Understanding the Tax Calculation Process

The tax calculation function performs the following for each line:

1. Obtains from the exchange rate table the exchange rate between the base currency and the tax location reporting currency.

2. Converts transaction line amounts from transaction currency to base currency.

3. Converts transaction line base currency amounts to tax location reporting currency

4. For each row in the child tax detail table, performs the following tax calculations using the tax location reporting currency amounts:

   1. If the calculation scheme is defined as an ad hoc amount, sets the tax amount to the tax rate amount from the tax calculation code.

      Converts the tax rate amount from tax calculation code currency to reporting currency, base currency, and then transaction currency.

   2. If the calculation scheme is defined as percentage:

      Calculates the taxable basis amount based on whether the assessable value must be used, whether freight and/or miscellaneous charges must be included plus any other tax component amounts that must be included.

      Calculates the tax amount by applying the tax rate percent against the taxable basis.

   3. Converts the resulting tax and tax basis amounts from transaction currency back to base currency.

   4. Converts the base currency tax and tax basis amounts to tax location currency.