The eBS R12 Tax Engine

and the Australian GST

Jeannie Dobney
August 2010

Updated slides can be found at www.jdobney.com

Introduction to R12 eBS

Tax Application
Implementation
example for Aust. GST
Tangent: Use of new
Legal Entity architecture
Upgrade experiences

This paper has been enabled by:

DEECDs generously
sharing their learning
with the user community
Solution Beacons R12 Vision
instance and
Imelda for her set-up
Solution Beacon consultants
for sharing their knowledge
Kiran Kunderu from Oracle Support

New product in Release 12

Supports international tax obligations for global
implementations

Single control point for transaction

based taxes

No need to set up tax separately in AP, AR & GL

Components include:

SetUp Repository
Tax Engine (Services & Service Request Mgr)
Tax Record Repository & Tax Reporting Ledger
Tax Simulator (for testing)

Schema ZX

a) Non-Tax Configuration
1. First Party: Legal Entity
2. Reporting and Collecting Tax Authorities

b) Tax Configuration

1.
2.
3.
4.
5.
6.
7.
8.

Tax Authorities Party Tax Profiles

Tax Regimes
First Party Legal Entity Party Tax Profile
Tax
Tax Status
Tax Jurisdictions
Tax Rate
Tax Rules

There are several parties involved in

a transaction to which GST applies:
The First Party:
the organisation remitting the tax
The Legal / Tax Authority:
the organisation to which the tax is
reported e.g. ATO
Third Parties
e.g. suppliers and customers
(not applicable for Aust GST)

The 11i Legal Entity organisation classification

was essentially a placeholder for Financials
Now has its own Schema (XLE)
Set up via the Legal Entity Manager
Responsibility or via GL using the Accounting
SetUp Manager (the only way to assign
Balancing Segment values to Legal Entities)
Bank Accounts are now owned by Legal
Entities and may span Operating Units.
LE set up is also used by Intercompany

Legal Entity
has rights and responsibilities under commercial law, thru
registration with the country's appropriate legal authority.

Establishment

100% owned and controlled sub-units e.g. branches,

divisions. Some countries require registration with local
regulatory bodies (e.g. US SIC code).

Jurisdictions / Legal Authorities

LEs must be registered against a jurisdiction that is

governed by a legal authority. e.g. the tax jurisdiction for
Australian GST is the country of Australia
and the Authority is the ATO

11i Organisations classified as GRE /

LEs will be migrated as Legal Entities
and Main Establishments
Operating Units and Inventory
Organisations associated with the GRE /
LE will be migrated as Establishments
Legal Entities will also be migrated as
parties in the Trading Community
Architecture (TCA)

Legal Entity Reporting now allows you to

filter transaction data based on the legal
entity stamped on them (for example, AP
Invoices, AR Transactions, etc) or based on
the ledger/balancing segment value that is
associated with a legal entity.

Image is from Chapter 2 of Oracle Financials Concepts Guide

Public
Company
(ultimate parent)

Legal Authorities
Countries, States, Local,
Agencies, Taxation,
Registrars, Regulators...

Regulates

Complies

Legal Entities
Registered Companies,
Funds, Partnerships
Inc. Ltd. SA. GmBH. Etc.
exist in the outside world

Managed & analyzed by

Management Orgs
Divisions, LOBS, Plants,
Cost Centers, Whatever =
Decision Making Tags

Subsidiary
Public
Company
Company
(regional parent)
Subsidiary
Company

Subsidiary
Company
(business parent)

Subsidiary
Company

Subsidiary
Company

Subsidiary
Company

Subsidiary
Company

Parent companies (LEs) own or

control subsidiaries (LEs)
LEs create commercial transactions

Next 4 slides from a presentation by Oracles Mary Burns

Why We Care

What weve done

LEs pay the taxes

- need tax registrations
Trade between LEs
needs intercompany
LEs own the money
and bank accounts
LEs file the accounts,
take care of accounting
LEs comply with
whatever needs
compliance: legal in LE

Addresses, Officers, etc.

Enabled First Party stamp
Added Establishments:
map Registrations to
Authorities
GRE/LE not touched
Authorities as TCA parties
LE Configurator

Transaction
Taxes Complies &
Files, Pays

Actual Registered
Companies, etc.

