2General Payables Options

This chapter contains the following:

Manage Common Options for Payables and Procurement

For invoice business units and requisitioning business units, you can set options common to the procure-to-pay business flow on the Manage Common Options for Payables and Procurement page.

The common options are grouped into the following categories:

  • Default distributions

  • Automatic offsets

  • Currency conversion

  • Expense accruals

  • Self-billed invoices

  • Legal entity information

Default Distributions

Default distributions are used to define accounts for payables transaction accounting.

Note: You can also specify some default distributions for a supplier on the Edit Site page.

Offset Segments

If you enter invoices for expenses or asset purchases with more than one primary balancing segment value, consider using automatic offsets. Automatic offsets balance accounting entries for Oracle Fusion Payables transactions. If you don't use automatic offsets, an invoice transaction has a single liability accounting entry and a payment transaction has a single cash accounting entry.

Currency Conversion

This table describes the options you can set for currency conversion.

Option Description

Require conversion rate entry

If enabled, you must provide a conversion rate whenever you enter an invoice or a payment in a currency other than the ledger currency. If you maintain daily rates, the rate is automatically supplied based on the date and rate type that you enter. If daily rates don't exist for that date and rate type, you can't enter or save the transaction. If the conversion rate type is User, then you must enter a conversion rate. You can't create accounting entries for, or pay foreign currency invoices without conversion rates.

If you don't enable this option, you can enter conversion rates manually on invoices and payments, or submit the Apply Missing Conversion Rates process. When you create a bills payable document, you must still provide a maturity rate, rate type, and date.

Conversion rate type

This setting provides the default conversion rate type when you enter invoices or create payments. You can change the conversion rate type at invoice entry or payment creation time.

Realized Gain or Loss Distributions

These distributions represent the default realized gain and loss accounts for payments from each of your bank accounts. If the conversion rate changes between invoice entry and payment time, the realized gain or loss is automatically calculated and recorded to these accounts.

Expense Accruals

Determine when to accrue for expense items.

Self-Billed Invoices

This table lists the options for self-billed invoices.

Option Description

Gapless invoice numbering

You can enable gapless, that's, no breaks in numbering, invoice number generation for your buying organization during pay on receipt processing. You can enable gapless numbering for the entire business unit with this setting or limit it to a supplier site.

Buying Company Identifier

A unique identifier that's included in the invoice number created by the pay on receipt process and in the debit memo number from returned receipts.

Legal Entity Information

This table describes the options for legal entity information.

Option Description

VAT Registration Member State

If your company operates in a member state of the European Union, select the country.

VAT Registration Number

If your company operates in a member state of the European Union, enter the value-added tax (VAT) registration number for your organization.

Bill-to Location

Enter the bill-to location to provide default values. The application uses the bill-to location to derive legal entity information.

Note: You can use the Create Chart of Accounts, Ledger, Legal Entities, and Business Units in Spreadsheet task to automate common options setup.

Default distributions are used to define accounts for payables transactions. Invoices may get some distributions from supplier sites and others from common options setup.

Default Distributions

The following table describes the default distributions on the Manage Common Options for Payables and Procurement page.

Distribution Description

Liability

The default liability distribution for new invoices, unless the Site Assignments tab on the Supplier page has a different distribution.

Caution: You can only specify a distribution with an account type of Liability.

Prepayment

The default distribution for prepaid expenses, unless the Site Assignments tab on the Supplier page has a different distribution.

Bill Payable

The default distribution for future-dated payments, unless the Site Assignments tab on the Supplier page has a different distribution.

Conversion Rate Variance Gain and Loss

Records conversion rate variance gains and losses for inventory and expense items that are accrued on receipt. Variance is calculated between an invoice and purchase order or, an invoice and receipt, depending on how you matched the invoice.

Discount Taken

Records discounts taken if the Discount Allocation Method option on the Manage Invoices page is set to Single distribution.

Miscellaneous

Records charges for invoice lines with a type of Miscellaneous. If you don't enter a value, miscellaneous charges are prorated across invoice item lines.

Freight

Records charges for freight lines. If you don't enter a value, miscellaneous charges are prorated across invoice item lines.

Prepayment Tax Difference

Records tax amount differences between a prepayment and the invoices that the prepayment is applied to. These differences are usually due to changes in tax rates from the time the prepayment is created to the time the invoice is created.

Caution: This distribution is used only if the Applied Amount Handling option in the tax record is set to Recalculate.

