E-Business Tax calculates the tax on a transaction based on the legal entity/operating unit setup, and the tax configuration and tax rules setup. The entire calculation process is transparent to the user. The tax used on the transaction belongs to the tax regime assigned to the legal entity or operating unit. The actual tax rate or rates used, and the manner in which rates are derived and calculated, depends on these factors:
First party of the transaction. This is either the legal entity or operating unit. If applicable, E-Business Tax also derives the legal establishment of each transaction line based on the legal establishment's associated business entities.
Tax registrations of the first and third parties.
Tax profiles of the first and third parties.
Tax configuration setup.
Tax rules for the configuration owner and tax.
Application event class option settings.
Each application event class contains default tax option settings that are used by E-Business Tax as the basis for determining and calculating taxes on transactions that belong to the event class. In some cases you can update tax option settings for a combination of configuration owner and application event class.
Customer tax exemptions.
Product tax exceptions.
Invoice tax lines capture the information that is used to determine the applicable taxes on a transaction. Depending on the details of your tax setup, you can enter new tax lines and update the calculation of existing tax lines.
Related Topics
Updating Establishments, Oracle Financials Implementation Guide
Party Tax Profiles in Oracle E-Business Tax
E-Business Tax calculates tax on Order to Cash transactions from Projects and Receivables and on Procure to Pay transactions from Purchasing and Payables. In addition, E-Business Tax calculates tax on transactions from applications that feed data into Payables or Receivables. These applications are called source applications. E-Business Tax supports tax handling on transactions from the source application Trade Management.
A source application can feed data, for example, into Payables for the recording and payment of invoices or into Receivables for invoicing customers or handling adjustments to invoices. The tax determination process only takes place after these applications interface data into Payables or Receivables.
Transactions from source applications sometimes require different tax handling from a regular sales or purchase invoice. For example, a rebate created in Trade Management and credited to a customer account through a credit memo may not include a new tax calculation, as the tax authority may not allow you to adjust your tax liability downward. You can define tax rules for source application event classes to manage these special situations. See: Tax Rules in Oracle E-Business Tax for more information.
This section describes the details of tax handling on certain types of transactions.
When you create an invoice in Payables by matching it to a purchase order, Payables copies the purchase order tax lines and tax-related information to the invoice and recalculates the tax. The tax rate that is used in tax calculation is always derived from the invoice date.
If the tax rate has not changed between the purchase order date and the invoice date, then the tax calculation results in the same tax lines on the invoice as on the purchase order shipment line. If the tax rate has changed between the purchase order date and the invoice date, then the tax calculation results in the same tax lines but using the tax rate that corresponds to the invoice date.
E-Business Tax manages the updates to tax-related information in this way:
Tax applies to the purchase order but not to the invoice - The tax line appears with a zero amount.
Tax applies to both the purchase order and the invoice but with different tax rate codes and tax rates - The tax line appears with the tax amount as calculated by the invoice. The tax line is created with the tax rate code and tax rate effective on the invoice date. Payables displays the tax rate variance at the distribution level.
If the Enforce Tax From Reference Document tax option is enabled for the applicable configuration owner and event class, the tax line for the invoice inherits the corresponding tax rate code and recovery rate code (if applicable) from the purchase order, but the actual tax rate and recovery rate used in the tax calculation are the rates defined for the rate period that corresponds to the invoice date.
When you apply a prepayment to an invoice, the tax rate at the time of prepayment may differ from the tax rate at the time the prepayment is applied to an invoice. E-Business Tax considers the tax calculated on the prepayment according to the value assigned to the Applied Amount Handling option in the tax record. The values are Recalculated and Prorated.
For example, you apply a prepayment amount of $5000 to an invoice with a total amount of $10,000. At the time of prepayment the applicable tax rate was 5% ($250 tax on the prepayment); at the time of invoice creation the applicable tax rate is 10%. E-Business Tax calculates the tax in this way:
Recalculated - E-Business Tax recalculates the tax on the prepayment using the invoice tax rate, and applies the same tax rate to the invoice line amount. The tax calculation creates two tax lines, one for the invoice line amount and one for the prepayment with a negative amount.
In the invoice example, the calculation creates an invoice line amount tax line of $1000 (10% * $10,000) and a prepayment tax line of -$500 (10% * -$5000). The total tax is $500.
