax code) and validate the invoice. This would generate two tax lines one each for sales tax and offset tax. After the upgrade to Oracle R12; Use tax can be applied on an invoice in two ways: 1. Similar to 11i make sales tax and offset tax codes to generate the use tax lines in the AP invoice. 1. Use feature of Self Assessed tax (newly introduced in R12) for accounting of use tax lines. Concept of Self Assessed tax is explained later in the document. In this case study we have used option 2 as the base. Detailed setups performed

1.

Define Tax Regime

Responsibility & Navigation:

Tax Managers Tax Configuration Tax Regime Create Define one tax regime for country United States as shown below:

2.

Define Taxes

Define one tax called US USE TAX under the tax regime created for United States Responsibility & Navigation: Tax Managers Tax Configuration Taxes Create

Click on Apply to save the changes

3.

Define Tax Statuses

Define one tax status for the tax regime and tax setup in the previous steps. Responsibility & Navigation: Tax Managers Tax Configuration Tax Statuses Create

4.

Define Tax Jurisdictions

Define one tax jurisdiction for the tax regime and tax setup in the previous steps. Responsibility & Navigation: Tax Managers Tax Configuration Tax Jurisdictions Create

5.

Define Tax Rates

Define multiple rates for the combination of Corp and Ship to location zip codes. A tax rate is made for the combination of Tax Regime, Tax and Tax Status. For instance: Balancing Segments BAL_A and BAL_B Ship to Location zipcode 100 and 101

The different rates which can be setup are USE_BAL_1_100 5% USE_BAL_B_101 10% USE_BAL_A_101 2% USE_BAL_B_100 1% Responsibility & Navigation: Tax Managers Tax Configuration Tax Rates Create

Click on Tax Accounts to enter the Expense and liability account details

Enter the Tax Expense Account. If this is left blank the expense account for ITEM line will be used. The Tax Recoverable/Liability is the Use tax Liability Account to be used.

6.

Define Tax Rules

Oracle provides a seeded set of Tax Rules which can be used by the user for tax calculation. For any transaction made the tax determination process uses these tax rules to decide the taxes which will apply and the amount of tax which has to be applied for a transaction. Prerequisites for setting up the Tax Rules: Step1: To decide whether use tax applied on any transaction within Payables module a tax classification code called USE TAX APPLICABLE will be made. A tax classification code is similar to a tax rate code with a tax rate of 0%. Responsibility & Navigation: Tax Managers Tax Configuration Tax Rates Create

Step2: Create Geography Hierarchy: The various zipcodes which will be used in the tax rules have to be setup in the geography hierarchy in the trading community architecture. Responsibility & Navigation: Trading Community Manager Administration Geography Hierarchy Query for country United States in the below screenshot

Click on View Details tab

Chose the State required and click on View Details

Enter the various County details or enter a default county for the state as shown below. Click on View Details

Enter the different cities for the county and click on View Details to enter the zip code for each city.

Enter the zip codes which will be used for tax calculation with the code type as Tax Geography Code. Click on Apply after creating/updating any changes

Step3: Create Tax Determining Factor Sets Responsibility & Navigation: Tax Managers Advanced Setup Options Tax Determining Factor Sets Create

The determining factor will work in the following manner: Since use tax had to be calculated on invoices based on the balancing segment and ship to location we chose the following values in a determining factor set:

1. Flexfield segment1 of the Line account is the balancing segment 2. The ship to location postal code of the invoice 3. Since use tax will apply only to certain invoices we chose a transaction input factor and the value is called as tax classification code. Step4: Create Tax Condition Sets Responsibility & Navigation: Tax Managers Advanced Setup Options Tax Condition Sets Create

The tax condition set is made from the tax determining factor set. In the above screenshot we have made a tax condition set for balancing segment CIP and postal code 62201 using the determining factor set made in the above set. TAX RULE SETUP Responsibility & Navigation: Tax Managers Tax Configuration Tax Rules

The following tax rules will be setup for use tax calculation: 1. Determine Tax Applicability: Since the tax US_USE applies only for use tax we make this tax applicable only if the tax classification code in the invoice for an ITEM line is USE TAX APPLICABLE

2. Determine Tax Rate This rule will derive the use tax rate for the invoices using the determining factor set and condition set. While making the tax rule we enter the determining factor set and the condition set made in the previous steps as shown in below screenshot.

For each condition set there will be a different tax rate which will be applied. Example: As shown in above screenshot there are 4 condition sets: 1. COND_CIP_62201 This means that the balancing segment is CIP and ship to postal code is 62201. If the invoice satisfies these two conditions and the tax classification code is USE TAX APPLICABLE the tax rate used will be USE_CIP_62201. 1. COND_AMC_63103 This means that the balancing segment is AMC and ship to postal code is 63103. If the invoice satisfies these two conditions and the tax classification code is USE TAX APPLICABLE the tax rate used will be USE_AMC_63103. For all the other rules the default values have been used.

