Setting Up Automatic Tax Calculation
Since journal entry taxes are computed similarly to taxes within Payables or Receivables, much of your Payables or Receivables setup is reusable. For example, you do not have to define tax codes for General Ledger if you have already defined them for Receivables. If you do not use those applications, you can also access the setup forms from within General Ledger.
Other journal entry tax setup information is associated with a particular set of books; therefore, you need to complete this setup for each set of books. Also, if you use multiple organization support in Payables and Receivables, tax information is associated with a specific operating unit, so you need to complete this setup for each operating-unit-specific responsibility.
Defaulting or Enforcing Tax Information
You can control the degree of flexibility your accounting clerks have when entering tax amounts, to meet legislative requirements and your policy. For example, if your legislation permits some flexibility in rounding calculated tax amounts, you might want to allow the standard rounding rule (for a set of books) to be overridden during manual journal entry.
See: Tax Information Defaults and Overrides
To set up and use automatic journal entry tax calculation:
1. Define Tax Codes and Tax Names (for example, "Standard" or "Consumption") within Receivables or Payables. If you do not use Oracle Receivables and Payables, you can define tax codes and tax names from General Ledger (Tax Names window and Tax Codes and Rates window).
2. Choose the Enable Journal Entry Tax option for each set of books for which you want to calculate tax in journal entries.
3. Set tax calculation options, such as the tax precision, using the Tax Options window.
4. (Optional) Set default input and output tax codes and rounding information for each set of books and for specific accounts.
5. Update your standard operating procedures for entering journals for taxable transactions.
To upgrade from Release 9 VAT descriptive flexfield system:
1. Wait for a logical time to upgrade, such as the end of a tax period or tax year.
2. Deactivate the Value Added Tax Descriptive Flexfield.
3. Implement and begin using Automatic Tax Calculation. Use the Tax Journals Report instead of the old VAT reports.
Tax Options Field Reference
The Tax Options window contains the following fields, which control the way tax is calculated:
Tax Reporting Currency: read only, shows the functional currency for the current set of books
Minimum Accountable Unit: the smallest unit that a tax amount can have; the system rounds up or down to yield a multiple of this minimum unit.
Precision: the number of decimal places to which you want to calculate tax; Precision specifies the accuracy, and Accountable Unit specifies the rounding target.
Calculation Level: either Journal or Line, to determine how taxable amounts are grouped and calculated
See Also
Tax Calculation Rules
Automatic Tax on Journal Entries