If you enter invoices for expenses or asset purchases with more than one primary balancing segment value, you might want to use automatic offsets. Automatic offsets balance accounting entries for Oracle Fusion Payables transactions. If you don't use automatic offsets, an invoice transaction has a single liability accounting entry and a payment transaction has a single cash accounting entry.

On the Manage Common Options for Payables and Procurement page, you can select the method for creating the offsetting accounting entry. You can offset by primary balancing segment, or you can offset by all segments, except natural account.

Invoice Accounting Entries

Amounts are automatically allocated for the following invoice accounting entries:

  • Conversion rate variance gain or loss

  • Liability

  • Nonrecoverable tax for invoices matched to purchase orders

  • Nonrecoverable tax for invoices not matched to purchase orders, where no tax expense account has been defined for the tax rate

  • Withholding tax, if the withheld amount is applied at invoice validation time

Payment Accounting Entries

Amounts are automatically allocated for the following payment accounting entries:

  • Cash, if you use a pooled bank account

  • Cash clearing, if you use a pooled bank account and if you account for payments at clearing time

  • Discount

  • Realized gain or loss

  • Bills payable

  • Withholding tax, if amounts are withheld at payment time

You can use the Offset Segments option on the Manage Common Options page to create balanced accounting entries for invoice and payment transactions. You can select the segments to override on the offsetting entry lines without having to define intercompany or intracompany rules. This option is also used by Oracle Fusion Receiving to derive the receiving inspection account.

Tip: Consider this option carefully before setting it. Changing automatic offsets after creating accounting entries can result in accounting inconsistencies or slow performance.

To meet more complex offsetting requirements, you can set up intracompany or intercompany rules at the ledger level in Oracle Fusion General Ledger. If you enable additional balancing segments for your chart of accounts, you must define intracompany or intercompany rules for the journal entry to balance.

Select one of the following offset segment methods:

None

The invoice liability distribution provides the liability entry line account, without any segment override. Receiving uses the receiving inspection distribution that's defined for the destination organization.

Note: If you anticipate creating invoices that cross balancing segment values, select another method or set up intracompany or intercompany rules in General Ledger.

Primary Balancing Segment

This method builds the liability entry line account using both the charge distribution on the invoice line and the liability distribution on the invoice header. The charge distribution provides the primary balancing segment value and the liability distribution on the invoice header provides the remaining segment values. The resulting journal entry is balanced by the primary balancing segment.

Receiving builds the receiving inspection entry line account using both the purchase order charge distribution and the receiving inspection distribution for the destination organization. The charge distribution provides the primary balancing segment value and the receiving inspection distribution provides the remaining segment values.

This figure illustrates how the invoice liability entry line account is built when the offset segment method is set to Primary Balancing Segment.

This graphic displays the Primary balancing segment
offset method.

All Segments, Except Natural Account

This method builds the liability entry line account using both the liability distribution on the invoice header and the charge distribution on the invoice line. The liability distribution on the invoice header provides the natural account segment and the charge distribution provides the remaining segment values. The resulting journal entry is balanced by all segments, except the natural account segment.

Receiving builds the receiving inspection entry line account using both the receiving inspection distribution for the destination organization and the purchase order charge distribution. The receiving inspection distribution provides the natural account segment and the purchase order charge distribution provides the remaining segment values.

This figure illustrates how the liability entry line account is built when the offset segment method is set to All Segments, Except Natural Account.

This graphic displays all segments except the natural
account offset method.

On the Manage Common Options for Payables and Procurement page, you can select a method for automatic offsets. The following example illustrates how liability accounts are built using the Primary balancing segment method.

Scenario

A supplier sends you an invoice for two items. Each item should be charged to a different company.

Transaction Details

The invoice is for 100 USD and consists of:

  • Item 1 for 60 USD

  • Item 2 for 40 USD

Analysis

The accounting flexfield consists of the following segments:

  • Primary balancing segment

  • Account

  • Cost center

Each primary balancing segment value represents a company. The default liability account for the supplier site is 00-LIAB-000.

This table lists the distribution combination information that you enter for each invoice item line.

Invoice Distribution Debit Credit

01-EXP1-111

60

02-EXP2-222

40

Resulting Liability Account Journal Entries

This table lists the liability accounts and amounts that are automatically created for the invoice.

Liability Account Debit Credit

01-LIAB-000

60

02-LIAB-000

40

On the Manage Common Options for Payables and Procurement page, you can select a method for automatic offsets. The following example illustrates how liability accounts are built using the method called All segments, except natural account.

