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E-Business Tax Architecture The E-Business Tax architecture consists of five tiers: 1.

The Tax Definition tier is the tax data that you set up for each tax regime and tax that your company or institution is subject to (also called the regime-to-rate flow). A tax authority administers the taxes of a tax regime. Each tax within a tax regime comprises a certain number of tax statuses, tax rates (and recovery rates, if applicable), and tax jurisdictions. 2. The Configuration tier identifies the factors that participate in determining the tax on an individual transaction. These taxability factors are: a. Party - The parties involved in the transaction. This can include first party legal entities; ship from/ship to parties; bill from/bill to parties; tax registrations and registration statuses of each party; type or classification of a party. b. Product The products transacted. This includes the designation of physical goods or services, and in some cases the type or classification of the good or service. c. Place - The places involved in the transaction, including the ship from and ship to locations, and the bill from and bill to locations. Other placessuch as point of origin or point of acceptancemay also be factors, depending on the applicable tax regulations. d. Process - The kind of transaction that takes place. This can include: Procure to Pay transactions, such as purchases, prepayments, and requisitions; Order to Cash transactions, such as sales, credit memos, and debit memos; the type of sale or purchase, for example, retail goods, manufactured goods, intellectual property, resales. Each of these factors can become determining factors in the creation of tax rules. 3. The Rule Engine tier comprises of the set of tax rules that are used to determine and calculate tax on a transaction. You define tax rules for each combination of tax regime, tax and configuration owner. You create tax rules by translating the tax regulations of a tax authority into determining factors and tax conditions that the E-Business Tax tax rules engine uses to evaluate the applicability of a tax on each transaction line. Tax rules determine: the applicability of a tax; the place of supply and tax jurisdiction of the transaction; the tax registration; the tax status and tax rate; the recovery rate (if applicable); and the taxable basis and tax formula to use in calculation. 4. The Services tier manages the calculation of the tax amounts, and tax recovery amounts (if applicable). 5. The Tax Management tier maintains all of the tax information pertaining to each transaction, for use in tax reporting. These tiers are discussed in further details throughout this course. For complete details on setting up and using Oracle E-Business Tax, see: Oracle E-Business Tax Implementation Guide and Oracle E-Business Tax User Guide. E-Business Tax Key Concepts Tax Definition The basic tax configuration includes the regime-to-rate flow for each tax regime. Tax Authority A government entity that regulates tax law, administers, or audits one or more taxes. Tax Regime The set of tax regulations that determine the treatment of one or more taxes administered by a tax authority. Examples of a tax regime include: A sales and use tax in the United States includes rules for state, county, and city sales and use taxes. An excise tax regime in India includes rules for excise tax and additional excise tax. A VAT tax regime in Argentina includes rules for standard VAT, additional VAT, and perception VAT. Tax A distinct charge imposed through a fiscal or tax authority.

Examples of a tax include VAT for the United Kingdom and TVA for France. Tax Jurisdiction A geographical area where a tax is levied by a specific tax authority or where a specific tax rate applies. Examples of tax jurisdictions include: The tax jurisdiction for VAT in Germany is the country of Germany. The tax jurisdiction for a San Jose city tax is the City of San Jose, California. The tax jurisdiction for Provincial Goods and Services tax (PST) in Canada is a particular Province, such as Ontario or British Columbia. Tax Status The taxable nature of a product or service in the context of a transaction for a tax type. Examples of a tax status include taxable standard rate, zero rated, exempt, and nontaxable. A tax status is similar to the concept of the tax type definition used within Payables and Receivables in releases prior to Release 12. Tax Rate The rate specified for a tax status in effect for a period of time. You can express the tax rate as a percentage or as a value per unit quantity. An example of a tax rate is 7.5% for a state sales and use tax. Recovery Rate The rate of input tax that is allowed to be recovered or offset against output tax. The recovery rate is applicable to VAT taxes. For example, organizations that only produce VAT applicable goods and services can use 100% recovery rate on most purchases. Organizations that produce VAT exempt goods and services, for example, financial institutions, have a 0% recovery rate. Operating Unit Tax Accounts The tax accounts that the system uses to post the tax amounts derived from your transactions. The tax accounts you define serve as default accounting information for taxes, tax rates, tax jurisdictions, and tax recovery rates. Key Concepts: Tax Authority Tax Authority is a government entity that regulates tax law, administers, and/or audits one or more taxes. Some examples of tax authorities are: *0Brazil - Secretaria da Fazenda Estadual (State Revenue Office) *1Brazil - Secretaria da Receita Federal (Federal Revenue Office) *2California, USA - California State Board of Equalization *3Canada -Canadian Customs and Revenue Agency *4France - Ministry of Economy, Finance and Industry *5Germany - Federal Ministry of Finance *6India - Central Board of Customs and Excise *7Singapore -Inland Revenue Authority of Singapore *8United Kingdom - HM Customs and Excise

Key Concepts: Tax Authority Tax Authority is a government entity that regulates tax law, administers, and/or audits one or more taxes. Some examples of tax authorities are: *0Brazil - Secretaria da Fazenda Estadual (State Revenue Office) *1Brazil - Secretaria da Receita Federal (Federal Revenue Office) *2California, USA - California State Board of Equalization *3Canada -Canadian Customs and Revenue Agency *4France - Ministry of Economy, Finance and Industry *5Germany - Federal Ministry of Finance *6India - Central Board of Customs and Excise *7Singapore -Inland Revenue Authority of Singapore *8United Kingdom - HM Customs and Excise

Key Concepts: Tax Regime Tax Regime is the set of tax rules that determine the treatment of one or more taxes administered by a tax authority. Some examples of tax regimes are: *0Brazil - RICMS -> ICMS Regulation *1Brazil - RIPI -> IPI Regulation *2California, USA - California Sales Tax *3Canada - Canadian Goods and Services Tax *4India - Excise Tax *5Singapore - Singapore Goods and Services Tax *6United Kingdom - UK VAT

*7

*8

Key Concepts: Tax

*9 We can define Tax by a classification of a charge imposed by a government through a fiscal or tax authority. Some examples of taxes are: *10 Tax Regime: Taxes: --------------------------------------*11 -----------------------------------------------------------*12 *13 *14 *15 *16 *17 *18 *19 *20 RICMS - Regulamento do ICMS RIPI - Regulamento do IPI California Sales Tax California Sales Tax Canadian Goods and Services Tax Canadian Sales Tax India Excise and Customs Singapore Goods and Services Tax UK VAT IPI State Sales Tax District Sales tax GST PST Excise Tax GST UK VAT

ICMS, ICMS-ST (Tributary Substitution)

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*22

Key Concepts: Tax Jurisdiction

*23 Tax Jurisdiction is a geographic area where a tax is levied by a specific tax authority. Some examples of tax jurisdictions are: *24 *25 *26 *27 *28 *29 *30 *31 *32 *33 *34 Tax -------------ICMS IPI State Sales Tax County Sales tax GST PST Excise Tax GST UK VAT Geographic Zone So Paulo Brazil California (State) Canada Ontario India Singapore UK Jurisdiction Sao Paulo ICMS Brazil IPI California State Sales Tax Canada GST Ontario PST India Excise Tax Singapore GST UK VAT ----------------------- --------------------------------

San Francisco (County) SFO County Sales Tax

E-Business Tax Key Concepts Configuration Components Along with the basic tax configuration data of the regime-to-rate flow for each tax regime and tax, your tax setup includes a number of other configuration components. Some of these components are mandatory, some are optional, and some are conditionally mandatory, depending on your tax requirements. Party Tax Profiles (mandatory) The party tax profile is the body of information that relates to a partys transaction tax activities. Set up and maintain a party tax profile for each party involved in your taxable transactions. Parties can include: *0Legal entities, legal establishments, and operating units in your organization that have a transaction tax requirement. *1Your customers and suppliers and their locations (conditionally mandatory). *2Tax authorities that administer tax regulations and rates. Customer Tax Exemptions (conditionally mandatory) A tax exemption applies either to a specific customer or to a combination of customer and specific product. You define tax exemptions as part of the third party tax profile of the applicable customers and customer sites. The details of tax exemptions are normally supported by tax exemption certificates from the relevant tax authority.

Product Tax Exceptions (conditionally mandatory) Set up tax exceptions to define special rates for specific products, as determined by the tax authority. This lets you define general rules for a wide classification of products, while applying a separate rule to a subset of products. At transaction time, E-Business Tax determines whether the tax exception applies to the transaction line for the product and, if so, uses the applicable exception rate. Tax Registrations (mandatory) Set up tax registrations for your first party legal establishments and your third party customers/customer sites and suppliers/supplier sites. A tax registration contains information related to a partys transaction tax obligation with a tax authority for a tax jurisdiction where it conducts business. E-Business Tax uses tax registrations in tax determination and tax reporting. For each tax that you create, you must define either a default tax registration or a tax rule for the rule type Determine Tax Registration. Configuration Owners (mandatory) The legal entities and operating units in your company are each subject to specific sets of tax regulations as designated by the tax authorities where you do business. The configuration owner determines, for each legal entity and operating unit, the ownership and use of each of your tax setups. E-Business Tax provides the concept of the Global Configuration Owner. The global configuration owner represents ownership of all of your tax setups at the company level. In most cases, legal entities and operating units can subscribe to the global configuration owner and therefore share the tax content that is maintained at the company level. Where necessary, an individual legal entity or operating unit can either override part of a tax setup or own its own tax content. Configuration Options (mandatory) The regime-to-rate flows that you create identify the taxes and the set of regulations that make up each tax requirement. Configuration options identify the relationships between the first parties in your company and tax regimes to reflect the tax requirements of each party. You use configuration options to associate legal entities and operating units with their applicable tax regimes. You must set up a configuration option for each combination of first party and tax regime, where the party is subject to any tax regulations belonging to a tax regime. Service Provider (optional) E-Business Tax lets you use the tax services of external service providers for tax calculation of US Sales and Use Tax on Receivables transactions. E-Business Tax provides transparent integration between the external provider tax service and Oracle Receivables. In the first release of E-Business Tax, the third-party service providers for US Sales and Use Tax calculation are Vertex Q-Series and Taxware Sales/Use Tax System. Fiscal Classifications (conditionally mandatory) E-Business Tax provides fiscal classifications to classify the parties, products, places, and processes involved in your tax transactions. You use fiscal classifications as determining factors in the creation of tax rules for tax determination. In some cases, fiscal classifications are necessary to identify specific tax regulations. In other cases, you can use fiscal classifications as a flexible tool for building a set of tax rules for a specific tax regime and tax. Country Default Controls (optional) Use country default controls to maintain tax setup information at the country level that you can default to the applicable E-Business Tax and legal entity pages. Country default

controls let you designate transaction tax-related values in the countries where you do business. You can update any default values that you enter on the applicable pages. E-Business Tax Key Concepts Tax Rules Engine The tax rules engine uses your tax configuration setup and the details on the transaction to determine which taxes apply to the transaction and how to calculate the tax amount for each tax that applies to the transaction. You use the tax rule engine to create rules that reflect the regulations of a tax authority for the taxes of a particular tax regime. Tax Rules Define a tax rule for a combination of a tax and rule type. Each tax rule applies to one tax within a tax regime and belongs to one configuration owner. Tax rules let you create a tax determination model to reflect the tax regulations of different tax regimes and the tax requirements of your business. Tax Determination Process The tax determination process identifies the steps that the tax rules engine uses to determine which taxes apply to a transaction and the tax amounts to calculate. Each step of the tax determination process is represented by a rule type. You define one or more tax rules for each rule type that you need. The steps in the tax determination process are: *0Determine Place of Supply. *1Determine Tax Applicability. *2Determine Tax Registration. *3Determine Tax Status. *4Determine Tax Rate. *5Determine Taxable Basis. *6Calculate Tax Amounts. *7Determine Recovery Rate (for applicable taxes). Tax Rule Defaults You can assign default values to each rule type in the tax determination process. EBusiness Tax uses the default values in tax determination when no rule provides a value that applies to the transaction. Tax Determining Factors A tax determining factor is an attribute that contributes to the outcome of a tax determination process. Tax determining factors include geographical locations, tax registration status, or one or more fiscal classifications. E-Business Tax provides the tax determining factors that you use to build tax rules. Tax Determining Factor Sets You use tax determining factor sets to group together related tax determining factors. You create tax determining factor sets to reflect the kinds of determining factors that go into the determination of a particular tax. For example, geographical location is often a determining factor in assessing VAT, while a specific product type may be a determining factor in assessing an excise duty. You must associate one tax determining factor set with each tax rule.

