08/12/2017 Document 473066.

How To Setup Expert Tax Rules on eBTax (Doc ID 473066.1)

In this Document

Goal
Solution
1. Tax Rules in Oracle E-Business Tax: Overview
2. How Tax Rules Work (An Example)
a. Understanding Tax Determining Factors
b. Setting Up A Determining Factor Set
c. Setup a Tax Condition Class
d. Expert Rule

APPLIES TO:

Oracle Payables - Version 12.2.4 to 12.2.4 [Release 12.2]

Oracle E-Business Tax - Version 12.0 to 12.1 [Release 12.0 to 12.1]
Oracle Payables - Version 12.1.3 to 12.1.3 [Release 12.1]
Information in this document applies to any platform.

GOAL

How does one setup Tax Rules using Expert Tax Rules?

SOLUTION

NOTE: Oracle strongly recommend to review the Oracle documentation on eBTax and do several
exercises to review the functionality.

ORACLE DOCUMENTATION:

Oracle E-Business Tax

User Guide
Release 12
Part No. B25959-01

Setting Up and Using Tax Rules

1. Tax Rules in Oracle E-Business Tax: Overview

The E-Business Tax tax determination process uses your 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.

E-Business Tax 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. You can create a simple tax model that makes use of default values without
extensive processing, or a complex tax model that considers each tax requirement related to a transaction before making
the final calculation.

During execution of the tax determination process, E-Business Tax evaluates, in order of priority, the tax rules that have
defined against the tax configuration setup and the details on the transaction. If the first rule is successfully evaluated, the
result associated with the rule is used. If not, the next rule is evaluated until either a successful evaluation or default value
is found.

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.

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The tax line determination process uses the information of the transaction header and transaction line to determine the
tax lines.

2. How Tax Rules Work (An Example)

Assumption: This example assumes that you are using the determine applicable regime tax calculation method (not
STCC). STCC is set as the default for all upgraded setup but cannot be used for "fresh" installs or for newly created
regimes.

The eBTax engine is driven by defaults, during the setup, the administrator had to setup a Regime to Rate flow and
default options across all steps.

If no other setup is done in eBTax, transactions will calculate taxes using the default settings.

Example of Defaults:
Responsibility: Tax Managers
Navigation: Tax Configuration > Tax Rules

Enter your configuration owner, tax regime and tax. Note that tax rules must be defined for each Tax and cannot be re-
used across multiple taxes.

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Assuming no rules are defined the defaults will be used to calculate tax.

For non-location based taxes this will mean that a single tax rate will be applied in all cases for a specific tax
(assuming the default is applicable).
For location based taxes the tax jurisdiction derived on the invoice line will cause the application to find and use the
tax rate associated with the jurisdiction from the default place of supply rule.

We encourage you to validate that your default tax rules work as expected before you configure additional rules. If you
experience difficulties in getting your tax rules to work properly please review Note 1082172.1 Overview and Basic
Troubleshooting of Tax That Does Not Calculate in R12 E-Business Tax (EBTAX)

Since most tax regulations have numerous exceptions and special situations it is common that tax rules must be defined to
adjust certain elements considered in the application of tax to a transaction. Oracle E-Business Tax provides two distinct
methods for tax Creation: Expert Rule Entry and Guided Rule Entry. In general both can be used to satisfy your tax rule
requirements however expert rule entry provides enhanced capabilities to use multiple condition sets within a single tax
rule while guided rule entry typically requires multiple rules to satisfy scenarios where different outcomes can occur.

Tax rules are executed any time an invoice is saved or completed in AR or Validated/Calculate Tax button is pressed in AP.

For this example we will step through the creation of an expert rule and explain each step.

a. Understanding Tax Determining Factors

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A tax determining factor is an attribute that may be used by rules you create in the E-Business Tax (EBTax)
engine to calculate taxes for a specific transaction. The EBTax rule engine allows implementers to create any
number of custom tax rules that reference the tax determining factors and that satisfy the unique needs of a
specific business operating within a taxing jurisdiction.

Determining factors exist in a range of categories or types (Determining Factor Classes). Within each of class
exist a Qualifier, Factor Name and Factor Value. This is best understood with an example as shown below:

1. Determining Factor Class = Geography (This is the "type" of factor we have available to us)
2. Class Qualifier = Ship To, Bill To, POA, POO, Ship From, Ship To (These are the levels that we can select
to be evaluated).
3. Determining Factor Name = Country, Province, City, County, etc. (These are the geography types you
have defined in TCA)
4. Determining Factor Value = Canada, Ontario, Toronto, etc (these are the actual values associated with
the factor name we selected above.

To learn more about tax determining factors and to see examples of a wide variety of tax rules created with
the different determining factors, please read Note 1108463.1 How Tax Determining Factors Work with Tax
Rules in R12 E-Business Tax.

b. Setting Up A Determining Factor Set

A Determining Factor Set is a grouping of tax determining factors created for use as part of a Tax Rule.
When creating a Determining Factor Set you specify which factors are to be evaluated within your rule. The
E-Business Tax Rule engine then extracts the values for each of these determining factors when the rule is
executed.

A Determining factor set identifies the Determining Factor Class, Class Qualifier and Determining factor
name.

For example:
Determining Factor Class: Geography
Class Qualifier: Ship To
Determining Factor Name: Country

To learn more about Determining Factor Sets please see Note 1111553.1 How To Setup Condition Sets and
Determining Factor Sets for Tax Rules in R12 E-Business Tax (EBTax)

Responsibility: Tax Managers

Navigation: Advanced Setup Options > Tax Determining Factor Sets > Create

In the example below we created a determining factor set with two determining factors.

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c. Setup a Tax Condition Class

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

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

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.

For Example (continuation of the prior example):

Determining Factors from Set: Geography Ship To Country
Operator: Equal To
Value/From Range: Canada

In the example below we created a condition set that uses just one of the two available determining
factors. You can use all or only a portion of the determining factors in your condition set.

Tip: Since you can only specify one determining factor set in a single tax rule, add all of the determining
factors into your determining factor set and then create condition sets for each combination of factors
needed to derive the proper tax outcome.

Responsibility: Tax Managers

Navigation: Advanced Setup Options > Tax Condition Sets > Create

To learn more about Condition Sets please see Note 1111553.1 How To Setup Condition Sets and
Determining Factor Sets for Tax Rules in R12 E-Business Tax (EBTax)

d. Expert Rule

Responsibility: Tax Managers

Navigation: Tax Configuration > Tax Rules > Pick your Rule Name> Select Expert Rule Entry

Select the Determining Factor

Select the Condition Set and Results
Set the Rule Order
Enable the rule.

Note that each rule name has slightly different steps.

For examples of rules using different tax determining factors and to see the setup required for each
determining factor type, refer to Note 1108463.1 How Tax Determining Factors Work in R12 E-

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Business Tax
Check back soon for additional Notes that will demonstrate with examples how to setup each rule
type.

Other content that may be helpful includes:

Note 577996.1 Case Study: Setup R12 E-Business Tax for Canada: Includes 2010 HST Changes
Note 463001.1 EBusiness Tax Seed Data (Includes a patch that will seed several regimes and which
loads a number of Determining Factor Sets and Condition Sets.

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