Legal
Files Entity

Registrations
with Authorities

Exists
Locally

Establishments

Accounts
for itself
in a Ledger
or BSVs

Files
Registrations
with Authorities

Ledger

Maintains
its Subledger
Documents
in many OUs
Default Legal
Context (DLC)

Business
Group
GRE/LE
Et Cetera, 11i

Operating
Units

Legal Entity:

Vehicle for compliance

Lets put LEs to work

Isolate legal compliance from management needs
Track your registered companies
Make your compliance flow more easily
Accounting Setup Manager
Assign books, bookkeeping rules and currency
management to your registered companies

eBusiness Tax
Have your registered companies calculate, file, and pay the
transaction taxes they owe

Intercompany
Do business between and across your registered
companies with full legal documentation

Bank Model
Have your registered companies use their money to pay
their bills, et cetera
This and the last 4 slides are from Oracles Mary Burns presentation:
Overview of the New Financial Architecture in Oracle E-Business Suite Release 12

There is no longer a
direct relationship
between LE and OU.
The Relationship is
derived from the OU
assigned and the LE
mapped to the Ledger

Image from http://davidhaimes.wordpress.com/2008/01/28/

defining-intracompany-balancing-rules/

Ledger

Legal Entities

BSVs assigned

Reading the fine print:

David Haimes confirms that non-US architecture
should be 1:1:1 (i.e. Ledger: Op Unit: Legal
Entity)
Refer:
http://www.orafaq.com/forum/t/70130/2/
on 15 January 2008, and
http://davidhaimes.wordpress.com/2007/11/2
1/how-do-i-define-my-legal-entities/
Oracle Support confirmed that eBus Tax was
designed based on the assumption of this 1:1:1
architecture

Concept

Meaning

Value Used

Tax Authority

Govt Entity that regulates tax

ATO

Tax Regime

Country of Taxation

Australia / country

Tax

Tax imposed

GST

Tax Jurisdiction

Area where tax is levied

Australia / country

Tax Status

Applicability of tax

Standard

Tax Rates

Recovery rates

10% and 0%

Full or partial reclaim of taxes

paid on the purchases

Full

4 steps performed by the tax engine

Applicability
Determine tax regime and candidate taxes
Determine place of supply and tax registrations
Determine applicable tax and jurisdiction

Status

Determine tax status for each applicable tax

Tax rate
Determine tax rate
Evaluate exemptions and exceptions & thresholds

Tax calculation

Calculate tax
Evaluate thresholds
Perform rounding

Use a Default, or
Let the system guide you through
creating one (Guided Rule Entry) or
Just create the rule (Expert Rule entry)

Determining Factor
Class: Transaction Input Factor
Name: Tax Classification Code

Condition

Operator: Equal To
Value: Will be the same as your tax names e.g. GST
10%

Tax Rules

Combine the Determining Factors with the

Conditions
(see next slide for screen image)

11i

12
AP / AR Tax Types Tax Regime Code
Tax Code
Tax Code & Rate Code
All Tax Codes
Tax Status Standard
Tax Rate Details
Tax Rate record
% rate, dates etc
Location based rates TCA geographies,
Tax Jurisdictions
Tax Calc details
Tax Classification Codes

Every 11i tax rate created its own

R12 tax
R12 tax status
R12 tax Classification code

The Upgrade process applies STCC as

the Regime Determination Set (see
next slide)
It worked

Oracles Recommendation:
Replace the upgraded configuration with a fresh
R12 implementation

But consider:

On going reporting.
Can you obtain the reporting you need?
Especially if you upgrade mid-month.
Defaults from existing suppliers, customers etc

The Tax Reporting Ledger consists of

tax information recorded in each of the
related Applications (i.e. AP, AR, GL).
The tax extract simply copies the original
accounting data from each application and
stores it in an interface table without
performing any calculations or derivations
on it.
The Tax Reporting Guide describes each of
the many columns (100s) in the single
reporting view ZX_REP_EXTRACT_V

Tax Reporting is not mature or robust

The Financial Tax Register
is the key report, it is an RXi report, it
must be run from the Forms interface
and offered limited flexibility.
Based on the view ZX_REP_EXTRACT_V
Other standard reports include:

Tax Register
Tax Reconciliation by Taxable Account
Tax Reconciliation

Business Requirements
Produce BAS input (summary data)
A mechanism for reconciling the summary data
against transaction detail and account details

Our Solution Proposal:

Produce 2 custom reports based on the view used

by this report i.e. ZX_REP_EXTRACT_V one
summary level grouped by tax code and one with
transaction detail for each tax code
Use the Account Analysis (with sub ledger details)
report as it might provide a reconciliation solution
for the tax account.

MOS # 1117544.1

If you have questions and

comments about
the Australian GST, contact
Michael DAscenzo (ATO)

Other questions and comments:

jdobney@bigpond.com
Updated slides can be found at
jdobney.com