7.

Concept of Self Assessed Tax

A self-assessed tax is a tax calculated and remitted for a transaction, where tax was not levied by the supplier but is deemed as due (and therefore needs to be paid by the purchaser). In such cases the purchaser is responsible for calculating and remitting the tax. Self-assessment is also known as reverse charge or use tax in certain tax regimes. When self-assessment applies to a tax line, E-Business Tax creates the recoverable and/or nonrecoverable distributions, and Payables creates an additional accounting distribution to record the liability for the self-assessment. You can set the self-assessment option:

 At the tax profile level to default to the tax registrations that you create for this party. At the tax registration level. On an individual tax line. E-Business Tax applies self-assessment to Payables invoices received by the first party according to the tax registration setting of the Set for Self Assessment/Reverse Charge option. The specific tax registration record that E-Business Tax uses is derived either from Determine Tax Registration rules or from the default tax registration. We have setup the self assessed tax feature at the Tax Registration level. Navigation: Tax Managers Home External Dependencies Create First Party : Legal Entity and Establishments Query the Legal Entity -View Details Establishments Tab Query Establishment (which is the OU here) Registrations Create Tax Registration Since we are using the self assessed tax feature only for use tax invoices we set up this option for the tax US_USE only. Other taxes will not have this flag checked.

8.

Invoice Creation and Use Tax calculation

Invoice can be created in base table or interface table with the tax classification code as USE TAX APPLICABLE. Use the correct ship to location and balancing segments in the invoice.

The tax rules will be triggered on validation of the invoice in base tables and the use tax line will be generated. Since we are using the self assessed tax feature there will not be any tax displayed on the invoice line, the tax details will be visible in the Tax Details form. They will also not be stored in ap_invoice_lines_all table; instead they will be stored in zx_lines table with the trx_id which will be the invoice_id of the invoice.

Tax lines form indicating the use tax details.

Case Study 2
Business Requirement: Calculation of SALES TAX in AP for Invoices made from source ERS based on Supplier site pin code The requirement of client was as follows: There were many invoices created in AP using the ERS source i.e create the PO and Receipt in Purchasing module and then run the Pay on Receipt program to generate the invoice in interface tables with source as ERS. The standard Payables Open Interface Import program will then import these invoices into base oracle. Sales tax applies on some of these ERS transactions based on the zip code of supplier site. For instance: An ERS invoice with a supplier site A having zip code 63301 has a tax rate of 10% to be applied where as supplier site B having zip code 62284 has a tax rate of 6% to be applied. Since the ERS invoice which is inserted into the interface table consists of only ITEM line we needed to insert one more TAX line with the correct amount. Additionally the total invoice amount also has to be corrected to include the tax amount. Detailed setups performed for the same.

1.

Define Tax Regime

Responsibility & Navigation: Tax Managers Tax Configuration Tax Regime Create Define one tax regime for country United States as shown below:

2.

Define Taxes

Define one tax called US SALES TAX under the tax regime created for United States Responsibility & Navigation: Tax Managers Tax Configuration Taxes Create

Click on Apply to save the changes

3.

Define Tax Statuses

Define one tax status for the tax regime and tax setup in the previous steps. Responsibility & Navigation: Tax Managers Tax Configuration Tax Statuses Create

4.

Define Tax Jurisdictions

Define one default tax jurisdiction for the tax regime and tax setup in the previous steps. Responsibility & Navigation: Tax Managers Tax Configuration Tax Jurisdictions Create

5.

Define Tax Rates

Define tax rates for each supplier site zip code. A tax rate is made for the combination of Tax Regime, Tax and Tax Status. For instance: Supplier site zip codes are 63119 and 61548. The different rates which will be setup are

SALES_63119 7.575% SALES_61548 7.25% Responsibility & Navigation: Tax Managers Tax Configuration Tax Rates Create

Click on Tax Accounts to enter the Expense and liability account details

Enter the Tax Expense Account. If this is left blank the expense account for ITEM line will be used. The Tax Recoverable/Liability is the Use tax Liability Account to be used. Since this is a sales tax rate we enter the default account of 000 for the same.

6.

