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Oracle E-Business Tax User Guide
Release 12.1
Part Number E13631-03
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Setting Up Fiscal Classifications

Fiscal Classifications in Oracle E-Business Tax

Use fiscal classifications to classify these aspects of your tax transactions: the parties and locations involved in your transactions; the products you buy and sell; and the nature of your transactions. You use fiscal classifications in the creation of tax rules for tax determination.

You can set up fiscal classifications under these general categories:

Each general classification that you create is called a fiscal classification type. You can assign fiscal classification types to tax regimes and taxation countries. You can also create a series of fiscal classification codes under a fiscal classification type to further refine the details of a particular category of tax determination. When creating tax rules, you use fiscal classification types as determining factors and fiscal classification codes as condition set values.

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

Examples of using fiscal classifications:

These are examples only. In some cases you may use fiscal classifications combined with tax rules to define a product group-specific rate, or alternatively you may use product classifications combined with product tax exceptions to define the same thing. E-Business Tax fiscal classifications provide a flexible tool for helping you to interpret and automate the tax requirements of specific taxes and tax regimes.

Related Topics

Setting Up Tax Exceptions

Tax Determination Processing

Setting Up Party Fiscal Classifications

Set up party fiscal classifications for the parties and party sites involved in your transactions that have a tax requirement. 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. Update the legal classification tax usage of legal activity codes according to your tax determination and tax reporting requirements.

You create a party fiscal classification by assigning a Trading Community Architecture (TCA) class category to a party fiscal classification type code that you define. The TCA class codes defined under the class category become fiscal classification codes belonging to the party fiscal classification type. TCA classifications let you classify parties and other business entities into user-definable categories. For example, you may want to classify parties according to tax handling requirements, such as End Consumer, Distributor, Non-Profit Organization, and so on.

You can create a hierarchy of party fiscal classification types to reflect the levels of codes and sub-codes within the TCA classification. You then associate each party fiscal classification type code to each tax regime that requires this party classification for tax determination and/or tax reporting purposes. Where necessary, you can assign party fiscal classifications to parties and party sites.

Note: You can only use a TCA class category for one party fiscal classification type or one group hierarchy. You cannot create multiple party fiscal classification types for the same TCA class category.

For tax rule usage, the party fiscal classification types that you create become determining factor names of the Party Fiscal Classification determining factor class. When you select a party fiscal classification type as a determining factor, the associated party fiscal classification codes become available as tax condition values.

Prerequisites

Before you can set up party fiscal classifications, you may need to complete one or more of these tasks:

To set up a party fiscal classification:

  1. Navigate to the Create Party Fiscal Classification Types page.

  2. Enter in the Party Classification field the TCA class category to use with this party fiscal classification type. You can use the View Existing Party Fiscal Classification Associations region to review the TCA class categories already in use.

    The Fiscal Classification Codes region displays the class codes defined for the TCA class category that you enter. E-Business Tax automatically considers these as party fiscal classification codes of the party fiscal classification type.

  3. If necessary, enter the number of levels in the hierarchy for this party fiscal classification type.

  4. If you are creating a hierarchy to match the TCA class category, enter in the Type Group field a name to identify this hierarchy.

  5. Enter a party fiscal classification type code and name.

    You may want to use a naming convention that is similar to the TCA class category, or that is in accordance with tax authority requirements.

  6. Enter the effective date range for this party fiscal classification type.

  7. Assign the party fiscal classification type to all applicable tax regimes and enter an effective date range for each tax regime assignment.

    Enter a tax regime assignment date range that is within the date range of both the party fiscal classification type and the tax regime.

  8. If you associated tax reporting types with fiscal classification, enter any applicable tax reporting codes. See: Setting Up Tax Reporting Types for more information.

Updating Legal Classification Tax Usage

Some countries use a set of codes to identify legal classifications that have a tax requirement. E-Business Tax provides a fiscal classification type code for each set of country-specific legal activity codes, for use in tax determination. You can assign these legal activity codes to the tax regimes within the applicable country, and update the codes according to your tax requirements.

The legal classification types are determining factor names of the Legal Party Fiscal Classification determining factor class. When you select a legal classification activity code as a determining factor, the associated legal classification codes become available as tax condition values.