Prorated - E-Business Tax retains the original tax rate on the prepayment and applies the new tax rate to the invoice line amount. The tax calculation creates two tax lines, one for the invoice line amount and one for the prepayment with a negative amount.
In the invoice example, the calculation creates an invoice line amount tax line of $1000 (10% * $10,000) and a prepayment tax line of -$250 (5% * -$5000). The total tax is $750.
Note: If a particular tax is not required for prepayment invoices, you can set up a Determine Tax Applicability rule for the tax using the Transaction Generic Classification determining factor and the Transaction Business Category determining factor name of Purchase Prepayment. See: Determine Tax Applicability for more information.
There are two types of debit/credit memos: On Account and Applied. E-Business Tax uses a different tax calculation method for each type.
On Account Debit/Credit Memos - E-Business Tax calculates tax on On Account debit/credit memos in a similar way to normal invoices. The only difference is that if the line amount is negative, the tax calculated is also negative.
Note: If a particular tax is not required for On Account debit/credit memos, you can set up a Determine Tax Applicability rule for the tax using the Transaction Input Factor determining factor and the Line Class determining factor name with the debit/credit memo transaction event. See: Determine Tax Applicability for more information.
Applied Debit/Credit Memos - E-Business Tax calculates tax on Applied debit/credit memos in direct proportion to the line amounts on the invoice to which the debit/credit memo is applied.
For example, if you create an invoice with one line item of $100 and tax of $10, then if the line item is credited $10 with an Applied credit memo the tax line is credited $1.
Receivables Credit Transactions
In Receivables, you can create credit transactions (applied credit memos) at the header level or the line level.
Header level - There are three options available for credit allocation:
Line Only - Tax is not credited.
Line and Tax - You enter the amount or percentage to be credited on the line amount. The amount you enter is credited proportionately to each line in the invoice. Each tax line is credited by the same percentage as the corresponding line amount.
Tax Only - You enter the amount or percentage to be credited on the tax amount. Each tax line is credited by the same percentage in proportion to the tax amount for the line.
Line level - You can credit individual lines. The tax line is credited in proportion to the line amount credit.
Payables Price Corrections
In Payables, you can create a new invoice to correct the quantity or amount of an existing invoice. The correction results in a change in line amount, either positive or negative. E-Business Tax calculates the tax on the new invoice created as a result of the price correction in proportion to the taxes on the original corrected invoice.
For example, an original invoice has a line amount of $100, and two tax lines one of $5 and $10. If the price correction reduces the line amount by $20, then the new invoice creates two tax lines of -$1 and -$2.
Intercompany transactions must account for tax on both the Receivables (sale) and Payables (purchase) side. If the transaction is between legal entities in different tax regimes, then you may need to account for the tax charged on the sale in a different manner from the purchase.
E-Business Tax accounts for intercompany transactions in this way:
If a tax is charged on the Receivables sale with a tax amount greater than zero, then E-Business Tax charges the same amount of tax on the Payables purchase side.
E-Business Tax looks for and applies a Payables tax rate code to match the Receivables tax rate code in order to reconcile the transaction tax. If you are using migrated tax data, then E-Business Tax uses the matching Receivables and Payables tax rate codes. If you are using an E-Business Tax configuration with the legal entities sharing the tax configuration of the Global Configuration Owner, then E-Business Tax applies the same tax rate to the Receivables and Payables transactions.
If a zero tax amount is charged on the Receivables sale, then E-Business Tax reconciles the Payables purchase in one of two ways:
If the Payables side also uses a zero-rated tax rate for goods and services, then E-Business Tax applies the zero-rated tax rate code.
If there is no zero-rated tax rate, then E-Business Tax self-assesses the tax using the applicable self-assessment setup: offset taxes; self-assessment/reverse charge; or reporting purposes only tax.
If any special implications apply to intercompany transactions, you can use the transaction business category Intercompany Transaction to identify these transactions. See: Setting Up Transaction Fiscal Classifications for more information.