Scenario

A supplier sends you an invoice for two items. The offsetting liability account must retain all segments of the invoice distribution, except for the account segment.

Transaction Details

The invoice is for 100 USD and consists of:

  • Item 1 for 60 USD

  • Item 2 for 40 USD

Analysis

The accounting flexfield consists of the following segments:

  • Primary balancing

  • Account

  • Cost center

Each primary balancing segment value represents a company. The default liability account for the supplier site is 00-LIAB-000.

This table lists the distribution information that you enter for each invoice item line.

Invoice Distribution Debit Credit

01-EXP1-111

60

02-EXP2-222

40

Resulting Liability Account Journal Entries

This table lists the liability accounts and amounts that are automatically created for the invoice.

Account Debit Credit

01-LIAB-111

60

02-LIAB-222

40

Set the Accrue Expense Items option on the Manage Common Options for Payables and Procurement page to indicate when to accrue for expense items.

At Receipt

Accrue when receipts are created. You can override this setting on the PO schedule for expense destination types.

Note: Inventory items are always accrued at receipt.

Period End

Accrue at the end of a period. During period close, expense accruals are created for all receipts that don't have invoices. Accrual entries are reversed when the next period is opened.

FAQs for Manage Common Options for Payables and Procurement

What's the difference between conversion rate gain or loss distributions and realized gain or loss distributions?

Conversion rate gain or loss distributions record the rate variances for inventory or expense items that accrue on receipt. The invoice validation process calculates the variance between the invoice and either the purchase order or receipt, depending on how the invoice was matched.

Realized gain or loss distributions record the rate variances between invoice entry and payment time. The gain or loss calculation is based on the Account for Payment option on the Manage Payment Options page, as well as at prepayment application. You can account at payment issue, clearing, or at both issue and clearing. If you account at payment issue, bills payable documents are accounted at maturity.

Realized gain or loss is always calculated at foreign currency prepayment application time, regardless of the Account for Payment setting.

Manage Invoice Options

Invoice options are settings and default values that control how invoices are processed for an invoice business unit. You set invoice options on the Manage Invoice Options page.

Invoice Entry and Matching Options

The following table describes the invoice entry options. You can also set some of these options on a supplier. The invoice options are used unless the supplier has a different default value.

Option On Supplier Setup? Description

Require invoice grouping

No

Requires you to enter the name of a group when creating an invoice.

Allow document category override

No

Allows override of the invoice document category if the Sequencing By ledger option is set to Ledger or Legal entity.

Caution: If the ledger option is set to No Sequencing:
  • A document category isn't assigned to the invoice.

  • You can't set this option or enter a document category on the invoice.

Allow adjustments to paid invoices

No

Lets you cancel or add lines to paid invoices. In addition,you can undo a match to a purchase order that's not finally matched and match the invoice to a different purchase order.

Caution: You can't modify distributions because accounting would be affected.

Allow remit-to supplier override for third-party payments

No

Allows override of the remit-to supplier name and address on invoice installments for suppliers with third-party relationships.

Recalculate invoice installments

No

Recalculates Installments during the invoice validation process.

Hold unmatched invoices

Yes

Applies a Matching Required hold to invoices that aren't matched to purchase orders or receipts.

Note: You can set this option on a supplier to: Yes, No, Default from Payables Options.

Prevent deletion of invoice attachments

No

Attachments won't be allowed to be deleted once the invoice is approved if approval is enabled or when the invoice is validated.

Receipt acceptance days

No

Specifies the number of days to add to the goods received date when recalculating installments.

Invoice currency

Yes

Provides the default invoice currency.

Payment currency

Yes

Provides the default payment currency.

Pay group

Yes

Provides the default group used when paying invoices.

Payment priority

Yes

Provides the default priority for paying invoices.

Payment terms

Yes

Provides the default payment terms.

Terms date basis

Yes

Provides the default basis for determining the terms date.

Pay date basis

Yes

Provides the default basis for determining the pay date.

Accounting date basis

No

Provides the default basis for determining the accounting date.

Budget date basis

No

Provides the default basis for determining the budget date.

The following table describes the options for matching invoices to purchase orders, receipts, and consumption advice documents. You can also set some of these options on a supplier. The invoice options are used unless the supplier has a different default value.

Option On Supplier Setup? Description

Allow final matching

No

Lets you perform a final match when matching to a purchase order, or when adjusting a matched invoice distribution.

Allow matching distribution override

No

Allows override of the invoice distribution that's created from matching an invoice to a purchase order.