To update the tax usage of legal activity codes:

  1. Navigate to the Legal Classification Tax Usage page.

  2. Select for update the fiscal classification type code that you want.

  3. If necessary, update the name and the effective date range.

  4. Assign the legal activity code to the applicable tax regimes and enter an effective date range for each tax regime assignment.

    Enter a tax regime assignment date range that is within the date range of the legal activity code and the tax regime.

  5. If you associated tax reporting types with fiscal classification, enter any applicable tax reporting codes. See: Setting Up Tax Reporting Types for more information.

Related Topics

Setting Up TCA Classifications, Oracle E-Business Tax Implementation Guide

Setting Up Product Fiscal Classifications

Set up product fiscal classifications to classify products that have a tax requirement for tax determination or tax reporting purposes. You set up product fiscal classifications according to the taxable nature of a product or product transaction, as designated by a tax authority.

You can set up product fiscal classifications for:

You can also set up product tax exceptions to apply special tax rates to products. See: Setting Up Tax Exceptions for more information.

Prerequisites

Before you can set up product fiscal classifications, you may need to complete one or more of these tasks:

Setting Up Inventory Based Product Fiscal Classifications

Define an Inventory-based product fiscal classification type against an Oracle Inventory category set. The product fiscal classification is defaulted on the transaction line for any item that belongs to the inventory category set. The category values defined for the inventory category set become fiscal classification codes belonging to the product fiscal classification type.

If necessary, you can create a hierarchy of product fiscal classification types, where each level in the product hierarchy can affect tax determination. For example, the hierarchy of an inventory category set can identify different variants of a raw material or different features of a product line, each of which may become a tax determining factor. You then associate each fiscal classification type code to each tax regime that requires this product fiscal classification for tax determination and/or tax reporting purposes.

You associate Inventory-based product fiscal classification codes with items by assigning the category value to the item using Oracle Inventory. Non-Inventory based and product intended use fiscal classification codes do not have an item assignment. You can enter these fiscal classification codes on a transaction line irrespective of the item.

To set up an Inventory-based product fiscal classification:

  1. Navigate to the Create Product Fiscal Classification Type page.

  2. Enter the inventory category set to use with this product fiscal classification. Use the View Existing Fiscal Classifications section to review the inventory organizations, items, and fiscal classifications already in use.

    The Fiscal Classification Codes region displays the category values defined for this inventory category set. E-Business Tax automatically considers these as fiscal classification codes of the fiscal classification type.

  3. If necessary, enter the number of levels in the hierarchy for this product fiscal classification type.

  4. If you are setting up a hierarchy of product fiscal classification types, in the Type Group field enter a name to identify this hierarchy.

  5. Enter a product fiscal classification type code and name, and the effective date range.

  6. If you are setting up a hierarchy of product fiscal classification types, update the coding scheme for this hierarchy:

  7. Assign the product fiscal classification type to the applicable tax regimes and enter an effective date range for each tax regime assignment.

    Enter a tax regime assignment date range that is within the date range of the product fiscal classification type and the tax regime.

  8. If you associated tax reporting types with fiscal classification, enter any applicable tax reporting codes. See: Setting Up Tax Reporting Types for more information.

  9. Assign the Inventory category values to items in Oracle Inventory. See: Setting Up Oracle Inventory for Product Fiscal Classifications, Oracle E-Business Tax Implementation Guide.

Setting Up Non-Inventory Based Product Fiscal Classifications

Define product fiscal classification types using the non-Inventory based E-Business Tax product category. You can designate a default product fiscal classification for a specific product, or a list of product fiscal classifications assigned to a particular country. Use the E-Business Tax product category to:

To set up a non-Inventory-based product fiscal classification code:

  1. Navigate to the Product Fiscal Classification Types page.

  2. Display the Product Classification Source of Oracle E-Business Tax and select for update the Product Category fiscal classification type code.

  3. Select the number of levels to make available to the Product Category fiscal classification type.

    Note: This is a one-time setup. When you create the first fiscal classification code for the Product Category fiscal classification type, E-Business Tax sets the number of levels. You cannot update the number of levels later.

  4. If necessary, update the effective date range for the Product Category fiscal classification type.

  5. Enter a fiscal classification code and name. You can either create a product fiscal classification code or create a sub-level code under an existing product fiscal classification code.