Related Topics
Entering Invoices with Matched Purchase Orders in the Invoice Workbench, Oracle Payables User Guide
Entering Prepayment Invoices in the Invoice Workbench, Oracle Payables User Guide
Debit Memos, Oracle Receivables User Guide
Credit Memos, Oracle Receivables User Guide
Price Corrections, Oracle Payables User Guide
Intercompany Balancing, Oracle Financials Implementation Guide
Setting Up Configuration Owner Tax Options
Enter and update detail and summary tax lines according to the requirements of your transactions. You can perform these operations on tax lines:
Enter a manual tax line.
Change existing tax line information.
Cancel a tax line.
The following sections describe the settings and rules that apply to each tax line operation.
These requirements apply to entering a manual detail or summary tax line:
Enable these options for the configuration owner and application event class:
Allow Entry of Manual Tax Lines.
Allow Manual Tax Only Lines, if you want to enter tax only tax lines.
See: Setting Up Configuration Owner Tax Options for information about updating event class options.
The Allow Entry of Manual Tax Lines option is enabled for the tax.
See: Setting Up Taxes.
Tax regime, tax, tax status, tax rate, tax amount, and place of supply are always mandatory for tax lines.
The combination of tax regime and tax is unique for each tax line that applies to the same transaction line. You cannot enter a manual tax line for a tax that already exists for the transaction line.
You must enter a tax status to enter a tax rate.
You must enter a tax regime, tax, tax status, and tax rate to enter a tax amount.
The tax calculation on a manual tax line is the standard formula of: Tax Amount = Taxable Basis * Tax Rate. E-Business Tax does not evaluate tax rules defined for the tax for any rule type.
You can enter a tax-only invoice in Payables to record tax lines that are not linked to a transaction. A tax-only invoice is used, for example, to record tax lines on purchases that are invoiced separately or to enter tax-only invoices from tax authorities or import agents that record import taxes.
The tax regimes available for selection on tax only tax lines are the tax regimes belonging to the configuration option of the applicable legal entity or operating unit.
For each tax only tax line:
Select a type of Tax.
Enter the tax amount in the Amount field.
Enter the GL date.
If applicable, enter the distribution account.
Enter the tax regime, tax, tax status, tax rate name, tax rate, and tax jurisdiction.
Complete and save the distribution.
See: Managing Detail Tax Lines for more information about completing tax lines.
These requirements apply to changing an existing detail or summary tax line:
The Allow Override for Calculated Tax Lines option is enabled for the applicable configuration owner and application event class.
If you update automatic tax calculation and you want E-Business Tax to automatically recalculate the tax on the tax lines you enter manually, then you must enable the Allow Recalculation for Manual Tax Lines option.
If you update automatic tax calculation and you want E-Business Tax to recalculate the tax on all other tax lines on the same transaction, then you must enable the Tax Line Override Impacts Other Tax Lines option.
See: Setting Up Configuration Owner Tax Options for information about updating event class options.
The Allow Override for Calculated Tax Lines option is enabled for the tax.
See: Setting Up Taxes.
For Payables transactions, you cannot enter or change detail tax lines while you have unsaved changes to summary tax lines.
E-Business Tax performs a limited evaluation of tax rules on certain updates to a tax line. See: Rule Order and Rule Evaluation for more information.
You can update these fields:
Tax Status
Tax Jurisdiction
Tax Rate
Tax Amount
Percentage Rate or Quantity Rate
Self Assessed option
Inclusive option
These requirements apply to changing tax statuses:
You cannot update the tax status on detail tax lines that are enforced from the natural account.
If you update a tax only tax line and change the tax status, you must to re-enter the tax rate code.
These requirements apply to changing tax rates:
Set the Allow Tax Rate Override option for the applicable tax status.
Set the Allow Ad Hoc Rate option for the applicable tax rate.
You may need to change the tax status to change to the appropriate tax rate.
You can change the calculated tax rate derived from the tax status by selecting another tax rate defined for the same tax regime, tax, and tax status.
See: Setting Up Tax Rates.
These requirements apply to changing tax rate percentages or quantity rates:
You cannot update the tax rate code and rate fields on detail tax lines that are enforced from the natural account.
You can only update the tax rate percentage if the tax rate code has the option Allow Ad Hoc Rate enabled.
These requirements apply to changing tax amounts:
The setting for the Adjustment for Ad Hoc Amounts option of the tax rate determines which value is adjusted--the taxable amount or the tax rate--when you change the tax amount.