Caution: You can't override the distribution for a matched invoice if you accrue at receipt. You also can't override the distribution if the purchase order is projects-related, and the item destination for the purchase order distribution is inventory.

Transfer PO distribution additional information

No

Transfers descriptive flexfield information from the purchase order distribution to the invoice distribution when you match to a purchase order.

Note: If you enable this option, ensure that the flexfield structures for the purchase order distributions and the invoice distributions are the same.

Quantity tolerances

Yes

Provides the default quantity-based tolerance set.

Amount tolerances

Yes

Provides the default amount-based tolerance set

Discounts

The following table describes the discount options. You can set some of these options on a supplier to: Yes, No, Default from Payables Options.

Option On Supplier Setup? Description

Exclude tax from calculation

Yes

Subtracts tax from the invoice when calculating the discountable amount for an installment.

Caution: You can't set the discount allocation method option to Tax lines and single distribution.

Exclude freight from calculation

Yes

Subtracts freight from the invoice when calculating the discountable amount for an installment.

Discount allocation method

No

Determines how discounts are allocated across invoice distributions.

Always take discount

Yes

Takes the available discount for a supplier, regardless of when you pay the invoice.

Prepayments

The following table describes the prepayment options.

Option On Supplier Setup? Description

Payment terms

No

Provides the default payment terms for a prepayment.

Settlement days

Yes

Specifies the number of days to add to the system date to calculate the settlement date.

Note: You can't apply a prepayment to an invoice until on, or after, the settlement date.

Use distribution from purchase order

No

Builds the distribution combination for the matched invoice distribution using information from the supplier and purchase order. The prepayment distribution on the supplier provides the natural account segment and the purchase order distribution combination provides the rest of the segment values.

Show available prepayments during invoice entry

No

Displays the available prepayments during invoice entry.

Approvals

You can use the invoice approval workflow to automate the invoice approval process. The workflow determines if an invoice requires approval and if so, routes the invoice to the approvers, who can then approve or reject the invoice.

The following table describes the approval options.

Option Description

Enable invoice approval

Sends invoices through the approval workflow. Invoices can't be paid until they're approved.

Require validation before approval

Sends invoices through the approval workflow after the invoices are checked for completeness by the validation process.

Accounting Preference

Choose your accounting preference for the invoices.

  • Account regardless of approval status: Account the invoices regardless of the approval status.

  • Require accounting before approval: Only invoices that are accounted are sent through the approval process.

  • Require approval before accounting: Only invoices that are approved are accounted.

Allow force approval

Allows managers to override the workflow and manually approve invoices. For example, you might want to force approve if the workflow doesn't complete, or you have the authority to pay without using the workflow.

Interest

This table lists the options you can set for interest on overdue invoices.

Option On Supplier Setup? Description

Create interest invoices

Yes

Calculates interest on overdue invoices and creates interest invoices. You can set this option on a supplier to: Yes, No, Default from Payables Options.

Minimum interest amount

No

The minimum amount of calculated interest that sets the threshold for creating an interest invoice. Interest invoices that don't meet the minimum interest amount aren't created.

Interest allocation method

No

Allocates interest across invoice distributions.

Interest expense distribution

No

Identifies the distribution combination used if allocating interest expense to a single distribution.

Payment Requests

The following table describes the payment request options.

Option Description

Payment terms

Provides the default payment terms.

Pay group

Provides the default pay group used when paying a prepayment.

Payment priority

Provides the default payment priority used when paying a prepayment.

Self-Service Invoices

The following table describes the options you can set for invoices created through Oracle Fusion Supplier Portal.

Option Description

Limit invoice to single purchase order

Limits an invoice to the schedules belonging to a single purchase order.

Allow invoice backdating

Allows a supplier to enter an invoice for a date in the past.

Allow unit price change for quantity-based matches

Allows a supplier to enter a unit price on an invoice that's different from the unit price on the purchase order.

Require attachment

Supplier users can't submit an invoice without an attachment. This applies to both matched and unmatched invoices.

Note: You can use the Create Chart of Accounts, Ledger, Legal Entities, and Business Units in Spreadsheet task to automate your invoice options setup.

During invoice entry, installments are automatically created using payment terms and terms date information. You can configure your setup to recalculate installments during the invoice validation process.

Settings That Affect Installment Recalculation

Select the Recalculate invoice installments option on the Manage Invoice Options page to recalculate the installments.

Note: Installments are recalculated, regardless of how the recalculate option is set, when both of the following conditions occur:
  • You enable the Exclude tax from calculation option on the Manage Invoice Options page.