Tax Condition Sets A tax condition is a determining factor plus the operator and value that you define for the determining factor in order to specify a particular result. For example, you may create a tax condition using the geography determining factor to identify sales within a state by specifying that the Ship From state equals the Ship To state. A tax condition set groups together all of the tax conditions that constitute a particular tax rule. In this sense, 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. Tax Rules Engine Components The components of the tax rules engine work together in the following way: *8Each Tax Rule applies to one tax within a tax regime and belongs to one configuration owner. You define a tax rule for a combination of a tax and a Rule Type. *9The Determining Factor Set contains the list of determining factors to consider in evaluating a tax rule. *10 You create Tax Condition Sets for the tax rule, using the determining factors of the determining factor set assigned to the tax rule. Each tax condition of the tax condition set contains a determining factor, an operator, and a value. *11 Each tax condition set is assigned a priority within the tax rule. Each tax rule is assigned a priority within a rule type. *12 At transaction time, the rule engine examines each tax condition until it finds a result that makes the rule true and applicable to the transaction. If no tax condition is found, then the tax rule does not apply to the transaction. The rule engine looks to the tax rule with the next highest priority and repeats the process until a tax rule is found. If no tax rule is found that evaluates as true, then either the tax rule uses the default value (if applicable) or the tax does not apply to the transaction. Tax Determination Management Tax Determination Management is responsible for calculating the tax on transactions according to the hierarchy of rule types in the tax determination process. The tax determination process functions in this sequence: *0Determine Place of Supply: Determines the location where a transaction is considered to have taken place for a specific tax. *1Determine Tax Applicability: Determines the taxes that apply to a given transaction. *2Determine Tax Registration: Determines the tax registration status for the applicable taxes of the parties involved in the transaction. *3Determine Tax Status: Determines the tax status of each applicable tax to use on the transaction. *4Determine Tax Rate: Determines the tax rate for each applicable tax to use on the transaction. *5Determine Taxable Basis: Determines the amount to use upon which to calculate the tax rate. *6Calculate Tax Amounts: Calculates the tax and displays the calculation results. *7Determine Recovery Rate: Where applicable, determines the recovery rate to apply to each applicable tax on the transaction.

Determine Place of Supply For example, in Europe the default for place of supply of goods is often Ship From. In the United States, the default for place of supply of goods is often Ship To. Determine Tax Applicability You can include or exclude specific taxes if there are conditions which control when the tax is applicable. Determine Tax Registration Normally, the default is Bill From Party, but there are cases, such as reverse charge or self assessment, where the default is Bill To Party for specific transactions. Determine Tax Status and Determine Tax Rate For example, you can apply a zero rate to the sale of childrens clothes for United Kingdom VAT. The system also looks for customer-specific tax exemptions and general exceptions that may apply. Determine Taxable Basis In many cases, the taxable basis is the line amount, but this may or may not include certain types of discounts. For example, in Brazil, there may be reductions in the taxable basis that apply. Calculate Tax Amounts The normal calculation is taxable basis * rate. Defaults for both Taxable Basis and Tax Calculation Formulae are delivered as part of seeded data. Determine Recovery Rate For example, for manufacturing companies, VAT on regular purchases used for company business is 100% recoverable. However, if you are a financial institution which only makes

VAT exempt sales, you are not allowed to recover any taxes and the recovery rate would therefore be 0% on all purchases. Oracle E-Business Tax Architecture Overview Oracle E-Business Tax is a centralized tax engine that provides tax determination, tax calculation, and tax repository services for Payables and Receivables transactions. Oracle E-Business Tax consists of a tax knowledge base, a variety of tax services that respond to specific tax events, a set of repositories (for tax content and tax recording) that allows organizations to manage their local tax compliance needs in a proactive manner, and an interface that allows integration with external tax content providers through a single integration point. E-Business Tax uses the information entered on the transaction line to calculate tax on Receivables transactions and return the results to Receivables. E-Business Tax records all transaction tax data for use in your tax reports. Any errors in tax calculation originate from and are corrected in E-Business Tax. E-Business Tax provides many tools for testing your tax configuration prior to using the configuration on transactions. Note: In the initial release of E-Business Tax the integration with external tax content providers is limited to the calculation of US Sales and Use Tax on Receivables transactions. Tax Authority A government entity that regulates tax law, and administers and/or audits one or more taxes. Some examples of tax authorities are: Brazil - Secretaria da Fazenda Estadual (State Revenue Office) Brazil - Secretaria da Receita Federal (Federal Revenue Office) California, USA - California State Board of Equalization Canada - Canadian Customs and Revenue Agency France - Ministry of Economy, Finance and Industry Germany - Federal Ministry of Finance India - Central Board of Customs and Excise Singapore - Inland Revenue Authority of Singapore United Kingdom - HM Customs and Excise Tax Regime A tax regime is the set of tax regulations that determine the treatment of one or more taxes administered by a tax authority. Some examples of tax regimes are: Brazil - RICMS - ICMS Regulation Brazil - RIPI - IPI Regulation California, USA - California Sales Tax Canada - Canadian Goods and Services Tax India - Excise Tax Singapore - Singapore Goods and Services Tax United Kingdom - UK VAT Tax In Oracle E-Business Tax, a tax is a specific charge within a tax regime imposed by a government through a fiscal or tax authority. Some examples of taxes are:

Tax Regime Taxes ------------------------------------------------------------------------------------------------RICMS - Regulamento do ICMS ICMS, ICMS-ST (Tributary Substitution) RIPI - Regulamento do IPI IPI California Sales Tax State Sales Tax California Sales Tax County Sales tax Canadian Goods and Services Tax GST Canadian Provincial Sales Tax PST India Excise and Customs Excise Tax Singapore Goods and Services Tax GST UK VAT UK VAT Tax Jurisdiction A tax jurisdiction is a geographic area where a tax is levied by a specific tax authority. Some examples of tax jurisdictions are: Tax Geographic Zone Jurisdiction ------------------------------------------------------------------ICMS So Paulo So Paulo ICMS IPI Brazil Brazil IPI State Sales Tax California (State) California State Sales Tax County Sales Tax San Francisco (County) County Sales Tax GST Canada Canada GST PST Ontario Ontario PST Excise Tax India India Excise Tax GST Singapore Singapore GST UK VAT UK UK VAT Calculating Tax on Transactions This diagram is an overview of the tax process in E-Business Tax and Receivables. The tax rate code and tax rules are defined within E-Business Tax for the applicable tax regime and tax. The E-Business Tax tax rules engine uses the tax rate code assigned to the invoice transaction line to calculate the tax, making use of the applicable tax rules. After calculating the tax, Receivables displays the transaction with tax distributions. EBusiness Tax records all tax data for use in tax reporting. Calculating Tax Using the Tax Classification Code This diagram is an overview of the tax process in E-Business Tax and Receivables using the migrated data approach. E-Business Tax lets you calculate tax on transactions in a manner similar to the Release 11i tax model. Release 11i Receivables tax codes migrate to E-Business Tax as tax classification codes. Tax classification codes are assigned to items, customers, sites, or revenue accounts. A particular tax classification code defaults to a specific invoice transaction line according to the rules that apply to the transaction. E-Business Tax either uses the migrated default assignment or a new assignment that you create using application tax options in E-Business Tax. The E-Business Tax tax rules engine uses the tax classification code assigned to the invoice transaction line to calculate the tax, making use of the applicable Direct Tax Rate Determination rule. After calculating the tax, Receivables displays the transaction with tax distributions. See: Using Application Tax Options and Using Direct Tax Rate Determination, Oracle EBusiness Tax User Guide for more information about calculating taxes using the tax classification code.

Global Tax Overview You use E-Business Tax to set up and maintain these taxes: Value Added Tax (VAT) - Imposed on the value added to goods or services at each stage of their supply. Goods and Services Tax (GST) - Sales tax levied on many consumer products and professional services. Excise Duties. US Sales and Use Tax - Imposed on all state, city, and county sales transactions within the US. Canada - Goods and Services Tax (GST), Harmonized Sales Tax (HST), and Provincial Sales Tax (PST) are sales taxes at the federal and/or provincial level. Japan - Consumption tax: VAT paid on an expense (input tax) that is recoverable against the VAT charged on revenue (output tax). Norway - Investment tax: Applies to certain items that are purchased for use or consumption by a VAT-registered entity. Spain - Recargo de Equivalencia: A special VAT, levied on goods and services that smaller customers pay on their purchase invoices in addition to standard VAT to simplify their tax reporting. With E-Business Tax, you can calculate and account for multiple tax regimes, levying additional taxes such as Surcharges, Excise, and Sales Equalization taxes as required. Receivables Latin Tax Engine You use the Receivables Latin Tax Engine, rather than E-Business Tax, to set up and maintain these country-specific taxes: Argentina Value Added Tax (VAT) Additional VAT VAT Not Categorized VAT Perceptions Provincial Turnover Perceptions Municipal Perceptions Excise Brazil IPI ICMS ICMS Tributary Substitution ISS IRJ Colombia Value Added Tax (VAT) Income Tax Self Withholding Tax Overview E-Business Tax processes Oracle Order Management and Oracle Receivables Output Tax, which is charged on the supply of taxable goods and services on customer invoices or revenue items. You should report Output Tax whenever you account for sales. E-Business Tax processes Oracle Payables and Oracle Purchasing Input Tax, which is paid on supplier invoices. Input tax: What you pay your tax authority via supplier invoices. Output tax: What you receive from customers and then pay to your tax authority.

Amount Due to the Tax Authority consists of Output Tax on customer invoices minus any Recoverable Input Tax on supplier invoices. Value Added Tax Overview

Value Added Tax Overview Value Added Tax (VAT) is imposed on the supply of goods and services paid for by the consumer, but collected at each stage of the production and distribution chain. The VAT charged on a customer invoice is called Output Tax. Any VAT paid on a vender invoice is called Input Tax. The amount due each period can be described as follows: Amount Due = Output Tax Input Tax. Tax Partner Process Overview E-Business Tax lets you use the tax services of external service providers for tax calculation of US Sales and Use Tax on Receivables transactions. E-Business Tax provides transparent integration between the external tax service provider and Oracle Receivables. Both EBusiness Tax and the external service provider execute and complete the tax services without any interruption to the application business flow. You set up a service subscription to an external tax service provider in E-Business Tax for a combination of tax regime and tax configuration owner (legal entity or operating unit). At transaction time, when a transaction belonging to this tax configuration owner and tax regime applies: E-Business Tax passes tax and transaction information to the tax partner.

The tax partner returns a tax rate and tax amount for each applicable invoice line. AutoAccounting generates account distribution tax lines based on the tax information returned by the tax partner and E-Business Tax. See: Setting Up Service Subscriptions, Oracle E-Business Tax User Guide for more information about tax partner services. Setting Up Receivables for Tax Calculation You need to complete setup steps in both E-Business Tax and Receivables in order to manage tax calculation on Receivables invoices. Most setup takes place in E-Business Tax. E-Business Tax setup: Regime-to-rate flow First and third party tax profiles Configuration options Tax registrations Tax exemptions Profile options Service subscriptions Tax rules Receivables setup: Transaction types AutoAccounting

Defining Transaction Types and Tax Exemptions Transaction Types Receivables, Vision Operations (USA) (N) Setup > Transactions > Transaction Types Order Management Super User, Vision Operations (USA) (N) Setup > Transaction Types > Define

Check the Default Tax Classification check box in the Transaction Types window for a transaction type, if you want to default a tax classification code to the transaction line for use by E-Business Tax. You only do this if you intend to calculate taxes using tax classification codes and the Direct Tax Rate Determination tax rule. If you intend to calculate taxes using the standard E-Business Tax tax determination process, then do not check this check box.