If a detail tax line belongs to an historic transaction, you can only update the tax amount.
You can change the tax amount independent of the tax inclusive and compound tax settings. If you change the tax amount, E-Business Tax recalculates the tax amounts on all detail tax lines.
If you defined tax tolerances for Payables transactions, then if the updated tax amount exceeds the specified tolerance, E-Business Tax places the invoice on hold. See: Defining Tax Tolerances.
If the tax rate is 0, you can only enter 0 as the tax amount.
These requirements apply to changing the Inclusive option:
If you update the Inclusive option setting, E-Business Tax recalculates the taxable amount and transaction amount.
Related Topics
Holds, Oracle Payables User Guide
These rules apply to canceling an existing detail or summary tax line:
You can only cancel tax lines on Payables transactions.
When you cancel a tax line, both the associated tax line and any distributions that were previously accounted are reversed. If the distributions were not accounted, then the amounts are set to zero.
You cannot reverse a cancelled tax line. If applicable, enter a new manual tax line.
Use the Detail Tax Lines interface to review and manage Payables and Receivables detail tax lines. Depending on the available settings, you can:
View tax line information.
Enter a manual detail tax line.
Enter tax-only invoices and tax only tax lines.
Change existing detail tax line information.
Cancel a Payables detail tax line.
The operations that you can perform depend upon the related application and tax settings. See: Entering and Updating Tax Lines for information about the requirements for entering and updating tax lines.
To view and manage detail tax lines:
Navigate to the applicable application and enter invoice header information.
Navigate to the Detail Tax Lines interface.
Set the required viewing option:
For this Line - View the tax lines for a specific transaction line.
For this Document - View the tax lines for the current transaction.
Update existing tax lines or enter new tax lines according to your requirements. All entries and changes apply to a combination of tax regime and tax.
This table describes the content and user action for each field and option for detail tax lines.
| Field/Option | Description |
|---|---|
| Tax Regime Code | The tax regime for this tax line. |
| Tax | The tax of the tax regime that applies to this tax line. |
| Tax Jurisdiction | If applicable, the tax jurisdiction for this tax line. The list of values displays the tax jurisdictions derived from the tax. If you select a tax jurisdiction and tax rates are defined for this jurisdiction, then these tax rates are available for this tax line. |
| Tax Status | The tax status for this tax line. The list of values displays the tax statuses defined for the tax regime and tax. |
| Tax Rate Name | The tax rate name is displayed when you select a tax rate. |
| Tax Rate | The tax rate for this tax line. The list of values displays the tax rates defined for the tax regime, tax, tax status, and, if applicable, tax jurisdiction. |
| Tax Amount | The calculated tax amount for this tax line. |
| Taxable Amount | The calculated taxable basis amount. The tax amount is derived by applying the tax rate to the taxable amount. |
| Cancel | If enabled, this option indicates that this tax line is cancelled. |
| Inclusive | If enabled, this option indicates that the line amount is inclusive of tax. |
| Self Assessed | If enabled, this option indicates that the tax on this tax line is self assessed. A self-assessed tax is a tax calculated and remitted for a transaction, where tax was not levied but is deemed as due. |
| Manually Entered | If enabled, this option indicates that this is a manual tax line. |
| Place of Supply | The location where the transaction is determined to have taken place for this tax regime and tax. |
| Calculated Tax Amount | The original calculated tax amount, if the tax amount is manually changed. |
| Tax Base Modifier Rate | The value of the tax base rate modifier as defined in the taxable basis formula. |
| Tax Only Line | If enabled, this option indicates that this is a tax only tax line. See: Entering Tax Only Tax Lines for more information. |
| HQ Registration | Tax registration of the legal entity establishment for the tax regime, tax, and tax jurisdiction for this tax line. |
Use the Additional Tax Determining Factors window to review and enter additional tax information on Receivables transaction lines. E-Business Tax calculates tax on the transaction based on the tax configuration and tax rules setup, as well as any additional tax information that you enter.
You navigate to the Additional Tax Determining Factors window from the Transactions window using the Tax Information button. Updates apply to the transaction of the legal entity and taxation country displayed in the header region. If you enter or update any fields in the Additional Tax Determining Factors window, you must update the Receivables transaction in order to recalculate the tax.