  6. If applicable, enter a country name to associate with this product fiscal classification code. If this is a sub-level code, you cannot enter a country name that is different from the country assigned to the parent code, if there is one.

    At transaction time, E-Business Tax makes available the fiscal classification codes assigned to the transaction country, along with the codes that do not have a country assignment.

  7. Enter an effective date range for this product fiscal classification code.

  8. If you associated tax reporting types with fiscal classification, enter any applicable tax reporting codes. See: Setting Up Tax Reporting Types for more information.

Setting Up Product Intended Use Fiscal Classifications

Define product intended use fiscal classifications for situations where the intended use of the product is a factor either in tax determination or the tax recovery rate. You can set up product intended use fiscal classifications using either an Inventory category set or the E-Business Tax product category.

Note: Once you select the basis on which to set up product intended use fiscal classifications--Inventory based or non-Inventory based--you cannot change it. If applicable, the data migration process may also create either Inventory based or non-Inventory based product intended use fiscal classifications.

To set up a product intended use fiscal classification:

  1. Navigate to the Product Intended Use Fiscal Classification Type page.

  2. Select for update the Intended Use fiscal classification type code.

  3. For your initial setup:

  4. Enter a fiscal classification code and name.

  5. Enter an effective date range for this product intended use fiscal classification code.

  6. If you associated tax reporting types with fiscal classification, enter any applicable tax reporting codes. See: Setting Up Tax Reporting Types for more information.

Setting Up Tax Exceptions

Set up tax exceptions to apply special tax rates to 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.

Depending on your requirements, you can use product tax exceptions instead of setting up tax rules for product types. You can set up these tax exceptions for products:

In E-Business Tax, a tax exception must belong to a combination of tax regime, configuration owner, and tax. You can also assign tax exceptions to a tax status or tax rate belonging to the tax or to a tax jurisdiction. At transaction time, E-Business Tax uses the tax exception if the details of the transaction and the tax match all of the entities assigned to the tax exception. Only one tax exception can apply to a transaction line for a specific tax.

You can define Inventory organization tax exceptions for items, or you can define tax exceptions for Inventory-based or non-Inventory-based product fiscal classification types and fiscal classification codes. The product fiscal classification must have the same tax regime assignment as the tax exception. See: Setting Up Product Fiscal Classifications for more information.

You can create more than one tax exception for the same item/product fiscal classification and tax regime combination. At transaction time, E-Business Tax applies the most specific tax exception to the transaction in this order:

When you set up configuration options for first party legal entities and operating units, you can set a separate configuration option for the owning and sharing of product tax exceptions for a combination of party and tax regime. See: Setting Up Configuration Options for more information.

To set up tax exceptions, you must enable the Allow Tax Exceptions option at all applicable levels in the regime-to-rate flow, including tax regime, tax, tax status, and tax rate. See: Setting Up Tax Regimes for more information.

If necessary, use lookups to define additional tax exception reasons, according to your requirements or the requirements of the tax authority. See: Setting Up Lookup Codes, Oracle E-Business Tax Implementation Guide for more information.

Prerequisites

Before you can set up tax exceptions, you may need to complete one or more of these tasks:

To set up a tax exception:

  1. Navigate to the Create Tax Exception page.

  2. Enter the tax regime, configuration owner, and tax to which this tax exception belongs.

  3. If applicable, enter the tax status, tax rate, and tax jurisdiction for this tax exception.

  4. Select the exception type to use:

  5. If the exception type is Product Fiscal Classification, then, if necessary, enter the numeric precedence level for this exception.

    You must enter a precedence level if:

  6. Select the exception reason to use for this tax exception.

  7. Enter the effective date range for this tax exception. Enter a date range that is within the effective period of the entities related to this tax exception: tax regime, tax, tax status, tax rate, and tax jurisdiction.

  8. Select the exception rate type for this tax exception:

  9. Enter the rate percentage to use for this tax exception. For example:

Setting Up Transaction Fiscal Classifications

You can use transaction fiscal classifications for tax regimes and taxes where the nature of the transaction itself determines the tax and the tax rate that applies. For example, different taxes and rates might apply to sales of inventory items vs. sales of manufactured goods, or might depend upon the ship-from and ship-to locations involved in the transaction. You can also use transaction fiscal classifications to classify the accompanying documentation required by a transaction.