  • You manually change a tax amount.

How Invoice Installments Are Recalculated

Installment recalculation uses the most recent applicable start date and the more favorable payment terms. To determine which is more favorable, the ranks on the payment terms are compared.

Caution: Installments aren't recalculated if you manually edit or split any of the installments.

The following table shows which start dates and payment terms are used for recalculating installments for matched and unmatched invoices.

Matched to a Purchase Order Start Date Payment Terms

No

Most recent of the following:

  • Invoice date

  • Terms date

  • Goods received date plus number of receipt acceptance days

Invoice payment terms

Yes

Most recent of the following:

  • Invoice date

  • Terms date

  • Goods received date plus number of receipt acceptance days

More favorable of the following:

  • Invoice payment terms

  • Purchase order payment terms

Discounts are taken when invoices are paid. On the Manage Invoice Options page, you can specify how to allocate these discounts. Select any one of the following methods:

  • All invoice lines

  • Tax lines and single distribution

  • Single distribution

All Invoice Lines

This method automatically prorates discounts across all invoice lines. Discounts are assigned to the charge account unless the invoice is matched to a purchase order that's set to accrue on receipt. For those invoices, the discount is assigned to the price variance account.

Note: If you exclude tax from discount calculations, discounts are allocated only to expense lines and not to tax lines.

Tax Lines and Single Distribution

This method prorates a percentage of the discount across tax lines based on the percentage of tax lines on the invoice.

For example, if tax distributions represent 10 percent of the total invoice amount, 10 percent of the discount is prorated across the tax distributions. The remaining 90 percent of the discount is applied to the Discount Taken distribution specified on the Manage Common Options for Payables and Procurement page.

Note: You can't select this method if you exclude tax from discount calculations.

Single Distribution

This method credits the Discount Taken distribution specified on the Manage Common Options for Payables and Procurement page. Select this method if you enable automatic offsets and you want to distribute the discount taken across balancing segments.

If you enable automatic interest calculation for a supplier and pay an overdue invoice, an invoice for the interest is automatically created and paid.

Caution: You must pay the overdue invoice in a payment process request or through a quick payment.

Setup

To set up automatic interest rate calculation:

  • Define interest rates using the Manage Interest Rates task.

  • Set the Create Interest Invoices option using the Manage Suppliers task.

  • Enable the Create interest invoices option using the Manage Invoice Options task.

Note: You can add, change, or delete an interest rate at any time. If a rate isn't defined, the interest calculation uses a zero rate.

Attributes

This table describes some of the attributes of an interest invoice.

Attribute Description

Number

The interest invoice number is the overdue invoice number plus the suffix -INTx, where x is the number of interest invoices for that overdue invoice. For example, if the invoice number is 54362, the invoice number for the third interest invoice is 54362-INT3.

Payment terms

The payment terms on an interest invoice are immediate. If immediate terms aren't defined, the payment terms for the interest invoice are the same as the payment terms for the overdue invoice.

Amount

The interest calculation is based on the rate on the Manage Interest Rates page and is in accordance with the United States Prompt Payment Act. The calculation formula compounds interest monthly, up to a maximum of 365 days interest.

Currency

The invoice currency for an interest invoice is the same as the invoice currency on the overdue invoice. The payment currency for an interest invoice is the same as the payment currency on the overdue invoice.

The Interest Allocation method on the Manage Invoice Options page determines how invoice distributions for interest invoices are created.

Select one of the following settings:

  • Single distribution

  • All invoice lines

Single Distribution

This setting uses the Interest Expense distribution on the Manage Invoice Options page as the invoice distribution for the interest invoice.

All Invoice Lines

This setting uses the natural account segment from the Interest Expense distribution to build the distributions for the interest invoice.

Oracle Fusion Payables can receive requests from internal or external sources to disburse funds to payees that aren't defined as suppliers. Payables records these requests as payment requests.

Internal payment requests can come from Oracle Fusion Receivables and Oracle Fusion Expenses. You can create a payment request from Receivables for a customer refund or from Expenses for an expense report. You can disburse the funds and manage the payment process using the payment management functionality in Payables.

Payment requests from external sources can be imported using the File Based Data Import (FBDI) spreadsheet for making One Time Payments. You can import, update, approve, pay transactions, and get the status update for payments. The payees, parties, and bank accounts are created automatically when the transactions are imported into the application.

Setting Up Payment Requests

The following setups affect the payment request process.

  • Invoice options: Set the default options for payment requests, such as payment terms, pay group, and payment priority.