Define Tax Rules

Oracle provides a seeded set of Tax Rules which can be used by the user for tax calculation. For any transaction made the tax determination process uses these tax rules to decide the taxes which will apply and the amount of tax which has to be applied for a transaction. Prerequisites for setting up the Tax Rules: Step1: To decide whether use tax applied on any transaction within Payables module a tax classification code called SALES TAX APPLICABLE will be made. A tax classification code is similar to a tax rate code with a tax rate of 0%. Responsibility & Navigation: Tax Managers Tax Configuration Tax Rates Create

Step2: Create Geography Hierarchy: The various zipcodes which will be used in the tax rules have to be setup in the geography hierarchy in the trading community architecture. Set up the zip codes to be used for the supplier sites where sales tax needs to be calculated based on the step 2 in Point 6 in Case study 1. Step3: Create Tax Determining Factor Sets Responsibility & Navigation: Tax Managers Advanced Setup Options Tax Determining Factor Sets Create

The determining factor will work in the following manner: Since sales tax had to be calculated on invoices based on the supplier site for ERS invoices the determining factors would be: 1. Geography Ship From postal code 2. Transaction Input Factor Tax classification code which will be used for ERS invoices. Step4: Create Tax Condition Sets Responsibility & Navigation:

Tax Managers Advanced Setup Options Tax Condition Sets Create

The tax condition set is made from the tax determining factor set. In the above screenshot we have made a tax condition set for postal code 61548 and tax classification code SALES TAX APPLICABLE using the determining factor set made in the above set. TAX RULE SETUP Responsibility & Navigation: Tax Managers Tax Configuration Tax Rules

The following tax rules will be setup for use tax calculation: 3. Determine Tax Applicability: Since the tax US_SALES applies only for ERS Sales Tax we make this tax applicable only if the tax classification code in the invoice for an ITEM line is SALES TAX APPLICABLE

4. Determine Tax Rate This rule will derive the sales tax rate for the invoices using the determining factor set and condition set. While making the tax rule we enter the determining factor set and the condition set made in the previous steps as shown in below screenshot.

For each condition set there will be a different tax rate which will be applied. Example: As shown in above screenshot there are 4 condition sets: 1. COND_SALES_63119 This means that if the ship from postal code is 63119 and the tax classification code in the invoice is SALES TAX APPLICABLE then the tax rate used will be SALES_63119.

1. COND_SALES_61548 This means that if the ship from postal code is 61548 and the tax classification code in the invoice is SALES TAX APPLICABLE then the tax rate used will be SALES_61548. For all the other rules the default values have been used.

7. Invoice Creation and Sales Tax calculation for ERS invoice.

Generate the ERS invoice in the invoice interface tables using the program Pay on Receipt program. Update the following values for the ERS invoice in the interface table: TAX CLASSIFICATION CODE SALES TAX APPLICABLE CALCULATE TAX AMOUNT DURING IMPORT Set the flag to Y ADD TAX TO INVOICE AMOUNT Set the flag to Y The calculate tax amount flag and add tax to invoice amount is set to Y so that the Payables Open Interface Import program would trigger tax rules and calculate the tax amount and also add the tax amount to the invoice amount. Hence the invoice will be imported with the tax line and correct invoice amount. Following is the update script for the same: UPDATE apps.ap_invoices_interface SET add_tax_to_inv_amt_flag = Y AND calc_tax_during_import_flag = Y WHERE source = ERS UPDATE apps.ap_invoice_lines_interface SET tax_classification_code = SALES TAX APPLICABLE WHERE invoice_id IN (SELECT invoice_id FROM apps.ap_invoices_interface WHERE SOURCE = ERS)

Snapshots of ERS invoices in the interface table. Invoice header in the interface table before it was processed.

Invoice line in the interface table

Supplier site pincode 62223

After importing this invoice; the tax line has got generated based on the tax rule for Supplier site. The invoice amount has also changed from 1000 to 1073.50

Case Study 3
Please check the following link for another Case Study How to Setup Oracle Applications R12 EBTax

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R12 Legal Entity , Ledgers & Accounting Options

June 4, 2012 Leave a comment Defining Legal Entity Navigation GL Super User Setup Financials Accounting Setup Manager Accounting Setups

Click on Create Accounting Setup which brings to the below screen

Enter all the details in the above screen and click Apply

Defining a Ledger

Enter the valid details for Name Chart of Accounts Accounting Calendar Currency Subledger Accounting Method

And then click Next

Please review the information in this screen else will be unable to change the Primary Ledger. See below the information in the screen

Click Finish to complete the process

Defining Accounting Options Click on Define Accounting Options in the above screen

In the above screen In Accounting options we can see the following

Click on Update to see the Ledger Options

Once we click Finish, we are back to the Accounting Options Screen

Here, there are options to Update the following Reporting Currency Click on the Update Icon to update the Reporting Currencies if any

Balance Level Sub ledger Accounting Options Sequencing After updating the above necessary setups, the screen looks like this

Click on Complete now to finish the Accounting Options Screen. There is a warning message that its going to complete the Accounting Setup. Click on Yes

Clicking on Yes, gives a confirmation message that the Accounting Setup is complete

Click on Return to Accounting Setups which brings to the Accounting Setup Page.

We can query for the Ledger just created or Click on Next to find out in the list

The pencil icon against the Update Accounting Options of the Ledger enables to Update the Accounting Options if required.