You can set up these types of transaction fiscal classifications:

E-Business Tax makes transaction fiscal classification codes available at transaction time for entry at the header level or line level. The available codes are both the country-specific codes of the applicable tax authority, and any non-country specific codes. You can also use transaction fiscal classifications as determining factors in tax rules. See: Determining Factor Classes and Tax Condition Values for more information.

Setting Up Transaction Business Category Codes

E-Business Tax provides six transaction business categories that you can use to identify and classify your business transactions. The six transaction business categories are:

You can use transaction business categories directly to classify transactions, and use transaction business category codes as determining factors in tax rules. You can assign a transaction fiscal classification to multiple transaction business categories and use this fiscal classification in tax rules, thus applying the same rule to several business transaction events, such as for Purchasing and Payables transactions, or Payables and Receivables transactions.

To set up a transaction business category code:

  1. Navigate to the Transaction Business Category Codes page.

  2. Select your hierarchy view of the transaction business category code path.

  3. Use the sub-level to navigate to the Create Transaction Business Category Code page.

  4. Enter a transaction business category code and name.

    E-Business Tax appends this code to the code path for this transaction business category.

  5. If necessary, enter the country that this transaction business category code applies to.

    You must ensure that the regime assignments of the transaction fiscal classification types that you associate with this transaction business category code are consistent with the country assignment.

  6. Enter the effective date range.

    Enter a date range that is within the date range of the transaction business category or transaction business category code that this level belongs to.

  7. Enter the transaction fiscal classification types and fiscal classification codes, and their effective date ranges, to associate with this transaction business category.

Setting Up Transaction Fiscal Classification Codes

Set up transaction fiscal classification codes to classify transactions for tax determination and tax reporting purposes according to the requirements of a tax authority.

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.

To set up a transaction fiscal classification code:

  1. Navigate to the Create Transaction Fiscal Classification Type page.

  2. If necessary, enter the number of levels in the hierarchy for this transaction fiscal classification type.

  3. If you are setting up a hierarchy of transaction fiscal classification types:

  4. Enter a transaction fiscal classification type code and name, and the effective date range.

  5. Assign the transaction fiscal classification type to the applicable tax regimes and enter an effective date range for each tax regime assignment.

    Enter a tax regime assignment date range that is within the date range of the transaction fiscal classification type and the tax regime.

  6. If necessary, create fiscal classification codes for this transaction fiscal classification type or type group.

  7. If you associated tax reporting types with fiscal classification, enter any applicable tax reporting codes for each fiscal classification code. See: Setting Up Tax Reporting Types for more information.

Setting Up Document Fiscal Classifications

Set up document fiscal classifications to classify transactions that require special documentation to accompany the transaction, as designated by the tax authority. 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. You can create sub-levels within a document fiscal classification code to identify details such as the tax authority requirements for document submission.

To set up a document fiscal classification:

  1. Navigate to the Update Document Fiscal Classification page.

  2. Select to create a new document fiscal classification code or a new sub-level under an existing document fiscal classification code.

  3. Enter a document fiscal classification code and name.

  4. If necessary, enter the country that this document fiscal classification code applies to.

  5. Enter the effective date range.

    Enter a date range that is within the date range of the document sub-type fiscal classification, or the document fiscal classification code that this level belongs to.

  6. If you associated tax reporting types with fiscal classification, enter any applicable tax reporting codes. See: Setting Up Tax Reporting Types for more information.

Setting Up User Defined Fiscal Classifications

Set up user defined transaction fiscal classification codes to classify any tax requirement that you cannot define using the existing fiscal classification types. You can assign a country and tax reporting type code to each user defined fiscal classification code that you create. User defined fiscal classifications do not make use of sub-levels.

To set up a user defined fiscal classification:

  1. Navigate to the Update User Defined Fiscal Classification page.

  2. Enter a user defined fiscal classification code and name.

  3. If necessary, enter the country that this user defined fiscal classification code applies to.

  4. Enter the effective date range.

    Enter a date range that is within the date range of the user defined fiscal classification.

  5. If you associated tax reporting types with fiscal classification, enter any applicable tax reporting codes. See: Setting Up Tax Reporting Types for more information.