This table describes the fields and user actions in the Additional Tax Determining Factors window.
| Field | Description |
|---|---|
| Taxation Country | The country in which the transaction is deemed to have taken place for taxation purposes. Once E-Business Tax calculates tax on the transaction, you cannot update this field. |
| Document Subtype | A documentation classification within the application event class of the transaction. |
| Tax Invoice Date | The date associated with the invoice for tax purposes. |
| Transaction Business Category | Used to classify business transactions or identify specific transaction events. All transactions that call E-Business Tax must have a transaction business category assignment. See: Setting Up Transaction Fiscal Classifications for more information. |
| Product Fiscal Classification | Identifies the taxable nature of an Inventory item for tax determination or tax reporting purposes. See: Setting Up Product Fiscal Classifications for more information. |
| Product Category | Identifies the taxable nature of a non-Inventory based item for tax determination or tax reporting purposes. See: Setting Up Product Fiscal Classifications for more information. |
| Product Type | Goods or Services. |
| Intended Use | Identifies the intended use of an Inventory item or non-Inventory based product fiscal classification, when the intended use is a factor either in tax determination or tax recovery. See: Setting Up Product Fiscal Classifications for more information. |
| User Defined Fiscal Classification | Identifies a user-defined transaction fiscal classification required by the transaction for tax determination or tax recovery. See: Setting Up Transaction Fiscal Classifications for more information. |
| Assessable Value | Identifies a special value associated with the transaction item. |
Use the Summary Tax Lines interface to review and manage Payables summary tax lines. Depending on the available settings, you can:
View summary tax lines.
Enter a manual summary tax line.
Allocate a manual summary tax line to specific transaction lines.
Change existing summary tax line information.
Cancel a summary tax line.
The operations that you can perform depend upon the related application and tax settings. See: Entering and Updating Tax Lines for information about the requirements for entering and updating tax lines.
Note: If you enter or change a summary tax line, you cannot update detail tax lines.
To view and manage summary tax lines:
Navigate to the Payables Invoice Workbench.
Enter invoice header information.
Navigate to the Lines region.
Update existing tax lines or enter new tax lines according to your requirements. All entries and changes apply to a combination of tax regime and tax.
If applicable, use the Allocations window to allocate summary tax lines to specific transaction lines.
This table describes the content and user actions for summary tax lines. This table only lists the summary line fields that apply to tax determination.
| Field/Option | Description |
|---|---|
| Tax Regime Code | The tax regime for this tax line. |
| Tax | The tax of the tax regime that applies to this tax line. |
| Tax Status | The tax status for this tax line. The list of values displays the tax statuses defined for the tax regime and tax. |
| Tax Rate Name | The tax rate name is displayed when you select a tax rate. |
| Tax Rate | The tax rate for this tax line. The list of values displays the tax rates defined for the tax regime, tax, tax status, and, if applicable, tax jurisdiction. |
| Tax Jurisdiction | If applicable, the tax jurisdiction for this tax line. The list of values displays the tax jurisdictions derived from the tax. If you select a tax jurisdiction and tax rates are defined for this jurisdiction, then these tax rates are available for this tax line. |
| Inclusive | If enabled, this option indicates that the line amount is inclusive of tax. |
If an invoice is inclusive of tax, the Inclusive option is enabled on both the detail and summary tax lines. If an invoice with multiple tax lines has a mixture of both inclusive and exclusive taxes with the same rate, then the Tax Summary Lines interface displays two tax lines, one with the Inclusive option enabled and one with the option disabled.
If the Allow Override and Entry of Inclusive Tax Lines at the tax rate level is enabled , you can update the applicable Inclusive option.
See: Setting Up Tax Regimes for more information about tax inclusive handling.
Because self-assessed taxes are not present on a supplier invoice, Payables does not include self-assessed tax lines on the Invoice Lines interface. After the tax on the invoice is calculated, you can navigate to the Tax Details/Summary window to view your self-assessed/reverse charges, or in the United States the calculation of use tax.
See: Setting Up Parties for Self-Assessment for more information about self-assessed taxes.
