Concept
«If goods purchased from a seller who is not registered for a tax then,
To ensure that tax is not evaded on that transactions, it s buyers
responsibilty o calculate and remit the tax to relevant authority.
-Known as "Self Assessed Tax’ or "Use Tax’
‘Even though they are fundamentally same, release 12 of Oracle
EBusiness suite has different setup and treatment for each of them,
For Example
+ ABC procures goods from XYZ ( Unregistered Seller) worth
$1,000
+ Normal tax rate = 15%
+ Since XYZis a unregistered seller, Itis ABC's ( Buyer's)
responsibilty to calculate tax
+ ABC will pay XYZ + $1,000 (Invoice Amount)
+ ABC will pay calculate and pay to Tax Authority $150, (Tax
Amount)Self Assessed Tax - Treatment
"pays only for item to the unrepistered seller,
the lines level,
Bu
“Gale information is displayed al
‘Assessed Tax information displayed in the Tax Details tab.
‘Sel
EEASelf Assessed Tax - Treatment
-For such self assessed tax line, the “Self Assessed’ flag will
b
a
Pini ase ee
"Self Assessed’ flag can be checked / unchecked on the fly
for a transaction.
-For a normally calculated, if this flag is manually checked then
tax will be treated as "Self Assessed” and no longer be visible at
lines level.
Similarly for a Self Assessed calculated tax if this flag is
manually unchecked then tax will be treated as normal tax and
be visible at lines level,Self Assessed Tax - Configuration
Step 1 =
Self Assessed Tax calculation is primarily driven by Suppliers or Supplier
Sos registration status. So users shoulé configure following rule under
the Registration status rue ype
1F Bil From OR Ship From (ie, Supplier Site PTP)
= Not Registered
‘Then Result is
‘Take Registration status of Bil To Party (First Party legal Establishment)Self Assessed Tax - Configuration
Step 2
Navigate to the Parly Tax Profile of First party Legal
Establishment and check the Set for Self Assessment flag
and give the registration details.
en 8
os 3Self Assessed Tax - Configuration
Step 3 -
f Supplier is uniformly not registered for all jurisdictions :-
Navigate to Supplier / Site Party Tax Profile Registration tab
and update the Registration status as “ Not Registered” for
that Regime.
—— “a
neSelf Assessed Tax - Configuration
However for particular tax, if a supplier is registered in one jurisdiction
and not for others, then there should be 2 Registration details
+One with Regime, Tax information and the status as “Not
Registered.”
«Second with that same Regime, Tax and also jurisdiction
information with stalus as “Registered.”
For Example :-
‘Supplier registered in CA and nowhere else in US i.e. Tax should be
calculated normally for CA but as Self Assessed for other states then,
Two Registrations will have to be created at PTP level
First with US Regime, State Tax and Registration status as ‘Not
Registered.”
«Second with US Regime, State Tax , CA Jurisdiction and
Registration status as “Registered.”Self Assessed Tax - Configuration
For Example 2)
Supplir registered across US except in CA Le. Tax should be
calculated normally for al other locations but Self Assessed for CA
then
“Two Registrations will have to be created at PTP level
-First with US regime, State Tax and Registration status as
“Registered.”
Second with US regime, State Tax , CA Jurscition and
Registration status as ‘Not Registered.”Self Assessed Tax - Calculation Logic
If Supplier (or Site) is Registered then rule specified
earlier will not be honored and normal tax will be
calculated.
However if the Supplier (or Site) is Not Registered then
rule will get honored, due to which tax engine will look at
registration status under the PTP of First party Legal
Establishment.
Since there “Set for Self Assessed” flag is checked,
Tax will be correctly calculated as Self Assessed.Self Assessed Tax — Pros and Cons
Pros :=
Easy one time set up required.
Correctly driven by suppliers registration status.
‘Automatic tax calculation, No Manual intervention needed
‘Automatic accounting of tax labilty
Recommended approach if customer is using rules model
Itis possible to check the “Self Assessed! flag on the fly in
the tax details tab,
Users can run “Account Analysis Report to get details of
Solf Assessed Tax.
Cons :-
Can be used only if customer intends to configure tax rules.
If suppliers have multiple registrations spread across
‘many jurisdictions then set up might become complicated.Approach 2 :- Use TaxUse Tax - Facts
Now use taxas cannot be configured in R12.
“Tax type "Use" doos not come in the ist of values of while creating
now taxes,
Users can create new use tax rates or change the percentage of
existing use tax rata. However no other updates are allowed,
Functionalty retained to suppor backward compattilty for
upgraded cases,
Recommend to use this approach ony til the customer moves 10
rules model and configures Self Assessed taxUse Tax - The R12 functionality
Only supported for upgraded customer.
Post upgrade users can continue using Use Tax in the
exact same manner as in 1 i.
‘When a tax code with tax type as USE is associated in
AP invoice at lines level, then the details of that use tax
would Not be visible on invoice but displayed only in the
Use Tax Liability Report.
‘Tax distribution would not get created for this tax rate.
‘The total of that report would determine the tax lability
User would have to create 2 accounting entries - One for
accruing tax liability and other for settlement.
Use taxes will be migrated with tax type as "Use"Use Tax — Pros and Cons
Cons :
‘Supported only for backward compatibility. New Use tax
creation not allowed,
Itis not driven by the supplier registration status. Tax will be
calculated as Use tax only if that tax code is manually entered
cr defaulted on the transaction,
No automatic accounting. Based on the Use Tax liability
report, users have to pass two accounting entries ~ One for
liablty and one for payment
‘No details displayed on the Invoice.
Pros :
Easy set up in 11 with seamless upgrade.
Use Tax Liabilty report displays the details of the calculated
use tax
Customers using Use Tax in 11, can use the same
functionality post upgrade.