Tax Exemptions

You set up tax exemptions in E-Business Tax for customers and customer sites that are exempt from a particular tax, or from tax on a particular product or service. You set up tax exemptions under the third party tax profile for the applicable customer or customer site. Tax exemptions apply to a specific customer or to a combination of customer and specific product. Basic Tax Configuration Additional Setup Options Depending on you tax requirements, you can define additional records as part of your basic tax configuration setup. You use various pages to set up these additional options. You navigate to these pages from within another page or to the page directly from the EBusiness Tax homepage. For example, you can access the Tax Accounts page from the Tax page to set up tax account defaults for the tax, or from the Tax Jurisdiction page to set up tax account defaults for the tax jurisdiction. You navigate directly to the Tax Recovery Rates page from the E-Business Tax homepage. Tax Zones

Set up tax zones to represent geographical regions from the point of view of a tax requirement. Tax zones let you group together regions otherwise separated by geographical or political boundaries where the tax treatment is identical throughout these regions. Tax Accounts Set up default tax accounts for the taxes in a tax regime to post the tax amounts derived from your transactions. The tax accounts you define serve as default accounting information for taxes, tax rates, tax jurisdictions, and tax recovery rates. Tax Reporting Types Use tax reporting types to capture additional tax information on transactions for your tax reports. You can use tax reporting types for your internal reporting needs and to fulfill country-specific reporting requirements. Mass Create Tax Jurisdictions You can create multiple tax jurisdictions at once using the mass create functionality, for taxes that relate to specific Trading Community Architecture (TCA) geographic hierarchies. E-Business Tax uses the parent geography type or tax zone associated with the tax regime and tax to create a tax jurisdiction for each record within the parent geography or tax zone type. Tax Recovery Rates Set up tax recovery rate codes for the recovery types identified on the taxes within a tax regime. A tax recovery rate code identifies the percentage of recovery designated by the tax authority for a specific transaction. Tax Zones Responsibility: E-Business Tax Manager (N) Tax Managers > Advanced Setup Options > Tax Zone Types > (B) Create Use the Create Tax Zone Type and Create Tax Zone pages to define tax zones. Tax zones group existing geographical regions that share the same tax requirement. The use of tax zones is optional and depends on your overall tax setup planning. For example, if a separate economic community exists in part of a country only, you can set up a tax zone and corresponding tax regime for the applicable geographic area. The tax zone setup makes use of the Trading Community Architecture (TCA) master reference geography hierarchy. The master reference geography hierarchy identifies the hierarchical structure of a country. For example, the geography hierarchy in the United States is: Country State County City Postal Code The master reference geography hierarchy also identifies which levels are mandatory for the tax zone. A tax zone type references a specific part of a master reference geography hierarchy. You create tax zones within a tax zone type to uniquely identify tax requirements within the area defined by the tax zone type. TCA Geography Hierarchy Responsibility: Trading Community Architecture (N) Trading Community > Administration > Geography Hierarchy Set up and maintain the TCA geography hierarchy for each country where you have a tax requirement. Use the TCA geography hierarchy in these cases: Taxes that are levied at a level lower than the country level, for example, state or provincial taxes. Tax characteristics, such as the tax rate, vary at a lower level than the country level.

Tax Zone Setup Prerequisites Before you can set up tax zones, verify that the TCA master geography contains the geographic information that you need. TCA provides seeded geography types for many countries.

If necessary, you can update an existing geography type, or set up new a geography type in accordance with the structure of a country that you need. For example, for Canada, Provinces are validated as part of the Geography Hierarchy whenever a tax address is created or maintained. Define Tax Accounts Responsibility: E-Business Tax Manager (N) Tax Managers > Tax Configuration > Taxes > (B) Tax Accounts (N) Tax Managers > Tax Configuration > Tax Rates > (B) Tax Accounts (N) Tax Managers > Tax Configuration > Tax Jurisdictions > (B) Tax Accounts Use the Create Tax Accounts page to set up tax accounts under a primary ledger and operating unit. The system posts calculated tax amounts to the specified operating unit accounts at transaction time. The actual account information that the system uses depends upon subledger accounting rules. You can define tax accounts for: Taxes Tax rates Tax jurisdictions Note: All tax accounts defined at the tax level default to the tax rates level for the same tax and operating unit. You can update these default tax accounts in the tax rate setup. See: Setting Up Tax Accounts, Oracle E-Business Tax User Guide for a description of each account. Tax Account Setup Before you can set up tax accounts, you may need to complete one or more prerequisite tasks. Prerequisites Mandatory prerequisite steps include: Set up primary ledgers and subledgers. Set up operating units and assign them to primary ledgers. Set up taxes. You must set up and maintain accounting information before you can set up tax accounts for the applicable primary ledgers and operating units. Optional prerequisite steps include setting up records for the default accounts that you want to create: Set up tax rates. Set up tax recovery rates. Set up tax jurisdictions. Accounts and Accounting Information Responsibility: General Ledger (N) General Ledger > Setup : Financials : Accounting Setup Manager > Accounting Setups (N) General Ledger > Setup : Accounts > Chart of Accounts Mapping Review and complete these accounting setup tasks according to your requirements: Set up the chart of accounts, accounting calendar and currency for the primary ledger of your legal entities and, if applicable, any secondary ledgers. Define balancing segment values for the legal entities involved in tax transactions.

Create an accounting setup for each legal entity with the ledger or ledgers that you created, and assign the applicable operating units to the primary ledger. Complete the details of the accounting setups. Tax Reporting Types

Use the Create Tax Reporting Type page to define tax reporting types. Tax reporting types capture additional tax information on transactions. A tax reporting type identifies a specific unit of information, such as a date or a text comment, to associate with a specific tax usage, such as a fiscal classification or tax jurisdiction. You can also create a group of tax reporting codes for a tax reporting type, to provide additional granularity for tax reporting. You can add tax reporting codes to a tax reporting type at any time. Tax Reporting Type Setup Before you can set up tax reporting types, you may need to complete one or more prerequisite tasks. Prerequisites Conditionally mandatory prerequisite steps include: Set up tax regimes (for regime-specific reporting). Set up taxes (for tax-specific reporting). If you associate a tax regime or tax with a tax reporting type, then this tax reporting type and its associated tax reporting codes are only available to the tax regime or tax. You must associate a tax regime with tax reporting types except for tax reporting types associated with fiscal classifications, tax registrations, and party tax profiles. Mass Create Tax Jurisdictions Responsibility: E-Business Tax Manager (N) Tax Managers > Tax Configuration > Tax Jurisdictions > (B) Mass Create Use the Mass Create Tax Jurisdictions page to create a tax jurisdiction for each record within a parent geography or tax zone type. Use the Update Mass Created Tax Jurisdictions page to review the jurisdictions created and to modify information for individual tax jurisdictions. For example, you can create a county jurisdiction for every county in the parent geography type of State and parent geography name of California. Mass Create Tax Jurisdictions Setup Before you can mass create tax jurisdictions, you may need to complete one or more prerequisite tasks. Prerequisites Mandatory prerequisite steps include: Set up taxes. Set the Allow Mass Creation of Jurisdictions option for the tax You must set this option in the tax record in order to set up mass jurisdictions for a tax jurisdiction related to this tax. Set up tax statuses and tax rates (for jurisdiction-based rates) You must set up tax rate records if you are using jurisdiction-based rates for the jurisdictions that you will create in mass. Enable multiple jurisdictions for the tax You set the Allow Multiple Jurisdictions option in the tax record to be able to define tax jurisdictions for this tax in more than one geographic region. Set up TCA master geography for the applicable parent geography and child records. An optional prerequisite step includes the set up of tax zones, if the tax jurisdictions relate to a specific tax zone. Tax Recovery Rates

Responsibility: E-Business Tax Manager (N) Tax Managers > Defaults and Controls > Tax Reporting Types > (B) Create

Responsibility: E-Business Tax Manager (N) Tax Managers > Tax Configuration > Tax Recovery Rates > (B) Create Use the Create Tax Recovery Rate page to set up recovery rates for a tax. You must set up tax recovery rates for all of your recoverable taxes. A recoverable tax is a tax that allows full or partial recovery of taxes paid on purchases, either as a recoverable payment or as an offset against taxes owed. For example, most VAT-type taxes allow for full recovery of taxes paid on goods and services that relate to taxable business supplies. In cases where an organization purchases both taxable and exempt supplies, the tax authority can designate a partial recovery rate to reflect the combination of taxable and exempt statuses.

Using Party Tax Profiles The Party Tax Profile is the central repository of tax-related information for all parties that participate in your tax-related transactions. This includes first party legal entities and establishments, operating units, tax authorities, and third party customers and suppliers. Party Tax Profile A party tax profile record is the body of information that relates to a partys transaction tax activities. A tax profile can include tax registrations, tax exemptions, configuration options, main and default information, party fiscal classifications, tax reporting codes, and account tax details (for migrated data). You must set up a tax profile for each first and third party involved in your tax transactions. Party Tax Profile can be accessed uniformly within standard party flows or directly from the E-Business Tax menu. Party Tax Profile and Tax Registration components are supported in three flows: Legal entity/establishment flows.

Supplier/supplier site flows. Customer and customer account sites flows.

Configuration Options Configuration options identify the relationship between each first party legal entity and operating unit in your company and the tax regimes that each first party and legal entity is subject to. You must set up a configuration option for each combination of configuration owner (first party legal entity/operating unit) and tax regime, where the party or operating unit is subject to any tax regulations belonging to a tax regime. The configuration options determine which configuration owners can own and maintain the tax content of specific tax regimes. Tax Registrations A tax registration contains information related to a partys transaction tax obligation with a tax authority for a tax jurisdiction where it conducts business. Set up tax registrations for your first party legal establishments and your third party customers/customer sites and suppliers/supplier sites. Customer Tax Exemptions A customer tax exemption is a discount/surcharge or replacement percentage from the base tax rate that reduces the applicable tax on a Receivables transaction. Set up tax exemptions for your third party customers and customer sites to reflect the eligibility of customers for tax exemptions according to the tax authority. Party Fiscal Classifications A party fiscal classification determines, for example, when taxes apply to a party, how much tax applies, and what percentage of the tax is recoverable. These tax requirements are usually defined by the tax authority for the taxes of a given tax regime. Set up party fiscal classifications for your first parties, customers and customer sites, and suppliers and supplier sites. Party Tax Profile Responsibility: E-Business Tax Manager (N) Tax Managers > Parties > Party Tax Profiles Depending on the party type of the tax profile that you are creating, the system displays various tabs on the Create Party Tax Profile page. Main Information Enter main information for all party types, according to your requirements. This information controls certain default values and settings on invoices associated with the party. Note: You can set some of these values at the tax registration level. If you do, then tax registration settings override the values you set at the main information level. For third party tax profiles, invoice controls defined at the tax registration level override invoice controls at the account tax details level, if defined. Party tax profile main information includes: Self-assessment option. Set this option to self-assess taxes on Payables invoices belonging to the party. Tax classification code If applicable, enter a tax classification code to use as determining factor in tax rules for this party or party site. You only enter a tax classification code if you intend to use the Direct Tax Rate Determination tax rule on transactions belonging to this party. Rounding level/rounding rule Set the rounding level and rounding rule to use on invoices belonging to this party. The rounding level indicates whether to apply rounding to calculated tax amounts once for each tax rate per invoice (header level) or to the calculated tax amount on each invoice line (line level). The rounding rule is the method to use to round off calculates tax amounts to the minimum accountable unit (Up, Down, Nearest). Note: If you updated the rounding precedence hierarchy for a specific configuration owner and event class, then the related transactions look instead for rounding level information according to the configuration owner and event class settings.

Tax inclusive option Select the Set Invoice Values as Tax Inclusive check box if the party intends to send or receive invoices with invoice line amounts inclusive of tax. Use Subscription of the Legal Entity (operating unit) Release 11 i tax data in Payables, Receivables, and other applications migrates to E-Business Tax as operating units containing their own tax content. Set this option if you want the operating unit to use the tax content of the associated legal entity at transaction time. Note: This is an irreversible setting. Once you associate the operating unit with its legal entity, you cannot update the operating unit tax profile or maintain separate tax content for this operating unit. Allow Tax Applicability (third party) - Set this option to automatically calculate taxes for this party whenever the party acts as a supplier. You can set this option, for example, for customers that also act as suppliers on transactions. Note: For third parties without a tax profile record, the default is to allow tax applicability. Allow Offset Taxes (third party) - Set this option to define whether the system considers offset taxes for transactions from this party. Tax Registrations The tax registration contains information related to a partys transaction tax obligation with a tax authority for a tax jurisdiction where it conducts business. The Tax Registrations page is available to first party legal establishments and third parties. Classifications There are two types of classifications: Party fiscal classification Legal classification. The party fiscal classifications optionally assigned to a party are used as determining factors in tax rules. The Classifications page is available to the: First Party Legal Entity. First Party Legal Establishment. Third Party. Third Party Site. Legal classifications are assigned to legal entities. You assign these classifications using the Legal Entity module. Tax Reporting Codes The tax reporting codes optionally assigned to a party capture tax information from party transactions for both internal and tax authority reporting requirements. The Tax Reporting Codes page is available to the: First Party Legal Entity. First Party Legal Establishment. Third Party. Third Party Site. Configuration Options The configuration options identify the tax regimes associated with a first party legal entity/operating unit acting as a configuration owner of tax content. The Configuration Options page is available to the: First Party Legal Entity. Operating Unit owning Tax Content. Account Tax Details The account tax details maintain Release 11 i migrated tax information for customer and supplier accounts. The Account Tax Details page is available to the: Third Party.

