Example of Setting Up Tax Box Allocation Rules

Many European countries commonly record domestic purchase or sales transactions with a particular tax rate. They then report the transaction taxable and tax amounts to the tax authorities. They use a specific tax box according to the tax rate that applies to the transaction.

This example illustrates how to configure tax box allocation rules and allocate tax box numbers to domestic purchase transactions.

This table summarizes key decisions for this example:

Decisions to Consider	In this example
Tax reporting codes	These factors determine the transactions that are reported: Country where you register your business for tax purposes Country of the suppliers with whom you do business Transaction type you want to report Tax rate applicable on the transactions
Tax condition set	These values must be assigned to the tax determining factors: Goods are shipped from and shipped to Italy Standard VAT rate applies to the goods Transaction is a purchase transaction
Tax box allocation rules	Define a rule that assigns tax box number 11 when these conditions mentioned are met.

In this example, your company is registered in Italy for tax purposes, and does business with Italian suppliers. You must report the recoverable taxable amount for purchase transactions from Italian suppliers that are taxed on the standard VAT rate. The tax authority requires that you report these amounts using tax box number 11.

Define Tax Reporting Codes

Use the Create Tax Reporting Type page to define tax boxes. Use these tax boxes to report the tax and taxable amounts of all eligible transactions to the tax authorities.

Perform these steps to create a tax reporting type:

1. Go to the Manage Tax Reporting Types page.

2. Click the Create icon.

3. Enter the tax reporting type code and name.

4. In the Tax Reporting Type Purpose field, select Tax box allocation.

5. In the Tax Reporting Codes section, click the Add Row icon and then enter these values:

   Tax Reporting Codes	Description	Amount Sign	Box Type	Effective Start Date
   11	Provide a description for the tax reporting code.	Plus	Recoverable taxable amount box	1/1/70

Define a Tax Determining Factor Set

Various Determining Factor Classes, such as Derived, Registration, and Geography, are used to define the tax determining factor sets.

Here's what you do to define a tax determining factor set:

1. Go to the Manage Tax Determining Factor Sets page.

2. Click the Create icon.

3. Enter the tax determining factor set code and name.

4. In the Set Usage field, select Tax box allocation rule.

5. Enter these values in the Associate Tax Determining Factors table:

   Determining Factor Class	Tax Class Qualifier	Determining Factor
   Derived		Tax Rate Name
   Geography	Ship from	Country
   Geography	Ship to	Country
   Registration	Bill-from party	Registration Status
   Transaction generic classification	Level 1	Transaction Business Category

Define a Tax Condition Set

Tax condition sets help you map the Tax Determining Factor Set using specific values.

In this example, you provide specific values that are associated with the determining factors defined in the previous step.

Perform these steps to define a tax condition set:

1. Go to the Manage Tax Condition Sets page.

2. Click the Create icon.

3. Enter the tax condition set code and name.

4. In the Tax Determining Factor Set Code field, select the tax determining factor set you defined earlier.

5. Enter these values in the Tax Condition Set Details table:

   Tax Determining Factor Class	Tax Class Qualifier	Tax Determining Factor Name	Operator	Value or From Range
   Transaction generic classification	Level 1	Transaction Business Category	Equal to	PURCHASE_TRANSACTION
   Registration	Bill-from party	Registration Status	Equal to	REGISTERED
   Geography	Ship to	Country	Equal to	Italy
   Geography	Ship from	Country	Equal to	Italy
   Derived		Tax Rate Name	Equal to	IT VAT STANDARD RATE

Define Tax Box Allocation Rules

Finally, you can define the tax box allocation rules. Use the tax reporting type and tax determining factor set you defined in the earlier steps.

Here's what you do to define tax box allocation rules:

1. Go to the Manage Tax Box Allocation Rule page.

2. Click the Create icon.

3. Enter these values in the Rule Details section on the Tax Determining Factors page:

   Field	Value	Notes
   Configuration Owner	Global configuration owner	Decide whether you want to define rules globally or for a specific legal entity.
   Tax Regime Code	IT VAT
   Tax	IT VAT
   Rule Code	TBA Domestic purchase rate
   Report Periodicity	Periodic allocation
   Rule Name	TBA Domestic purchase transaction
   Start Date	1/1/70
   Tax Reporting Type		Select the name of the tax reporting type that you gave while defining tax reporting type.

4. In the Tax Determining Factor Set section, select the tax determining factor set that you defined in the previous step as the Code.

   You can see the tax determining factor set details that you provided earlier in the Tax Determining Factor Set Details table.

5. Click Next.

   Use the Tax Condition Set page to associate the Tax Condition Set created in the previous step with the tax box allocation rule.

6. Select the Tax Condition Set Code that you specified while defining the tax determining factor set in the previous step.

7. Enter the New Condition Set Order as 1.

8. Click the Selected Results button.

   Select the tax boxes you defined while creating the tax reporting type. This action associates these tax boxes to the tax box allocation rule.

9. Select the Enabled check box.

10. Click Save and Next.

    Use the Rule Status and Order page to set the order of the tax box allocation rules.

11. Select the Enabled check box for the rules you want to apply.

    You can also enter new rule order for the tax box allocation rules you see, or leave the order unchanged.

12. Click Submit.

    Run the Tax Box Allocation process. It applies the tax box allocation rule to the invoice and assigns tax box number 11 to the invoice. You can review this using the Tax Allocation Listing Report.