  • Document sequence category: Comply with document sequencing policies using the predefined Payment Request category or override the document category, if allowed.

  • Common Options for Payables and Procurement: Enter the default Liability and Expense accounts for One Time Payments.

You can use the following setups in Oracle Fusion Payments to manage payment requests separately from other payments:

  • Payment method controls

  • Payment method default rules

  • Payment file and report formats

  • Payment attribute validations

Reporting on Payment Requests

You can track progress of a payment request in the originating application. After a payment request has been approved, you can report on and audit the request in Payables using the following reports:

  • Payables Invoice Aging

  • Payables Invoice Audit by Voucher Number Listing

  • Payables Open Items Revaluation

  • Payables Cash Requirement

Manage Payment Options

On the Manage Payment Options page, set the Payment Accounting option to determine when payment accounting entries are created.

Tip: Carefully consider this setting at implementation time. After you set this option, the only change you can make is from accounting At Payment Issue to accounting At Payment Issue and Clearing.

Select from the following options:

  • At payment issue

  • At payment clearing

  • At payment issue and clearing

At Payment Issue

With this setting, the liability account is debited and the cash account is credited when a payment is created. For a bills payable payment, the credit is to the bills payable account. Then at payment maturity, the bills payable account is debited and the cash account is credited. Realized gain or loss is calculated at payment creation and for a bills payable payment, at payment maturity.

At Payment Clearing

With this setting, the liability account is debited and the cash account is credited when the payment clears. Realized gain or loss is calculated at payment clearing.

At Payment Issue and Clearing

With this setting, accounting entries are created at:

  • Issue time: The liability account is debited and the cash clearing account is credited. For a bills payable payment, the credit is to the bills payable account. Then at payment maturity, the bills payable account is debited and the cash clearing account is credited.

  • Clearing time: The cash clearing account is debited and the cash account is credited.

Note: Realized gain or loss is calculated at all points mentioned.
Note: You can use the Create Chart of Accounts, Ledger, Legal Entities, and Business Units in Spreadsheet task to automate your payment options setup.

FAQS for Manage Payment Options

What's the difference between the currency conversion settings on the common options page and the payment options page?

The currency conversion settings on the Manage Common Options for Payables and Procurement page affect invoice transactions.

The settings on the Manage Payment Options page affect payment transactions.

For business units that process both invoice and payment transactions, the Conversion Rate Type option is the same for both types of transactions. You can set this option on either the Manage Common Options for Payables and Procurement page or the Manage Payment Options page.

Manage Tax Reporting and Withholding Tax Options

Withholding tax options are settings and default values that control how Oracle Fusion Tax processes withholding for a business unit. You can enable your withholding tax options for a specific effective period.

Withholding Tax Options

Set the following withholding tax options on the Manage Tax Reporting and Withholding Tax Options page:

Option Description

Event Class

Apply withholding tax to standard invoices, including credit and debit memos, or prepayment invoices.

Apply Withholding

Apply withholding if the tax authority requires your company to withhold taxes from suppliers.

Process Transaction Taxes

Calculate withholding tax on transaction tax lines.

Allow Manual Withholding

Create and adjust manual withholding tax lines for your invoices.

Regime Determination Set

Select the template that determines the tax regime to use for all transactions belonging to this event class. The options include WHTSTCC and WHTTAXREGIME.

Calculation Point

Specify the time when withholding tax is applied.

The options are Invoice, Payment, or Both. The options available are controlled by the regime determination set.

Tax Invoice Creation Point

Specify the time when a tax authority invoice is generated.

The options are dependent on the value in the Calculation Point field:

  • If the calculation point is Invoice, you can select Blank, Invoice, or Payment as the tax invoice creation point.

  • If the calculation point is Payment, you can select Blank or Payment as the tax invoice creation point.

Include Discount

Determine if a deduction of a discount is applied to the taxable basis when the calculation point is Payment.

Select:

  • No to always exclude the discount amount from the taxable basis.

  • Yes to always include the discount amount in the taxable basis.

  • Blank for the deduction of a discount to be applied based on the taxable basis formula definition.

Rounding Level

Apply rounding to calculated tax amounts once for each withholding tax rate per invoice or to the calculated withholding tax amount on each invoice line.

On the Manage Tax Reporting and Withholding Tax Options page, define the calculation point to specify the time to apply withholding taxes to supplier invoices.

Calculation point is determined at:

  • Invoice

  • Payment

Invoice

Select Invoice for taxes to be automatically withheld at invoice validation. If you select this option, Oracle Fusion Tax calculates withholding only once. If you adjust an invoice after it was validated, you must adjust the withholding tax manually and enable the Allow manual withholding option.