Third Party Site. The account details overrides the details at the third party and third party site level, if applicable. First Party Legal Entity Tax Profile Responsibility: E-Business Tax Manager (N) Tax Managers > Parties > Party Tax Profiles Once you select a first party legal entity on the Party Tax Profiles page, navigate to the Create Tax Profile page to set up tax profiles for your first party legal entities and legal establishments. You set up legal entities and establishments using the Oracle Legal Entity Manager. You can also enter party tax profile and tax jurisdiction information when you create and update legal entities, as well as tax-related information for associated business entities. Legal classifications appear as read-only data in the party tax profile. First Party Legal Entity First party legal entities identify your organization to the relevant legal authorities, for example, a national or international headquarters. When you create a legal entity, the system automatically creates a legal entity establishment. To set up a party tax profile for a first party legal entity: Enter main and default information, such as set for self assessment / reverse charge, tax classification, and rounding levels and rules. Optionally enter the party fiscal classifications, such as associated legal and fiscal classifications. Optionally enter tax reporting codes. Enter tax configuration options to associate tax regimes with the party. Note: You can set up this tax information as part of the Legal Entity maintenance flow. First Party Legal Establishment Tax Profile Responsibility: E-Business Tax Manager (N) Tax Managers > Parties > Party Tax Profiles Select a first party legal establishment as a party type on the Party Tax Profiles page to create and update the tax profile. First Party Legal Establishments First party legal establishments identify each office, service center, warehouse and any other location within the organization that has a tax requirement. The system automatically creates a legal entity establishment when you create a legal entity. However, you can create additional legal establishments according to your needs. For each legal establishment there are one or more tax registrations, depending upon the tax requirements of the applicable tax authority. To set up a party tax profile for a first party legal establishment: Enter main and default information. Enter the tax registrations required for this party. Optionally enter the party fiscal classifications. Optionally enter tax reporting codes. First Party Tax Profile Setup Before you can set up first party tax profiles, you may need to complete one or more prerequisite tasks. Prerequisites Mandatory prerequisite steps include: Set up legal entities and legal establishments. Set up tax regimes. Optional prerequisite steps include: Set up legal entity secondary establishments.

Set up taxes. Set up tax jurisdictions. Set up lookup codes. Set up party fiscal classifications. Set up tax reporting types. Operating Unit Tax Profile Responsibility: E-Business Tax Manager (N) Tax Managers > Parties > Party Tax Profiles Once you select an operating unit owing tax data on the Party Tax Profiles page, navigate to the Update Party Tax Profile page to modify the tax profile for your operating unit. Release 11i tax data in Oracle Payables, Receivables, and other applications migrates to EBusiness Tax as operating units containing their own tax content. To help you manage the tax content of operating units, you can use the operating unit tax profile in either of two ways: Indicate that tax setup is used and maintained by a specific operating unit. Indicate that operating unit tax setup is used and maintained based on the configuration of the associated legal entity at transaction time. The tax setup of the associated legal entity setup is either specific to the legal entity or shared across legal entities using the Global Configuration Owner setup. This concept is also discussed in Oracle E-Business Tax: Appendix A: Managing Migrated Tax Data. Tax Authority Tax Profile Responsibility: Legal Entity Manager (N) Legal Entity Manager > (T) Legal Entities > (B) Create Legal Entity Use the Oracle Legal Entity Manager to set up each tax authority as a legal authority for transaction tax. After you create the tax authority, you can select a Tax Authority as a party type and update the tax profile on the Party Tax Profiles page. The tax authority party tax profile identifies a tax authority party as a collecting authority and/or a reporting authority. A collecting tax authority manages the administration of tax remittances. A reporting tax authority receives and processes all company transaction tax reports. To set up a party tax profile for a tax authority: If applicable, designate the tax authority as a collecting and/or reporting authority. Enter any applicable tax reporting codes. Tax registration is not available for a tax authority, they utilize tax reporting codes. Third Party Tax Profile Responsibility: E-Business Tax Manager (N) Tax Managers > Parties > Party Tax Profiles Once you select a third party or third party site on the Party Tax Profiles page, navigate to the Create Tax Profile page to set up tax profiles for your customers, customer sites, suppliers, and supplier sites. To set up a party tax profile for a third party or third party site: Enter main and default information, such as allow for tax applicability, allow offset taxes, set for self assessment / reverse charge, and rounding levels and rules. Enter the tax registrations required for this party. Optionally enter the party fiscal classifications, such as associated legal and fiscal classifications. Optionally enter tax reporting codes. Update migrated account tax details. Note: You can set up this tax information as part of the relevant third party maintenance flow (for example, customer and supplier maintenance).

Account Tax Details Use the Account Tax Details region to maintain migrated account tax information. Use the third party site Supplier Site Tax Details region to maintain operating unit supplier site tax information. Use the third party site Customer Account Site Business Purpose Tax Details region to maintain operating unit customer account ship-to site and bill-to site tax information. This concept is discussed in detail in Oracle E-Business Tax: Appendix A: Managing Migrated Tax Data. Third Party Tax Profile Setup Before you can set up third party tax profiles, you may need to complete one or more prerequisite tasks. Prerequisites A mandatory prerequisite step includes set up parties. Optional prerequisite steps include: Set up tax regimes. Set up taxes. Set up tax jurisdictions. Set up lookup codes. Set up party fiscal classifications. Set up tax reporting types. Set up customer and supplier accounts. Self-Assessment Setup 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. You can let a first party self-assess the taxes calculated on the Payables invoices it receives. Self-Assessment Options 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. Self-Assessment Application Depending on the level at which this first party establishment tax registration is created, the self-assessment will apply to: All taxes of the tax regime, if the tax registration is defined for the tax regime only. All tax jurisdictions of the tax, if the tax registration is defined for the tax regime and tax. A specific tax jurisdiction of the tax, if the tax registration is defined for the tax regime, tax, and tax jurisdiction.

Offset Taxes An offset tax calculates and records third party Payables tax liabilities for reverse charges, self-assessments, and Consumer's Use tax (US). An offset tax record is a matching, duplicate record with negative amounts that reduces or completely offsets the tax liability recorded in the tax transaction.

Use offset taxes when the tax requirement includes creating offset general ledger postings. Tax Recovery You cannot update the recovery rate on an offset tax line. The recovery rate is always 100% in order to create credit entries that match the original tax amounts. When you create an offset tax, you enter a primary recovery type with a recoverable rate of 100% and a 100% recovery rate. Offset Taxes Setup To set up for offset taxes, you must perform these tasks; Enable offset tax calculations for each applicable transaction event and party. Set up the offset tax, tax status, and tax rate. Set up the original tax and assign the offset tax rate code to the original tax rate. Enable Offset Tax Calculations Perform these tasks to enable offset tax calculations: 1. Review the offset tax setting for Payables transaction events. a. Allow Offset Tax Calculation option enables the calculation of offset taxes for a transaction event. b. Offset Tax Basis indicates the party whose transactions are involved in offset tax creation. 2. Update the offset tax basis for the combinations of configuration owners and transaction events that you want, if applicable. 3. Set the Allow Offset Taxes option for the applicable third parties. Set this option for each third party involved in offset tax transactions. Tax Exemptions Responsibility: E-Business Tax Manager (N) Tax Managers > Parties > Party Tax Profiles Once you select a third party or third party site on the Party Tax Profiles page, navigate to the Create Tax Exemptions page to set up tax exemptions for your third party customers and customer sites. Tax exemptions can apply to a specific tax, tax status, tax jurisdiction, or product. You can set up a tax exemption at regime, tax, status, or rate level, for a specific jurisdiction or for all jurisdictions, for a specific product or for all products. Tax exemptions are defined as a discount/surcharge or a new rate. Exemption Setup Tasks Use the third party tax exemption record to maintain information about a customer or customer site tax exemption. In addition to the third party tax exemption record, you must also complete the appropriate setups in order for E-Business Tax to calculate tax exemptions. These setups are: Set the eBTax: Allow Override of Customer Exemptions profile option to control the display of the Tax Handling field on the transaction line. You use the Tax Handling field to select the applicable tax exemption value for the transaction line. E-Business Tax processes tax exemptions in different ways depending upon the value you choose. Set the Allow Tax Exemptions option at the levels that correspond to the tax exemption. Indicate whether you are creating tax exemptions for the tax, or using tax exemptions previously created for an existing tax for each applicable tax. Verify that the applicable event class allows tax exemptions. If it does not, then set up configuration owner tax options for the applicable configuration owner and event class to include tax exemptions. Tax Exemptions Setup

Before you can set up tax exemptions, you may need to complete one or more prerequisite tasks. Prerequisites Mandatory prerequisite steps include: Set up customer third parties. Set up tax regimes. Set up taxes (for exemptions for a specific tax). Set up tax statuses (for exemptions for a specific tax status). Set up tax rates (for exemptions for a specific tax rate). Set up tax jurisdictions (for exemptions for a specific tax jurisdiction). Set up inventory organizations (for product exemptions). Set up inventory items (for product exemptions). An optional prerequisite step includes set up exempt reason lookup codes. Tax Registrations Responsibility: E-Business Tax Manager (N) Tax Managers > Parties > Party Tax Profiles Once you select a first party legal establishment, or a third party or third party site, on the Party Tax Profiles page, navigate to the Create Tax Registration Details page to set up tax registrations. In some cases you may need to create multiple tax registrations for a single location. E-Business Tax uses tax registrations in tax determination and tax reporting. For each tax that you create, you must define either a default tax registration or a tax rule for the rule type Determine Tax Registration. This rule determines which tax registration is stamped on a transaction. Tax Registration Setup Tasks You must set up a separate tax registration to represent each distinct registration requirement for a first party, including Each legal establishment that is required to file tax documents. Each tax regime, where the registration is used for all taxes within the regime. Each tax within a tax regime that has a separate tax requirement, where the registration is used for all jurisdictions where the tax is applicable. Each tax jurisdiction that has a separate tax requirement for a tax registration. Each tax for which the party is not registered, if the not registered tax registration status is used as a tax condition in tax rules. If a party has more than one tax registration under the same tax regime, then E-Business Tax considers the tax registrations in the order: jurisdiction; tax; tax regime. You optionally set up tax registrations for your customers and suppliers, as necessary, to support specific tax regulations or reporting requirements. Instructor Note Tax registrations are a record of the actual registration that the company files with the tax authority. E-Business Tax is not actually filing real registrations, but recording information that gets stamped on the transaction. A company may not necessarily register with a tax authority, but as long as it is filing taxes, the company is acting as though it is registered. You indicate the Source of the tax registration as either explicit or implicit: Explicit The party is registered with the local tax authority. Implicit The party is not formally registered with the tax authority, but the party is considered to meet one or more requirements for reporting taxes because of the level of business conducted, typically a minimum presence in the county and/or a minimum revenue threshold. Tax Configuration Options

