Example of Transaction Fiscal Classifications

A transaction fiscal classification groups multiple transaction business categories into a single transaction fiscal classification that is used with tax rules. This helps in triggering all the applicable transaction business categories with relevant tax rules.

The following scenario illustrates how you can use transaction fiscal classifications for tax determination and reporting in Brazil.

Scenario

In Brazil, you need to identify a transaction correctly to be able to report and determine the correct applicable taxes. Create specific transaction business categories as children of the sales transaction. The transaction business categories include:

Level	Fiscal Classification Code	Fiscal Classification Name	Country	Start Date
1	SALES_TRANSACTION	Sales Transaction	Not applicable	1-Jan-1951
2	INTERSTATE MNFTRD FOR SALE	Interstate Manufactured for Sale	Brazil	The earliest transaction date or start date of tax.
2	INTERSTATE MNFTRD FOR MANUFACTURE	Interstate Manufactured for Manufacture	Brazil	The earliest transaction date or start date of tax.

Tip: Specify the country name while creating transaction business categories. This ensures that a limited applicable list is presented while entering the transaction fiscal classification during transaction or tax rule creation.

Tip: In this classification and many other tax classifications, classify the nonstandard items of your business as standard items. This can be modeled as a default tax rule and therefore, doesn't require an explicit classification or an explicit rule. Classify only exception items and define specific tax rules for them. For a standard item, none of the explicit tax rules apply except the default rate.

The tax rules that apply to sales transactions also apply to purchase transactions. In this case, you need equivalent set rules to represent the purchase side of the same transaction type. Therefore, create the following additional transaction business categories:

Level	Fiscal Classification Code	Fiscal Classification Name	Country	Start Date
1	PURCHASE_TRANSACTION	Purchase Transaction		1-Jan-1951
2	INTERSTATE MNFTRD FOR SALE	Interstate Manufactured for Sale	Brazil	The earliest transaction date or start date of tax.
2	INTERSTATE MNFTRD FOR MANUFACTURE	Interstate Manufactured for Manufacture	Brazil	The earliest transaction date or start date of tax.

In the given scenario, instead of creating separate tax rules for sales and purchase transactions, create a single transaction fiscal classification and link it to both the applicable sales and purchase transactions.

Create the following specific transaction fiscal classification with the relevant tax regime and transaction business category associations. In addition, create appropriate tax rules against this transaction fiscal classification.

Level	Transaction Fiscal Classification Code	Fiscal Classification Name	Start Date
1	BRAZIL MNFTRD (O2C and P2P) FOR SALE	Brazil Manufacture	1-Jan-1951

At transaction time, the tax determination process derives this transaction fiscal classification whenever you use related transaction business categories on the transaction.