Taxes can be withheld from standard invoices, including credit and debit memos, and prepayment invoices. If you select the calculation point of Invoice for the event class, Prepayment invoices, consider timing the entry of the prepayment application before the invoice is validated.

If you:

  • Apply the prepayment before the invoice is validated, Oracle Fusion Tax creates a withholding tax net of the prepayment amount.

  • Validate the invoice first, Oracle Fusion Tax creates a withholding tax based on the taxable invoice amount. When you apply the prepayment, the withholding tax on the invoice isn't updated. You can manually adjust the withholding tax amount and the withholding invoice.

    As an alternative, you can cancel all of the withholding taxes on the validated invoice before you apply the prepayment. Once you apply the prepayment, withholding taxes are created net of the prepayment amount.

Payment

Select Payment for taxes to be automatically withheld when you create payments in a payment process request or with a Quick payment.

On the Manage Tax Reporting and Withholding Tax Options page, define the tax invoice creation point to specify when to automatically create withholding tax invoices to remit withheld taxes to tax authorities.

Tax invoice creation point is determined at:

  • Blank

  • Invoice

  • Payment

The options available are dependent on the value in the Calculation Point field.

Blank

Select Blank so Oracle Fusion Tax doesn't automatically create withholding tax invoices. You can enable this option for any value you selected as the calculation point.

You must run the withholding tax reports to determine the amounts to remit to your tax authorities, and create the withholding tax invoices.

Invoice

Select Invoice for a withholding invoice to be automatically created when an invoice subject to withholding tax is validated. You can enable this option only if the calculation point is applied at invoice validation time.

Payment

Select Payment for a withholding invoice to be automatically created when an invoice subject to withholding tax is paid. You can enable this option if the calculation point is applied either at invoice validation or at payment.

Use the Include Discount option on the Manage Tax Reporting and Withholding Options page to specify whether to include discount amounts in the calculation of withholding tax when the calculation point is Payment.

Select from the following options:

  • No

  • Yes

  • Blank

No

Select No to exclude the deduction of the discount to the taxable basis for taxes.

For example, assume you have an invoice for 100 USD. The discount amount taken is 5 USD and the automatic withholding tax rate is 10 percent. If the discount amount is excluded, the automatic withholding tax amount is 10 percent of 95 USD or 9.5 USD.

Yes

Select Yes to include the discount to the taxable basis for taxes.

For example, assume you have that same invoice for 100 USD. The discount amount taken is 5 USD and the automatic withholding tax rate is 10 percent. If the discount amount is included, the automatic withholding tax amount is 10 percent of 100 USD or 10 USD.

Note: This setting applies only to payment time withholding. You cannot enable this setting if the Calculation Point option is set to Invoice. At the time of invoice validation the discount amount to be taken is unknown, so withholding tax is calculated on the entire invoice amount.

Blank

Select Blank for the application to apply the deduction of the discount based on the taxable basis formula definition.

Use the Manage Tax Reporting and Withholding Tax Options task to manage the following income tax reporting options for an invoice business unit:

  • Use combined filing program

  • Use supplier tax region

  • Income tax region

  • Include withholding distributions in income tax reports

Use Combined Filing Program

Enable this option if you're using US 1099 Combined Federal and State Filing Program reporting. When you submit the US 1099 Electronic Media Report, K records are produced for all tax regions participating in the program that have qualifying payments.

Tip: If you file tax information with the Internal Revenue Service electronically and don't use the combined filing program, don't enable this option.

Use Supplier Tax Region

This option is used with combined filing. You can enable this option to use the tax region from US 1099 suppliers as the default tax region on invoice distributions. If needed, you can override the tax region on the Manage Distributions page. If you enable this option, you could have as many K records as you have different supplier tax regions.

Income Tax Region

This option is used with combined filing. You can forward US 1099 payment information to one tax region, regardless of the tax regions your US 1099 suppliers do business from. If you enter a value in the Income Tax Region field, you might have only one K record. If needed, you can still override the tax region on an invoice distribution.

Include Withholding Distributions in Income Tax Reports

Enable this option to report on federal income tax withheld for US 1099 suppliers. The withholding tax distributions that are automatically created have an:

  • Income tax type of MISC4 for reporting in box 4 on the 1099-MISC form

  • Income tax region, if combined filing is enabled

Note: If you manually create withholding tax lines, then you must enter the income tax type and income tax region manually.