Use configuration options to associate legal entities and operating units with their applicable tax regimes. The association between a party and a tax regime includes these definitions: Configuration for Taxes and Rules - The setup that the party uses for taxes, tax statuses, tax rates, tax recovery rates, and tax rules. Configuration for Product Exceptions - The setup that the party uses for product tax exceptions. Service Subscriptions - The external service providers that the party uses in place of Oracle E-Business Tax to provide tax calculation services for US Sales and Use tax. Configuration for Taxes and Rules E-Business Tax provides the global configuration owner to represent ownership of all tax setups at the company level. The configuration options that you set for each party/regime combination are in relation to the global configuration owner. These options are: Common Configuration - The party uses the company tax setups for the applicable regimes. All parties with a Common Configuration option share the same tax setup. When setting up taxes, tax details, and configuration owner tax options, the global configuration owner represents any party with a Common Configuration. Authorized updates to the tax setup affect all users of the Common Configuration. Common Configuration with Party Overrides - The party uses the company tax setups for the applicable regimes, but with the ability to override portions of the company tax setup with tax setup specific to the party's requirements. Party-Specific Configuration - A legal entity or operating unit party does not share the company tax setup, but instead creates and maintains its own tax setup for the applicable regimes. In this case, only this party can use the tax setup it creates. Instructor Note For Release 11i migrated data, the configuration owner of the tax setup converts to EBusiness Tax in this way: Tax codes - Party-Specific configuration, with the operating unit owning its tax setup. Location-based tax codes - Common Configuration, with the global configuration owner owning the location-based tax setup. The Configuration Owner Tax Options page displays the E-Business Tax tax option settings for each migrated operating unit. You can update certain of these settings according to your requirements. Migrated data is discussed in detail in Oracle E-Business Tax: Appendix A: Managing Migrated Tax Data. Legal Entity and Operating Unit Configuration Options You can define relationships between parties and tax requirements that reflect the specific taxation needs of your company and the way it is organized. These configuration options include: One legal entity owns and maintains its tax configuration. Multiple operating units of one legal entity share the legal entity tax configuration. Multiple legal entities share the same tax configuration. Multiple legal entities share the same tax configuration, with individual legal entities able to override the shared tax configuration for requirements specific to the legal entity, including tax, tax status, tax rate, and tax rules and formulas. One or more operating units of one legal entity own and maintain a separate tax configuration. A legal entity, or an operating unit that owns and maintains a separate tax configuration, uses third party tax services for specific transaction events.

Configuration Options Responsibility: E-Business Tax Manager

(N) Tax Managers > Tax Configuration > Tax Regimes > (B) Continue

(N) Tax Managers > Parties > Party Tax Profile > (I) Create/Update Tax Profile > (T) Configuration Options Use the Configuration Options page to set up configuration options to associate tax regimes with the parties in your company that have a tax requirement under these tax regimes. You can set up tax configuration options when you create a tax regime or when you create a party tax profile for a first party legal entity or operating unit. Both setup flows display and maintain the same party/regime definitions.

Configuration options only apply to tax regimes directly linked to taxes and not to tax regimes that are used to group other tax regimes. Any authorized user can maintain the common tax setup associated with the global configuration owner. Configuration Options Setup Before you can set up configuration options, you may need to complete one or more of these tasks. Prerequisites Set the eBTax: Read/Write Access to GCO Data profile option to identify users that can maintain tax configuration content for the Global Configuration Owner. Set up tax regimes. Set up party tax profiles. Service Subscriptions Responsibility: E-Business Tax Manager (N) Tax Managers > Parties > Party Tax Profile > (I) Create/Update Tax Profile > (T) Configuration Options > (I) Service Subscriptions The setup for provider services is called a service subscription. A service subscription applies to the transactions of one configuration option setup for a combination of tax regime and legal entity/operating unit. Use the Subscription Options page to assign an external service provider to a configuration option. When assigned, E-Business Tax uses the external service provider tax services to calculate US Sales and Use tax on Receivables transactions and the external service provider tax data for reporting. E-Business Tax provides transparent integration between the external service provider and Oracle Receivables. Both E-Business Tax and the external service provider execute and complete the tax services without any interruption to the application business flow. You can use the tax services of these external service providers: Taxware, LP - A First Data Company Vertex, Inc. Service Subscriptions Setup Before you can set up service subscriptions, you may need to complete one or more of these tasks. Prerequisites Mandatory prerequisite steps include: Set up tax regimes. Set up party tax profiles. Set up configuration options. Event Classes Responsibility: E-Business Tax Manager (N) Tax Managers > Transactions > Event Class Settings > (I) Event Class Mappings (N) Tax Managers > Transactions > Event Class Settings > (I) Event Class Options

Use the Event Class Mapping page to review the mappings between event types and tax event types. You can use event class mapping information when setting up tax rules. You can set up tax rules that refer to application event classes and/or tax event classes. Use the Event Class Options page to review the default tax settings for each application event class. E-Business Tax provides predefined event class settings for each combination of application and event class. Event class settings provide a means of standardizing the interaction between E-Business Tax and other applications. E-Business Tax responds to specific application transaction events, such as a Payables invoice or a Receivables credit memo, according to the predefined settings of each application event class. In this way, E-Business Tax can determine and calculate taxes without requiring access to each product. By default, the event class option settings of an event class apply to all configuration owners. You can update event class options belonging to an application event class for a selected configuration owner in this way: if the event class option is enabled, you can deselect the option to exclude it from tax calculation. If an event class option is not enabled for a particular application event class, you cannot enable this option. Event Classes Applicable to E-Business Tax These event classes are applicable to E-Business Tax: Payables Standard invoices Prepaid invoices Expense reports Purchasing Requisitions Purchase orders and agreements Releases Receivables Invoices Credit memos Debit memos Trade Management (source application) Tax Event for Claims Interfacing to AP Tax Event for Claims Interfacing to AR Configuration Owner Tax Options Responsibility: E-Business Tax Manager (N) Tax Managers > Defaults and Controls > Configuration Owner Tax Options > (B) Create Use the Create Configuration Owner Tax Options page to set up configuration owner tax options for a combination of configuration owner and application event class. You can update some of the E-Business Tax predefined event class settings for a particular configuration owner. Configuration owner tax options let a configuration owner update default tax options on transactions that belong to a specific application event class. At transaction time, E-Business Tax uses the tax option settings of the configuration owner and application event class instead of the default settings. These are the tax options you can update for each application and its event classes: Payables Standard Invoice, Prepaid Invoice, Expense Report Rounding Precedence Hierarchy Regime Determination Set Perform Additional Applicability for Imported Documents Offset Tax Basis

Allow Tax Applicability Allow Entry of Manual Tax Lines Allow Recalculation for Manual Tax Lines Allow Override for Calculated Tax Lines Tax Tolerance Purchasing - Requisition, Purchase Order and Agreement, Release Rounding Precedence Hierarchy Offset Tax Basis Allow Tax Applicability Receivables Invoice, Credit Memo, Debit Memo Rounding Precedence Hierarchy Allow Exemptions Regime Determination Set Offset Tax Basis Allow Tax Applicability Allow Entry of Manual Tax Lines Allow Recalculation for Manual Tax Lines Allow Override for Calculated Tax Lines

Fiscal Classifications Fiscal classifications provide tax determination values for situations where the party, product, or transaction are factors in tax determination. You set up a fiscal classification type to identify a category of fiscal classification that has a potential tax implication; you assign fiscal classification types to tax regimes and taxation countries. You set up fiscal classification codes under a fiscal classification type to provide additional granularity to a particular fiscal classification category. When creating tax rules, you use fiscal classification types as determining factors and fiscal classification codes as condition set values. See: Oracle E-Business Tax: Part 2: Setting Up Tax Rules for information about determining factors and tax conditions.

The use of fiscal classifications is optional, and depends upon your overall scheme for managing tax determination and tax calculation requirements. At transaction time EBusiness Tax determines, according to the tax rules you create, which fiscal classifications apply to the transaction line.

You set up fiscal classifications under these general categories:

Party fiscal classifications - Classify your first partiesthe various parts of your organizationand your third partiesyour customers and suppliers and their locations for use in tax determination. In some countries, the tax authority provides the specific party fiscal classification to use.

For example, set up different party fiscal classifications for wholesale suppliers and retail suppliers. Product fiscal classifications - Classify the products and services that you buy and sell for use in defining rules for tax determination. In some countries, the tax authority provides the specific product fiscal classification to use. For example, set up a product fiscal classification type in the United Kingdom for supplies that are zero-rated for VAT, and then set up fiscal classification codes for specific supplies, such as food, cleaning supplies, and printed matter. Transaction fiscal classifications - Classify the nature of a transaction itself, and the details that must accompany a transaction, according to its tax requirements.

For example, set up a transaction fiscal classification for retail sales, then set up fiscal classification codes for sales of manufactured goods, sales of imported items, and sales giveaways. Party Fiscal Classifications Responsibility: E-Business Tax Manager (N) Tax Managers > Parties > Party Classification > (B) Create Use the Create Party Fiscal Classification Type page to create party fiscal classification types and codes. The party fiscal classifications that you create are used as tax determining factors in tax rules. A party fiscal classification determines, for example, when taxes apply to a party, how much tax applies, and what percentage of the tax is recoverable. Set up party fiscal classifications for: First parties. Customers and customer sites. Suppliers and supplier sites. Once you set up your party fiscal classifications types and codes, you can associate a party fiscal classification with a party tax profile for each party that requires a party fiscal classifications for tax determination and/or tax reporting purposes. For example, you may want to classify parties according to tax handling requirements, such as End Consumer, Distributor, Non-Profit Organization, Government Agency, and so on. Product Fiscal Classifications Responsibility: E-Business Tax Manager (N) Tax Managers > Products > Product Classifications > (B) Create (N) Tax Managers > Products > Intended Use Classifications Use the Product Fiscal Classification Type pages and Product Intended Use Fiscal Classification Type page to classify goods and services for tax purposes. You use product fiscal classifications as tax determining factors in tax rules. You can set up product fiscal classifications for: Inventory-based products and services Product fiscal classifications that correspond to Oracle Inventory items. Non-Inventory based products and services An E-Business Tax generic product category for non-Inventory based items. Product intended use fiscal classification - One classification for either Inventorybased or non-Inventory based products and services to identify situations where the intended use of the product is a factor in tax determination. You associate the product fiscal classification type codes that you create with the corresponding tax regimes that require product fiscal classifications. These product fiscal classification type codes become available to transactions belonging to the tax regime for use in tax determination. An Inventory-based product fiscal classification corresponds to the related setup for items belonging to Oracle Inventory. The Inventory category set corresponds to the product fiscal classification type, and the Inventory category segment values correspond to the product fiscal classification codes. When an item belonging to the Inventory category set is entered on the transaction line, the corresponding product fiscal classification code defaults to the transaction. A non-Inventory based product fiscal classification lets you define product fiscal classification codes for goods and services that are not associated with Oracle Inventory items. The non-Inventory based product fiscal classification uses a generic product fiscal classification type called PRODUCT_CATEGORY. You create product fiscal classification codes under PRODUCT_CATEGORY according to categories that you define. You can create both individual codes and a hierarchy of codes to represent lines of goods and services that have a tax requirement. You can also optionally assign non-Inventory based product fiscal classifications to a particular country.