After you create summary tax lines, you can use the Allocate Summary Tax Lines page to review and allocate your manual summary tax lines to specific transaction lines. You can view the transaction line number, description, line amount, and transaction date of each transaction line.
These conditions apply to allocating summary tax lines:
You must select at least one transaction line for allocation.
You cannot allocate a tax only summary tax line.
You cannot update or delete a transaction line that is to be allocated.
Use the Tax Distributions window to review and update tax distributions. You can review tax distributions and, if applicable, update the tax recovery rate on a tax distribution.
E-Business Tax creates recoverable distributions and calculates tax recovery rates when you save the line distribution, according to the Determine Recovery Rate tax rule process or the default recovery rate.
E-Business Tax creates one recoverable distribution for the primary recovery type and, if applicable, the secondary recovery type, for each tax line for each of the item distributions into which the item line or expense line is distributed. E-Business Tax displays tax distributions in this way:
If the tax is non-recoverable, E-Business Tax displays one non-recoverable tax distribution line for the tax, with the non-recoverable amount equal to the tax amount. You cannot update a non-recoverable tax distribution nor create a manual recoverable distribution.
If the tax is recoverable, E-Business Tax displays two distribution lines, one for the recoverable amount and another for the non-recoverable amount.
If the tax is fully recoverable, then the recoverable distribution amount is equal to the tax amount and the non-recoverable distribution amount is equal to zero.
If the tax is recoverable and the recovery rate is zero, then the non-recoverable distribution amount is equal to the tax amount and the recoverable distribution amount is equal to zero.
You can update the recovery rate code if the Allow Recovery Rate Override option is enabled for the tax. You can update the recovery rate if the Allow Ad Hoc Rate option is enabled for the recovery rate. The update method differs according to the transaction application:
Purchasing - You can either enter a new recovery rate or select another recovery rate that you previously defined from the list of values.
Payables - You can only select another rate that you previously defined.
If you update the recovery rate on a tax distribution, E-Business Tax also updates the related non-recoverable rate and amount, and the distribution for the tax line.
If applicable, accounting-related setups may affect tax calculation:
If there are tax rules defined based on the Accounting determining factor class, then changing or creating a distribution may affect tax calculation.
If the Enforce Tax from Account option is enabled for the configuration owner and event class, this may affect the tax calculation based on the distribution.
This table describes the content and, if applicable, user actions for tax distributions.
| Field/Option | Description |
|---|---|
| Recovery Type | The recovery type. |
| Recovery Rate Code | The recovery rate associated with the tax line |
| Recovery/Non-Recovery Rate | The recovery rate percentage associated with the recovery rate code. |
| Recovery Amount | The calculated recovery amount. |
| Frozen | If enabled, you cannot update this tax distribution. |
| Reverse | Reverse a frozen tax distribution and enter a new distribution. |
| Account | Account code combination for the distribution line. The tax calculation process derives the account code. |
| Status | Indicates whether the distribution is validated. |
| Accounting | Indicates whether the accounting is completed. |
| Functional Amount | Indicates the distribution amount in the ledger currency. This is (invoice currency) * (exchange rate used in the invoice). |
Related Topics
Entering Invoice Distributions in the Invoice Workbench, Oracle Payables User Guide
Setting Up Parties for Self-Assessment
Enter and update tax exemptions on Receivables transactions according to your requirements. A tax exemption applies a discount or a replacement percentage that reduces the tax on a transaction.
Tax exemptions apply to a specific customer or to a combination of customer and specific product. You must complete the necessary setups for all of the tax exemptions that you need for each customer and customer site involved in transactions. These setups include:
Set the eBTax: Allow Override of Customer Exemptions profile option to display the Tax Handling field.
Set up exemption reason lookup codes.
Enable the Allow Tax Exemptions option at all the applicable levels in the regime-to rate flow. E-Business Tax only considers tax exemptions for the tax regimes, taxes, tax statuses, and tax rates that have this option enabled.
Set up customer and customer site tax exemptions for the tax regimes, taxes, tax statuses, tax rates, tax jurisdictions, and products that you need.
See: Setting Up Tax Exemptions for more information.
During the life of a tax exemption, the exemption status can often change. Because the status of a tax exemption affects its applicability on the transaction line, you must update the tax exemption record each time the status changes.