When you enable this option, the Update 1099 Withholding Tax Distributions process runs. This process updates the income tax type and income tax region on existing withholding tax distributions. The process selects distributions to update as follows.

If the current date is:

  • Before March 1 of the current calendar year, distributions with a payment date of January 1 of the previous calendar year or later are updated.

  • March 1 of the current calendar year or later, distributions with a payment date of January 1 of the current year or later are updated.

In the United States (US), you must report to the Internal Revenue Service certain types of payments that you make to US 1099 reportable suppliers. You can designate suppliers as federally reportable in the supplier setup. When you enter invoices for the supplier, you classify invoice distributions by US 1099 miscellaneous type using the Income Tax Type field. At year end, you can report accumulated US 1099 payment information to the Internal Revenue Service, other tax agencies, and your suppliers, in standard format.

If you're using combined filing, the US 1099 electronic format produces K records and B records. The K records provide information for tax regions or states participating in combined filing that have qualifying payments. The B records are for suppliers with US 1099 payment amounts that equal or exceed the tax region reporting limit in qualifying states.

US 1099 Reporting Overview

The following figure shows the steps for US 1099 reporting from setup to reports.

This graphic displays the US 1099 reporting setup.
  1. Set up Payables for US 1099 reporting: Refer to the following section for details.

  2. Enter US 1099 details for suppliers: On the Income Tax tab on the Supplier page, you can specify federal and state information.

  3. Enter, account, and pay US 1099 invoices: You can specify the income tax type and income tax region on each applicable invoice distribution, or accept the default values from the supplier.

    To automatically create invoice distributions, you can enter a distribution set or match to a purchase order. If you're using a distribution set that doesn't have income tax types, the invoice distribution gets the income tax type from the supplier. If the distribution set has an income tax type that's different from the supplier, the distribution set tax type is used. You can also enter distributions manually.

    You can adjust the Income Tax Type and Income Tax Region on each invoice distribution. You can also clear the Income Tax Type field for distributions that aren't federally reportable. If you enabled the Use supplier tax region tax option, the default region is the state in the supplier site address for the invoice. Alternatively, you can also specify a default income tax region on the Manage Tax Options page. The income tax region is used to group distributions by type and region on US 1099 reports. If you enable combined filing, when you run US 1099 reports, all reportable distributions are grouped by state.

  4. Identify and resolve US 1099 exceptions: Submit the US 1099 Invoice Exceptions and Supplier Exceptions reports. Generate Tax Information Verification Letters for each supplier that hasn't furnished or confirmed the tax identification number or tax reporting region.

  5. Optionally withhold tax from suppliers: You can withhold tax if Tax Identification Numbers (TIN) are invalid or missing and if you haven't met legal requirements of requesting a valid TIN.

  6. Update US 1099 payment information: You can adjust invoice distributions manually on the Manage Distributions page, or you can submit the Update and Report Income Tax Details process.

  7. Generate US 1099 reports:

    • US 1099 Forms: Reports the total US 1099 miscellaneous payments for US 1099 suppliers, and generates US 1099 forms for each tax reporting entity in an organization.

    • US 1096 Form: Summarizes each US 1099 form type that's transmitted on paper, as required by the United States Internal Revenue Service. The report is generated on a preformatted Internal Revenue Service form.

    • US 1099 Electronic Media: Generates summarized US 1099 information in electronic format as required by the United States Internal Revenue Service.

    • US 1099 Payments Report: Lists payments made to US 1099 reportable suppliers.

Payables Setup for US 1099 Reporting

This figure shows the steps for setting up Payables US 1099 reporting.

This graphic displays the Payables steps for US
1099 reporting.
  1. Enable combined filing: To use combined federal and state US 1099 filing, select the Use combined filing program option on the Manage Tax Options page.

    Note: If you file US 1099 tax information electronically and don't participate in the Combined Filing Program, leave the combined filing option disabled.
  2. Enable withholding tax distributions: To automatically create withholding tax distributions, select the Include withholding distributions in income tax reports option on the Manage Tax Options page. The income tax type for these distributions is automatically set to MISC4. If you use combined filing, the income tax region is also provided.

  3. Define income tax regions: If you use combined filing, define the tax regions on the Manage Tax Regions page.

  4. Define reporting entities: Set up reporting entities on the Manage Reporting Entities page. For each reporting entity, you assign one or more balancing segment values. When you submit US 1099 reports for a tax entity, the paid invoice distributions with the balancing segment values in their accounts are added together.