You can use non-Inventory based product fiscal classifications to: Classify products for taxes if you do not use Oracle Inventory. Create country-specific product fiscal classifications. Create product fiscal classifications for items that are not a good. Create ad hoc product fiscal classifications without reference to an inventory item, for example, if you are making product purchases that are not a part of your standard business processes. A product intended use fiscal classification is used to classify goods and services where the intended use of the product is a factor either in tax determination or the tax recovery rate. For example, a company may purchase promotional items that it intends to give away free, or offer special services at a reduced charge. You can only set up product intended use fiscal classifications for either an Inventory category set or the non-Inventory based PRODUCT_CATEGORY, but not both. When you first set up product intended use fiscal classifications, you decide which one becomes the basis for this classification (this is an irreversible setting). If applicable, the data migration process may also create either Inventory-based or non-Inventory based product intended use fiscal classifications. Note. Because non-Inventory based and product intended use fiscal classification codes are not assigned to a particular Inventory item or tax regime, E-Business Tax makes these fiscal classification codes available to all transactions (except for non-Inventory based product fiscal classification codes assigned to a particular country). Transaction Fiscal Classifications Responsibility: E-Business Tax Manager (N) Tax Managers > Transactions > Transaction Business Categories (N) Tax Managers > Transactions > Transaction Fiscal Classifications > (B) Create (N) Tax Managers > Transactions > Document Classifications (N) Tax Managers > Transactions > User Defined Transaction Classifications Use the Transaction Business Category Codes, Create Transaction Fiscal Classification Type, Update Document Fiscal Classification, and Update User Defined Fiscal Classification pages to create transaction fiscal classifications. E-Business Tax uses transaction fiscal classifications as tax determining factors in tax rules. You use transaction fiscal classifications when the tax authority requires you to classify the nature of the transaction itself for tax purposes in order to determine the tax rate. You can set up these types of transaction fiscal classifications: Transaction business categories. Transaction fiscal classification codes. Document fiscal classifications. User defined fiscal classifications. Transaction Business Categories E-Business Tax provides the following transaction business categories that you can use to identify and classify your business transactions: Expense report. Purchase pre-payment transaction. Purchase transaction. Sales transaction. Sales transaction adjustment. Intercompany transaction. Transaction Fiscal Classification Codes

You can create a hierarchy of transaction fiscal classification codes for use with a transaction business category to identify specific transaction events, such as employee expense reports vs. contractor expense reports or retail sales vs. product demonstrations, and, if applicable, designate codes for specific countries. Document Fiscal Classifications Set up document fiscal classifications to classify transactions that require special documentation to accompany the transaction. For example, international transactions often require proof of export documentation to support the sale or transfer of goods; you can create a document fiscal classification code to confirm receipt of export documents. User Defined Fiscal Classifications Set up user defined transaction fiscal classification codes to classify any tax requirement that you cannot define using existing fiscal classification types. E-Business Tax Architecture The Rule Engine tier comprises the set of tax rules that are used to determine and calculate tax on a transaction. You define tax rules for each combination of tax regime, tax and configuration owner. You create tax rules by translating the tax regulations of a tax authority into determining factors and tax conditions that the E-Business Tax tax rules engine uses to evaluate the applicability of a tax on each transaction line. Tax rules determine: the applicability of a tax; the place of supply and tax jurisdiction of the transaction; the tax registration; the tax status and tax rate; the recovery rate (if applicable); and the taxable basis and tax formula to use in calculation. This module discusses basic principles concerning tax rules and tax calculations, and how to set up a tax rule using default values and the guided rule entry. Rule Engine Oracle E-Business applications pass the necessary information to E-Business Tax about the transaction regarding Party, Product, Place, and Process (4Ps). The E-Business Tax tax determination process then uses the tax configuration setup and the details on the transaction to determine: Which taxes apply to the transaction. How to calculate the tax amount for each tax that applies to the transaction.

Rule Engine - Rule Types The E-Business Tax tax rules engine uses the Tax Determination process to identify the taxes that apply to a transaction and to calculate the tax. The E-Business Tax tax determination process is organized into rule types. Each rule type identifies a particular step in the determination and calculation of taxes on transactions. You must either set up tax rules or provide a default value for each rule type in order for the tax rules engine to determine and calculate taxes.

The steps in the Tax Determination process are:

1 Determine Applicable Tax Regimes and Candidate Taxes: This is a preliminary step used by E-Business Tax to determine tax regimes and candidate taxes within each tax regime. This step identifies the first party of the transaction and the countries associated with the transaction. For each country identified, the process selects the tax regimes that are associated with the first party and defined for the country as candidate tax regimes. The process then selects the taxes defined for each candidate tax regime as candidate taxes.

2 Determine Place of Supply and Tax Jurisdiction: Determines the location where a transaction is considered to have taken place for a specific tax, and the associated tax jurisdiction for each candidate tax. This step uses the Determine Place of Supply rule type.

For example, in Europe the default place of supply of goods for VAT is often Ship From, meaning the place of supply of a sale or purchase within a European country is the country itself. In the US, the default place of supply for US Sales and Use is often Ship To, meaning the state that is purchasing/receiving the goods.

3 Determine Tax Applicability: Determines the tax applicability of each candidate tax derived from the Determine Place of Supply and Tax Jurisdiction process, and eliminates taxes that are found to be not applicable. This step uses the Determine Tax Applicability rule type.

4 Determine Tax Registration: Determines the party whose tax registration is used for each tax on the transaction, and, if available, derives the tax registration number. This step uses the Determine Tax Registration rule type. Generally, the registration default is Bill From Party, but there are cases, like Reverse Charge or Self Assessment, where the default becomes Bill To Party for specific transactions. 5 Determine Tax Status: Determines the tax status of each applicable tax on the transaction. This step uses the Determine Tax Status rule type. 6 Determine Tax Rate: Determines the tax rate for each tax and tax status derived from the previous process. This step uses the Determine Tax Rate rule type. If applicable, the tax rate is modified by any exception rate and/or tax exemption that applies. The result of this process is a tax rate for each applicable tax. The rate or rates are applied to the taxable basis in Step 8, Calculate Taxes. 7 Determine Taxable Basis: Determines the taxable base amount or quantity upon which to apply the tax rate for each applicable tax. This step uses the Determine Taxable Basis rule type. The taxable basis is typically the transaction line amount. E-Business Tax provides the default taxable basis formula taxable basis = line amount. In some cases, the taxable basis either can include another tax or is based on the tax amount of another tax. You can set up special taxable basis formulas to manage these requirements.

8 Calculate Taxes: Calculates the tax amount for each applicable tax on the transaction. This step uses the Calculate Tax Amounts rule type. The tax is typically determined by applying the tax rate to the line amount. EBusiness Tax provides the default tax calculation formula tax amount = taxable basis * tax rate. In some exceptional cases, the tax amount is altered by adding or subtracting another tax. You can set up special tax calculation formulas to manage these requirements.

Tax Recovery Rate: Determines the recovery rate on Procure to Pay transactions to apply to each recovery type for each applicable tax on the transaction (Determine Recovery Rate rule type). Tax recovery is a separate process with its own set of steps, for taxes that allow for full or partial recovery of the tax amount. See: Oracle E-Business Tax: Tax Recovery for more information. Direct Tax Rate Determination: This is a special tax rule type that lets you specify the results of tax applicability, tax status, and tax rate for a given tax. You use this rule type with migrated tax data and the Release 11i tax model in E-Business Tax. See: Oracle E-Business Tax: Appendix A: Managing Migrated Tax Data for more information. Rule Engine Tax Regimes The Tax Regime process determines tax regimes and candidate taxes. The result of the process is a list of taxes that are eligible for consideration on the transaction.

The activities include: Determine the first party of the transaction. Identify location types to derive candidate tax regimes. Identify tax regimes. Identify taxes using subscriber configuration option. The components used include: Party Tax Profile. Regime Determination Set. Configuration Options. Rule Engine Place of Supply / Taxation The Place of Supply / Taxation process identifies the applicable place of supply and associated tax jurisdiction for each candidate tax. The place of supply, or sites 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. The activities include: Identify location type. Identify jurisdiction. The components used and corresponding rule type include: Tax Rule: Determine Place of Supply, or the default value for Place of Supply for the tax. Tax Jurisdictions. Rule Engine Applicability & Registration Applicability Process The Applicability process determines the tax applicability of each candidate tax derived from the Determine Place of Supply and Tax Jurisdiction process, and eliminates taxes that are found to be not applicable. The process first attempts to derive the applicability of each candidate tax based on the rule conditions of the Determine Tax Applicability rules for the tax. If no rule applies, the process uses the default value of Applicable or Not Applicable that was assigned to the rule type for the tax. If the tax does not apply, it is removed from the list of candidate taxes. The Applicability activities include: Consider candidate taxes from the previous process. Eliminate taxes based on tax applicability rule for each tax. The component used in these activities and corresponding rule type include Tax Rule: Determine Tax Applicability and the default value for applicability for the tax. Registration Process The Registration process determines the party whose tax registration is used for each tax on the transaction, and, if available, derives the tax registration number. During the Registration process, E-Business Tax also considers these details of the derived tax registration for each tax: Tax inclusive handling. Self-assessment/reverse charge setting. Rounding rule. The Registration activity includes determine the party type to use to derive the tax registration for each applicable tax. The component used in this activity and corresponding rule type includes: Tax Rule: Determine Tax Registration, or the default value for the tax.

Party Tax Profile. Tax Registration.

Rule Engine Status & Rates Status Process The Status process determines the tax status of each applicable tax on the transaction. EBusiness Tax attempts to derive the tax status using either tax rules belonging to the Determine Tax Status rule type, or the default value assigned to this rule type. The Status activities include: Consider tax statuses of applicable taxes. Consider tax status rules or use default tax status.

Rates Process The Rates process determines the tax rate of the tax status derived from the previous process to use on the transaction line for each applicable tax. If applicable, the tax rate is then modified by any exception rate and/or tax exemption that applies. The Rates activities include: Determine the tax rate code to use for the tax status, for each applicable tax. Determine the tax rate percentage or per-unit tax amount for a quantity based tax. If a tax exception applies, update the tax rate for each applicable tax. If a tax exemption applies, update the tax rate. The components used in these activities and corresponding rule type include: Tax Rule: Determine Tax Rate, or the default value defined for the tax status derived in the previous process. Tax Rates. Product Tax Exceptions. Customer Tax Exemptions. Defaulting Logic If defined, E-Business Tax uses the tax rate assigned to the tax jurisdiction for the applicable tax and tax status; otherwise, E-Business Tax uses the default tax rate. Rule Engine Taxable Basis The Taxable Basis process determines the taxable base amount or quantity for each tax. This is typically the transaction line amount. In some cases, the taxable basis either can include another tax or is based on the tax amount of another tax. E-Business lets you define taxable basis formulas to manage these requirements. The result of this process is the taxable basis on which the tax rate for each tax is applied. If the process cannot find a taxable basis formula for an applicable tax, then E-Business raises an error. The activities include: Identify the taxable basis formula for each applicable tax. Determine the taxable basis and compounding details based on the taxable basis formula. Consider the Tax Inclusive settings of the applicable taxes. The components used and corresponding rule type include: Tax Rule: Determine Taxable Basis, or the default value for the tax. Taxable Basis formula. Tax Inclusive settings at the tax rate level. Rule Engine Tax Calculation The Tax Calculation process calculates the tax amount on the transaction. In most cases, the tax amount is computed by applying the derived tax rate to the derived taxable basis. In some exceptional cases, the tax amount is altered by adding or subtracting another tax. E-Business lets you define tax calculation formulas to manage these requirements. The result of this process is the tax amount for each tax. If the process cannot find a tax calculation formula for an applicable tax, then E-Business raises an error. The activities include: Identify the tax calculation formula. Calculate taxes using the tax calculation formula. Perform applicable tax rounding. The components used and corresponding rule type include: Tax Rule: Calculate Tax Amounts. Calculate Tax formula, if applicable.

Tax Rounding Rule from registration, account site, party tax profile, or tax. Configuration Owner Tax Options. Rule Engine Recovery Rate A recoverable tax is a tax that allows full or partial recovery of taxes paid on purchases, either as a recoverable payment or as an offset against taxes owed. The Recovery Rate process is an optional process that determines the recovery rate to use on Procure to Pay transactions, when the tax allows for full or partial recovery of the tax amount. The activities include: Allocate tax amount per item distributions. Determine recovery types. Determine recovery rates. Determine the recoverable amounts. Determine the non-recoverable amount. See: Oracle E-Business Tax: Tax Recovery for complete information about the tax recovery process. Make Tax Available on Transactions Responsibility: E-Business Tax Manager (N) Tax Managers > Tax Configuration > Taxes > (I) Update Use the Update Tax page to make each tax available on transactions. You must enable the Make Tax Available for Transactions option before E-Business Tax can use this tax setup to calculate taxes on transactions. When you enable the Make Tax Available for Transactions option, E-Business Tax runs a series of checks to ensure that all of the definitions related to the tax have been defined. E-Business Tax displays an error message if you have not set up the definitions properly. Prior to making a tax available on transactions, you must: Define either a default place of supply or a tax rule for the rule type Determine Place of Supply. Define either a default tax registration or a tax rule for the rule type Determine Tax Registration. Define either a default tax status and default tax rate, or tax rules for the rule types Determine Tax Status and Determine Tax Rate, or the rule type Direct Tax Rate Determination. Define either a default tax formula or a tax rule for the rule type Determine Taxable Basis. Define either a default tax formula or a tax rule for the rule type Calculate Tax Amounts. Define a primary tax recovery rate, if you set the allow recovery option for the tax. Define at least one tax jurisdiction for the tax. Define an exchange rate type, if the tax is used in cross-border transactions. Oracle Tax Simulator Responsibility: E-Business Oracle Tax Simulator (N) Oracle Tax Simulator > Tax Simulator Use the Oracle Tax Simulator to enter transactions in order to simulate the tax determination process without creating live data. With the Oracle Tax Simulator, you can: Enter Payables and Receivables transactions to simulate tax calculation based on various scenarios. View the tax rules that were applied to a tax calculation and the processed result for each rule type.