These rules apply to the status of a tax exemption:
Tax exemptions with a status of Primary apply to all transactions of the customer or customer site.
Tax exemptions with a status of Manual apply to specific transactions only of the customer or customer site.
E-Business Tax considers tax exemptions with a status of Manual or Unapproved during tax calculation provided the exempt reason and certificate number entered on the transaction line match the exemption record values.
Tax exemptions with a status of Discontinued or Rejected are not considered during tax calculation.
If a tax exemption with a status of Primary, Manual, or Unapproved has an end date, E-Business Tax considers these tax exemptions if the transaction date is within the effective date range of the exemption.
You use the Tax Handling field to select the applicable tax exemption value for the transaction line. E-Business Tax processes tax exemptions in different ways depending upon the value you choose:
Require - The customer is required to pay the tax. Tax exemptions do not apply to this transaction line, even if defined.
Exempt - Enter the exemption certificate number and the customer exemption reason. E-Business Tax processes the tax exemption in this way:
Consider tax exemptions with a status of Primary, Manual or Unapproved.
Verify that the transaction date is within the tax exemption effective date range.
Verify that the transaction exemption reason and exemption certificate number match the tax exemption reason and certificate number. If you do not enter a certificate number, E-Business Tax still looks for a matching tax exemption.
If E-Business Tax does not find an exemption matching these conditions, it creates an exemption with the status Unapproved and a 100% discount.
Standard - This tax handling is for exemptions of the Primary status only. You do not have to enter the exemption certificate number or customer exemption reason.
E-Business Tax looks for a tax exemption with the Primary status and an effective date range that includes the transaction date. If more than one tax exemption applies, E-Business Tax uses the most specific tax exemption, in this order:
Customer and product tax exemption for tax rate and tax jurisdiction.
Customer and product tax exemption for tax rate.
Customer and product tax exemption for tax status and tax jurisdiction.
Customer and product tax exemption for tax status.
Customer and product tax exemption for tax.
Customer only tax exemption for tax rate and tax jurisdiction.
Customer only tax exemption for tax rate.
Customer only tax exemption for tax status and tax jurisdiction.
Customer only tax exemption for tax status.
Customer only tax exemption for tax.
After applying the tax exemption to the transaction line, E-Business Tax calculates the tax rate in this way:
If the exemption type is a discount/surcharge, then:
Tax Rate = Tax Rate * Discount/Surcharge percentage.
If the exemption type is a special rate, then:
Tax Rate = Special Rate.
If both a tax exemption and tax exception apply to the same transaction line, E-Business Tax calculates the tax rate in this way:
If the exemption type is a special rate, then E-Business Tax only applies the tax exemption special rate:
Tax Rate = Special Rate.
If the exemption type is a discount/surcharge and the exception type is a special rate, then:
Tax Rate = Tax Exception Special Rate * Tax Exemption Discount/Surcharge percentage.
If both the exemption type and exception type are discount/surcharge, then:
Tax Rate = Tax Rate derived from tax rules * Tax Exception Discount/Surcharge percentage * Tax Exemption Discount/Surcharge percentage.
Use the Oracle Tax Simulator to enter transactions in order to simulate the tax determination process without creating live data. The Oracle Tax Simulator lets you preview the workings of your tax configuration before you enter transactions in an application, such as the Payables or Receivables workbench. In this way a tax manager or implementation consultant can simulate transactions to test the entire tax and related configuration. The Oracle Tax Simulator provides immediate verification that the tax configuration and tax rules were created and applied according to your requirements.
With the Oracle Tax Simulator, you can:
Enter transactions to simulate tax calculation based on various scenarios.
View the tax rules that were applied to a tax calculation and the processed result for each rule type.
Simulate the characteristics of the Payables, Purchasing, and Receivables workbenches and create the tax line for each type of operation.
View the summarized tax lines for each transaction and the tax lines generated for each transaction line.
Use the associated tax windows to view and/or override tax lines.
The Oracle Tax Simulator provides these verifications:
How the tax rules that you have defined for one or more taxes work in conjunction with the defaults you have set for them.
Whether a tax rule that you expected to have a successful evaluation for a given set of transaction conditions achieved the desired result.