Simulate the characteristics of the Payables, Purchasing, and Receivables workbenches and create the tax line for each type of operation. View the summarized tax lines for each transaction and the tax lines generated for each transaction line. Use the associated tax windows to view and/or override tax lines. The Oracle Tax Simulator provides these verifications: How the tax rules that you have defined for one or more taxes work in conjunction with the defaults you have set for them. Whether a tax rule that you expected to have a successful evaluation for a given set of transaction conditions achieved the desired result. How the options that you have set at various levels are reflected in the results of tax determination processing. If a certain transaction does not processes taxes as you predicted, then you can use the simulated result to troubleshoot the cause. Troubleshooting the Tax Configuration Responsibility: Oracle Tax Simulator (N) Oracle Tax Simulator > Tax Simulator If a certain transaction does not process taxes as you predicted, then you can use the simulated result to troubleshoot the cause. For example: You defined product tax exceptions, but they were not used on a transaction as expected. You then discover that the Allow Tax Exceptions option was not enabled on the applicable tax rate record. Your supplier record has the option enabled to use offset taxes, but the offset taxes do not appear. You then discover that the tax rate record does not have an offset tax rate associated with it. Tax Simulator Tools Use the Tax Simulator tools to analyze the tax calculations for your transaction: View Tax Log - Use the View Tax Log option on the Tools menu to generate a log file of transaction activity. The log file provides details of all processing done on a transaction, including a list of tax rules that were not evaluated successfully. Detail Tax Lines window - Use the Detail Tax Lines window to view the calculated tax lines for the transaction. The window displays, for each transaction line, the applicable tax with the corresponding tax configuration details, including tax regime, tax, tax jurisdiction, tax status, tax rate code, tax rate, and tax amount. Rules window - Use the Rules window to view the tax rules that were applied to each tax line for each tax calculation process. For each rule type, you can view the processed result and verify whether the result was determined by a tax rule or the default value. If a tax rule was applied, you can also determine the associated tax rule and tax condition set. Summary Tax Lines window - Use the Summary Tax Lines window to view the summary tax lines for your Payables transactions. For each applicable tax, you can view the total tax amount across all transaction lines, with the corresponding tax configuration details, including tax regime, tax, tax jurisdiction, tax status, tax rate code, and tax rate. Tax Distributions window - Use the Tax Distributions window to view the resulting distributions information and any associated recovery details for your Payables transactions. 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. Setting up tax rules using the Expert Tax Rule Entry is discussed in Oracle E-Business Tax: Part 3: Setting Up Tax Rules. Tax Rules Entry E-Business Tax provides two entry flows for setting up your tax rules:

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. Setting up tax rules using the Guided Tax Rule Entry is discussed in this module. Tax Rules Guided Rule Entry Responsibility: E-Business Tax Manager (N) Tax Managers > Tax Rules > (I) Guided Rule Entry Use the following page flow to set up tax rules using the guided rule entry: Tax Rules Create Tax Rule: General Information Create Tax Rule: Determining Factors and Conditions Create Tax Rule: Condition Results Create Tax Rule: Rule Order Create Tax Rule: Rule Templates Tax Rules Guided Rule Entry A tax rule is defined by: Ownership information - Identifies the tax rule configuration owner. If the configuration owner is a legal entity or operating unit, then the rule only applies to the transactions of this legal entity or operating unit. If the configuration owner is the Global Configuration Owner, then the rule applies to the transactions of all legal entities and operating units with a configuration option setting for the tax regime of either Common Configuration or Common Configuration with Party Overrides. Context information - Identifies the tax regime, tax, and rule type for which a rule is defined. Rule order - Identifies the order in which a rule is evaluated. You cannot repeat a rule order for the same tax regime, tax, and rule type for the same configuration owner. If the configuration option setting is Common Configuration with Party Overrides, you cannot repeat a rule order for the same tax regime, tax, and rule type for either the same configuration owner or the Global Configuration Owner. Additional context information - Applies further restrictions to a rule: Transactions belonging to a specific application event class. Transactions belonging to a specific application tax event class. Transactions belonging to a specific location. Determining factor set - Identifies the factors to consider when evaluating the tax rule. Tax condition set - Identifies the conditions (from one or more of the determining factors belonging to the determining factor set) to satisfy in order evaluate a tax condition set successfully. Result - The value that results when the tax conditions are satisfied. For the direct tax rate determination rule type, multiple results may apply to the successful evaluation of a tax condition set. Determining Factors Determining factors are the key building blocks of your tax rules. They are the variables that are passed at transaction time or derived from information on the transaction. Determining factors fall into four groups, namely: Party Product Place Process

A determining factor is an attribute that contributes to the outcome of a tax determination process, such as a geographical location (place) or tax registration status (party). Determining factors can be used in tax rules, taxable basis formula, and tax regime determination. Determining Factor Classes Tax determining factors are categorized into logical groupings called determining factor classes, such as Accounting or Geography. The grouping of determining factors into determining factor classes is done to simplify searches, by grouping similar determining factors together. A determining factor is automatically created under the appropriate determining factor class whenever you create a new element, such as a new fiscal product classification code. Class Qualifiers You use a class qualifier with a determining factor class when it is possible to associate a determining factor class with more than one value on the transaction. For example, for the determining factor class Geography and the determining factor Country, you need to specify which party location to use by means of a class qualifier such as ship from party or ship to party location. Determining Factor - Party The Party determining factor includes the following determining factor classes and their class qualifiers: Legal party fiscal classification First party Registration Bill From Party Bill To Party Ship From Party Ship To Party Party fiscal classification Bill From Party Bill To Party Point of Acceptance Party (AR transactions) Point of Origin Party (AR transactions) Ship From Party Ship To Party Transaction input factor Not applicable The transaction input factor determining factor class groups together additional factors entered on the transaction line that can influence tax determination. Transaction input factors can apply to the parties, products, or processes involved in a transaction. See: Oracle E-Business Tax: Fiscal Classifications for a discussion of legal party and party fiscal classifications. Determining Factor Product The Product determining factor includes the following determining factor classes and their class qualifiers: Product Inventory linked Not applicable Product Non-Inventory linked Product fiscal classification level (Levels 1-5) Transaction input factor (intended use, product override) Not applicable

Determining Factor - Place The Place determining factor includes the following determining factor classes and their class qualifiers: Geography Bill From Bill To Point of Acceptance (AR transactions) Point of Origin (AR transactions) Ship From Ship To Tax Zones Bill From Bill To Point of Acceptance Point of Origin Ship From Ship To Determining Factor - Process The Process determining factor includes the following determining factor classes and their class qualifiers: Document Document fiscal classification level (Levels 1-5) Transaction fiscal classification Not applicable Transaction generic classification Classification level (Levels 1-5) Accounting event Accounting segments of the selected ledger Transaction input factor Not applicable The transaction generic classification determining factor class references fiscal classification codes belonging to the designated level in the corresponding fiscal classification type. Tax Determining Factor Set Responsibility: E-Business Tax Manager (N) Tax Managers > Advanced Setup Options > Tax Determining Factor Sets > (B) Create Use the Create Tax Determining Factor Set page to set up a tax determining factor set. The tax determining factor set groups together related tax determining factors for use in tax rules determination and tax regime determination. Tax Rules Associate a tax determining factor set with a rule type to use in the creation of tax rules for the rule type. Tax determining factors are the building blocks in the creation of tax conditions for each tax rule. You associate one determining factor set with each tax rule to create the tax condition sets for the tax rule. You can maintain and reuse a tax determining factor set that you create for one rule with another rule for a different tax or a different rule type, where requirements are identical. You can also reuse a tax determining factor set within the same rule type for a different condition set. You can set up determining factor sets in advance to use with tax rules, or set up a determining factor set during the creation of a tax rule.

Regime Determination Associate a regime determination set with a combination of configuration owner and application event class to identify tax regimes and candidate taxes on transactions belong to this configuration owner and application event class. Tax regime determination is the first step in the tax determination process. A regime determination set differs from tax rule determining factor sets in that the determining factors are location types only. E-Business Tax compares the location types in the active regime determination set to the locations specified on the transaction to identify the countries associated with each location and the tax regimes associated with each country. Note: By default, E-Business Tax provides a seeded regime determination set for all Payables and Receivables transactions for all configuration owners. This regime determination set considers all location types (except Paying Location) to look for applicable tax regimes on a transaction. In most cases, you create alternative regime determination sets for specific configuration owners and application event class combinations in order to narrow the number of location types that E-Business Tax evaluates to derive eligible tax regimes. This increases regime determination efficiency for the related transactions. Tax Formulas Responsibility: E-Business Tax Manager (N) Tax Managers > Advanced Setup Options > Tax Formulas > (B) Create Use the Create Tax Formula page to set up tax formulas for use in the tax rules Determine Taxable Basis and Calculate Tax Amounts. Determine Taxable Basis The Determine Taxable Basis tax rule derives the amount or quantity on the transaction line that E-Business Tax uses to apply the tax rate. The standard taxable basis formulas are: Taxable Basis = Line Amount. Taxable Basis = Quantity. If the tax requires the calculation of a taxable basis other than the line amount or line quantity (for example, assessable value or prior tax), then create a taxable basis tax formula and either associate it with a Determine Taxable Basis tax rule for the applicable tax regime and tax or set it as the default taxable basis for a tax. Calculate Tax Amounts The Calculate Tax Amounts tax rule determines the formula that E-Business Tax uses to calculate the tax amount on the transaction line. The standard tax calculation formula is Tax Amount = (Taxable Basis) * (Tax Rate). If the tax amount is to be altered by adding or subtracting the tax amount of another tax , then create a tax calculation tax formula and either associate it with a Calculate Tax Amounts tax rule for the applicable tax regime and tax or set it as the default tax calculation formula for a tax. Tax Formula Setup Before you can set up tax formulas, you must set up tax regimes and taxes for taxable basis tax formulas and for tax calculation tax formulas that you intend to assign to specific tax regimes and taxes. If you do not assign a tax calculation tax formula to a specific tax regime, then it becomes available to all tax regimes. You must also enable cross-regime compounding and compounding precedence for the tax regimes and taxes that will use tax formulas with compounding details. Tax Condition Sets Responsibility: E-Business Tax Manager (N) Tax Managers > Advanced Setup Options > Tax Condition Sets > (B) Create Use the Create Tax Condition Set and Create Tax Conditions pages to set up tax condition sets. The tax conditions belonging to an individual tax condition set constitute the conditions

to consider in order to determine if the result of the condition is true for the applicable transaction. The tax condition set or sets belonging to an individual tax rule constitute the logic of the tax ruleif any tax condition set belonging to a tax rule arrives at a true result, then the tax rule applies to the transaction. You can set up tax condition sets in advance and apply them to a tax rule, or you can set up tax condition sets during tax rule creation. The tax condition set 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. 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. When the elements of the transaction meet all of the tax regulations, then the rule result is true and the rule applies to the transaction. Tax Condition Sets Setup Before you can set up tax condition sets, you may need to complete one or more of these tasks. Prerequisites Mandatory prerequisite steps include: Set up determining factor sets. Set up values for the applicable determining factor classes. You should ensure that all of the values that you need have been defined for the determining factor classes that you intend to use in a tax condition set. For example, define all of the fiscal classification codes that you need for each applicable fiscal classification determining factor class. Services E-Business Tax calculates tax on Order to Cash transactions from Receivables, and on Project invoices created in Receivables. For intercompany transactions, E-Business Tax accounts for tax on both the Receivables (sale) side and Payables (purchase) side. For General Ledger, you can use E-Business Tax to set up automatic tax calculation on taxable journal entry lines. You can define a tax rate code at the ledger level to default to all taxable journal lines entered in the ledger, or you can define a tax rate code for a natural account segment to default to related taxable journal entry lines. E-Business Tax also calculates tax on transactions from applications that feed data into Payables or Receivables. These applications are called source applications. The tax determination process only takes place after these applications interface data into Payables or Receivables. Example 1: A source application can feed a Receivables invoice into Payables to use as the source document for an intercompany Payables transaction. Example 2: A source application can feed Trade Management transaction information into Receivables to ensure consistency in the tax calculation between the Trade Management source and Receivables and Payables transactions. Payables Transactions E-Business Tax provides tax services for the following Payables event classes: Standard invoices. Prepayment invoices. Expense reports. With the invoice line introduction by Payables in Release 12, tax calculation is now also supported at both invoice lines and distribution level. Additional attributes are captured by Payables for tax purposes as displayed on the Payables Invoice Workbench. Additional attributes include:

Taxation country. Document subtype. Transaction business category. Product fiscal classification. Product category. Product type. Line intended use. User defined fiscal classification. Assessable value. You can enter and update detail and summary tax lines according to the requirements of your transactions. You can perform these operations on tax lines: Enter a manual tax line. Change existing tax line information. Cancel a tax line. Self-assessed taxes are also handled in Payables transactions. Examples of tax handling on Payables transactions are discussed in the following slides: Invoices matched to purchase orders. Prepayment invoices. Payables price corrections. Payables Transactions - Invoices Matched to POs When you create an invoice in Payables by matching it to a purchase order, Payables copies the purchase order tax lines and tax-related information to the invoice and recalculates the tax. The tax rate that is used in tax calculation is always derived from the invoice date. If the tax rate has not changed between the purchase order date and the invoice date, then the tax calculation results in the same tax lines on the invoice as on the purchase order shipment line. If the tax rate has changed between the purchase order date and the invoice date, then the tax calculation results in the same tax lines but using the tax rate that corresponds to the invoice date. E-Business Tax manages the updates to tax-related information in this way: 1. Tax applies to the purchase order but not to the invoice - The tax line appears with a zero amount. 2. Tax applies to both the purchase order and the invoice but with different tax rate codes and tax rates - The tax line appears with the tax amount as calculated by the invoice. The tax line is created with the tax rate code and tax rate effective on the invoice date. Payables displays the tax rate variance at the distribution level. If the Enforce Tax From Reference Document tax option is enabled for the applicable configuration owner and event class, the tax line for the invoice inherits the corresponding tax rate code and recovery rate code (if applicable) from the purchase order, but the actual tax rate and recovery rate used in the tax calculation are the rates defined for the rate period that corresponds to the invoice date. Payables Transactions - Prepayment Invoices When you apply a prepayment to an invoice, the tax rate at the time of prepayment may differ from the tax rate at the time the prepayment is applied to an invoice. E-Business Tax considers the tax calculated on the prepayment according to the value assigned to the Applied Amount Handling option in the tax record. The values are Recalculated and Prorated. For example, you apply a prepayment amount of $5000 to an invoice with a total amount of $10,000. At the time of prepayment the applicable tax rate was 5% ($250 tax on the prepayment); at the time of invoice creation the applicable tax rate is 10%. E-Business Tax calculates the tax in this way:

Recalculated - E-Business Tax recalculates the tax on the prepayment using the invoice tax rate, and applies the same tax rate to the invoice line amount. The tax calculation creates two tax lines, one for the invoice line amount and one for the prepayment with a negative amount. In the invoice example, the calculation creates an invoice line amount tax line of $1000 (10% * $10,000) and a prepayment tax line of -$500 (10% * -$5000). The total tax is $500. Prorated - E-Business Tax retains the original tax rate on the prepayment and applies the new tax rate to the invoice line amount. The tax calculation creates two tax lines, one for the invoice line amount and one for the prepayment with a negative amount. In the invoice example, the calculation creates an invoice line amount tax line of $1000 (10% * $10,000) and a prepayment tax line of -$250 (5% * -$5000). The total tax is $750.

Payables Transactions - Price Corrections In Payables, you can create a new invoice to correct the quantity or amount of an existing invoice. The correction results in a change in line amount, either positive or negative. E-Business Tax calculates the tax on the new invoice created as a result of the price correction in proportion to the taxes on the original corrected invoice.

For example, an original invoice has a line amount of $100, and two tax lines one of $5 and $10. If the price correction reduces the line amount by $20, then the new invoice creates two tax lines of -$1 and -$2. Receivables Transactions E-Business Tax provides tax services for the following Receivables event classes: Invoices Debit memos Credit memos Receivables has integrated with Oracle E-Business Tax windows to capture additional attributes and also to enter, view, or modify tax lines. You can set up Receivables tax accounts to record tax amounts that you can and cannot claim as deductions against overall tax liability. Credit memo processing no longer allows different percentage of line amount and tax amount crediting. Examples of tax handling on Receivables debit and credit memo transactions are discussed in the following slide. Receivables Transactions Debit and Credit Memos There are two types of debit/credit memos: On Account and Applied. E-Business Tax uses a different tax calculation method for each type: On Account Credit Memos - E-Business Tax calculates tax on On Account credit memos in a similar way to normal invoices. The only difference is that if the line amount is negative, the tax calculated is also negative. Applied Debit/Credit Memos - E-Business Tax calculates tax on Applied debit/credit memos in direct proportion to the line amounts on the invoice to which the debit/credit memo is applied. For example, if you create an invoice with one line item of $100 and tax of $10, then if the line item is credited $10 with an Applied credit memo the tax line is credited $1. Receivables Credit Transactions You can create Applied credit memos at the header level or the line level. Header level - There are three options available for credit allocation:

Line Only - Tax is not credited. Line and Tax - You enter the amount or percentage to be credited on the line amount. The amount you enter is credited proportionately to each line in the invoice. Each tax line is credited by the same percentage as the corresponding line amount. Tax Only - You enter the amount or percentage to be credited on the tax amount. Each tax line is credited by the same percentage in proportion to the tax amount for the line. Line level - You can credit individual lines. The tax line is credited in proportion to the line amount credit. Intercompany Transactions Intercompany transactions must account for tax on both the Receivables (sale) side and Payables (purchase) side. If the transaction is between legal entities in different tax regimes, then you may need to account for the tax charged on the sale in a different manner from the purchase. E-Business Tax accounts for intercompany transactions in this way: If a tax is charged on the Receivables sale with a tax amount greater than zero, then E-Business Tax charges the same amount of tax on the Payables purchase side. E-Business Tax looks for and applies a Payables tax rate code to match the Receivables tax rate code in order to reconcile the transaction tax. If you are using migrated tax data, then E-Business Tax uses the matching Receivables and Payables tax rate codes. If you are using an E-Business Tax configuration with the legal entities sharing the tax configuration of the Global Configuration Owner, then E-Business Tax applies the same tax rate to the Receivables and Payables transactions. If a zero tax amount is charged on the Receivables sale, then E-Business Tax reconciles the Payables purchase in one of two ways: If the Payables side also uses a zero-rated tax rate for goods and services, then EBusiness Tax applies the zero-rated tax rate code. If there is no zero-rated tax rate, then E-Business Tax self-assesses the tax using the applicable self-assessment setup: offset taxes; self-assessment/reverse charge; or reporting purposes only tax. This applies, for example, to intercompany Intra-EU sales, where the sale is to another legal entity of the same company in a different EU country. If any special implications apply to intercompany transactions, you can use the transaction business category Intercompany Transaction to identify these transactions. Managing Detail Tax Lines Responsibility: Payables and Receivables (N) Payables > Invoices : Entry > Invoices > (B) Tax Details > (B) Detail Tax Lines (N) Receivables > Transactions > Transactions > (B) Tax Use the Detail Tax Lines window in the applicable application to review and manage Payables and Receivables detail tax lines. Depending on the available settings, you can: View tax line information. Enter a manual detail tax line. Enter tax-only invoices and tax only tax lines. Change existing detail tax line information. Cancel a Payables detail tax line. The operations that you can perform depend upon the related application and tax settings. Entering Additional Determining Factor Information on Receivables Tax Lines Responsibility: Receivables (N) Receivables > Transactions > Transactions > (B) Tax Information

Use the Additional Tax Determining Factors window to review and enter additional tax information on Receivables transaction lines. E-Business Tax calculates tax on the transaction based on the tax configuration and tax rules setup, as well as any additional tax information that you enter. You can only enter additional tax information for imported lines. You cannot enter and apply additional tax information to manually entered lines. Updates apply to the transaction of the legal entity and taxation country displayed in the header region. If you enter or update any fields in the Additional Tax Determining Factors window, you must update the Receivables transaction in order to recalculate the tax. Managing Tax Distributions Responsibility: Payables and Receivables (N) Payables > Invoices : Entry > Invoices > (B) All Distributions > (B) Tax Distributions (N) Receivables > Transactions > Transactions > (B) Distributions Use the Distributions window to review and update tax distributions. You can review tax distributions and, if applicable, update the tax recovery rate on a tax distribution. E-Business Tax creates recoverable distributions and calculates tax recovery rates when you save the line distribution, according to the Determine Recovery Rate tax rule process or the default recovery rate. If self-assessment is enabled for the applicable party, E-Business Tax creates two distributions for each tax, one with a positive amount and the other with a negative amount. E-Business Tax displays tax distributions as follows: If the tax is non-recoverable, E-Business Tax displays one non-recoverable tax distribution line for the tax, with the non-recoverable amount equal to the tax amount. You cannot update a non-recoverable tax distribution nor create a manual recoverable distribution. If the tax is recoverable, E-Business Tax displays two distribution lines, one for the recoverable amount and another for the non-recoverable amount. Managing Tax Exemptions Responsibility: E-Business Tax Manager (N) Receivables > Transactions > Transactions > (T) Tax Exemption Use the Tax Exemption region of the Lines window to enter and update tax exemptions on Receivables transactions according to your requirements. A tax exemption applies a discount or a replacement percentage that reduces the tax on a transaction. Tax exemptions apply to a specific customer or to a combination of customer and specific product. Processing Tax Exemptions E-Business Tax processes tax exemptions in different ways depending upon the value you choose in the Tax Handling field on the Tax Exemption region of the Lines window: Require - The customer is required to pay the tax. Tax exemptions do not apply to this transaction line, even if defined. Exempt - Enter the exemption certificate number and the customer exemption reason. E-Business Tax processes the tax exemption in this way: Consider tax exemptions with a status of Primary, Manual or Unapproved. Verify that the transaction date is within the tax exemption effective date range. Verify that the transaction exemption reason and exemption certificate number match the tax exemption reason and certificate number. If you do not enter a certificate number, E-Business Tax still looks for a matching tax exemption. If E-Business Tax does not find an exemption matching these conditions, it creates an exemption with the status Unapproved and a 100% discount.

Standard - This tax handling is for exemptions of the Primary status only (applies to all transactions of the customer or customer site). You do not have to enter the exemption certificate number or customer exemption reason. E-Business Tax looks for a tax exemption with the Primary status and an effective date range that includes the transaction date. If more than one tax exemption applies, E-Business Tax uses the most specific tax exemption. Calculating the Tax Rate After applying the tax exemption to the transaction line, E-Business Tax calculates the tax rate as follows: If the exemption type is a discount/surcharge, then Tax Rate = Tax Rate * Discount/Surcharge percentage. If the exemption type is a special rate, then Tax Rate = Special Rate. If both a tax exemption and tax exception apply to the same transaction line, EBusiness Tax calculates the tax rate in this way: If the exemption type is a special rate, then E-Business Tax only applies the tax exemption special rate (Tax Rate = Special Rate). If the exemption type is a discount/surcharge and the exception type is a special rate, then Tax Rate = Tax Exception Special Rate * Tax Exemption Discount/Surcharge percentage. If both the exemption type and exception type are discount/surcharge, then Tax Rate = Tax Rate derived from tax rules * Tax Exception Discount/Surcharge percentage * Tax Exemption Discount/Surcharge percentage. Using the Oracle Tax Simulator to Enter Transactions Responsibility: Oracle Tax Simulator (N) Oracle Tax Simulator > Tax Simulator Use the Tax Simulator to enter transaction information for tax analysis purposes. Oracle Tax Simulator displays the Transaction Lines window for the entry of detailed transaction and tax information. The Transaction Lines window contains a Header region for entering application, party and general transaction information, and a Lines region for entering detailed information for each transaction line. The Tax Simulator: Allows a standard interface for all applications, so you are not required to learn a lot of applications. Does not create real transactions, so it is safe to use. Provides a repository of transactions which can be reused to test a new tax setup. Provides user access to detailed information about which rules and defaults have been used for each rule type.