How the options that you have set at various levels are reflected in the results of tax determination processing. If a certain transaction does not processes taxes as you predicted, then you can use the simulated result to troubleshoot the cause. For example:
You defined product tax exceptions, but they were not used on a transaction as expected. You then discover that the Allow Tax Exceptions option was not enabled on the applicable tax rate record.
Your supplier record has the option enabled to use offset taxes, but the offset taxes do not appear. You then discover that the tax rate record does not have an offset tax rate associated with it.
Important: These restrictions apply to using the Oracle Tax Simulator:
Oracle Tax Simulator does not provide simulation of tax recovery processing.
Oracle Tax Simulator is not meant to test actions that you perform on transactions or transaction lines, such as canceling, deleting and reversing lines.
You cannot use Oracle Tax Simulator to test or verify user control settings.
Oracle Tax Simulator displays the Transaction Lines window for the entry of detailed transaction and tax information. The Transaction Lines window contains a Header region for entering application, party and general transaction information, and a Lines region for entering detailed information for each transaction line.
Main - The application, legal entity, operating unit, and main document details. The list of values in the Document Event field depends on the application that you select:
Oracle Payables: Expense Reports, Prepayment Invoices, Standard Invoices.
Purchasing: Charges, PO_PA, Release, Requisition.
Receivables: Credit Memo, Debit Memo, Invoice, Invoice Adjustment, Receipts.
Trade Management: Trade Management Payables, Trade Management Receivables.
Party - The shipping and billing parties.
Sites - The shipping and billing party sites and locations.
You can narrow the list of values on fields in the Sites tabbed region in these ways:
Enter the site name in the Ship From Party Site and Bill From Party Site fields for Payables transactions, and the Ship To Party Site and Bill To Party Site fields for Receivables transactions.
Enter the city name in the Ship From Location and Bill From Location fields for Payables transactions, and in the Ship To Location and Bill To Location fields for Receivables transactions.
Currency - The currency and exchange rate information.
Misc - The default taxation country and document subtype:
Default Taxation Country - The country of taxation for tax calculation purposes. This is an important prerequisite for defaulting other associated tax fields.
Document Sub Type - Used for both tax calculation and tax reporting depending upon the requirements of the taxation country. You can use this field when documents such as an Invoice or a Credit Memo need to be further classified.
Location - The points of acceptance and origin.
The list of values available in the Party, Sites, and Location tabbed regions depend on the application for which you are entering the transaction. You must select at least one location for a transaction.
Main - The standard line information for a transaction.
More - Additional charges, discounts or exemption details.
Reference Documents - If applicable, a prior document in the business flow, such as a purchase order for a Payables standard invoice.
Adjusted Documents - If applicable, a prior document that is adjusted by the current document, such as an existing sales invoice for a Receivables credit memo.
Applied Documents - If applicable, a prior document that is applied to the current document, such as an existing prepayment invoice for a new Payables invoice.
Tax - The regime-to-rate flow used in the tax calculation and the calculated tax amount.
After entering your transaction details, use the Tax Simulator tools to analyze the tax calculations for your transaction:
View Tax Log - Use the View Tax Log option on the Tools menu to generate a log file of transaction activity. The log file provides details of all processing done on a transaction, including a list of tax rules that were not evaluated successfully.
Detail Tax Lines window - Use the Detail Tax Lines window to view the calculated tax lines for the transaction. The window displays, for each transaction line, the applicable tax with the corresponding tax configuration details, including tax regime, tax, tax jurisdiction, tax status, tax rate code, tax rate, and tax amount. See: Managing Detail Tax Lines for more information.
Rules window - Use the Rules window to view the tax rules that were applied to each tax line for each tax calculation process. For each rule type, you can view the processed result and verify whether the result was determined by a tax rule or the default value. If a tax rule was applied, you can also determine the associated tax rule and tax condition set. See: Tax Determination Processing for more information.
Summary Tax Lines window - Use the Summary Tax Lines window to view the summary tax lines for your Payables transactions. For each applicable tax, you can view the total tax amount across all transaction lines, with the corresponding tax configuration details, including tax regime, tax, tax jurisdiction, tax status, tax rate code, and tax rate.
Tax Distributions window - Use the Tax Distributions window to view the resulting distributions information and any associated recovery details for your Payables transactions.