Considerations for Setting Up Rounding Rules

Criteria for rounding the calculated tax amounts comes from various parties involved in a transaction.

For example, for a purchase transaction, the rounding methodology is generally specified by the supplier. Specify rounding details in your tax setup to ensure that your entered invoice amount, including the calculated tax, is the same as the actual invoice amount. For a Receivables invoice, you can specify rounding details based on your organization's policy, but for most countries the rounding criterion is directed by tax legislation.

Rounding requirements can originate from:

• Third parties

• First parties

• Tax legislation

Rounding Requirements from Third Parties

If rounding is based on third-party requirements, particularly for purchase transactions, you:

• Define the configuration owner tax options for the combination of business unit or legal entity for which the transaction is registered, and the event class. In the Rounding Precedence field, enter the reference of the third party or third party. For purchase transactions, it is either the ship-from party or the bill-from party.

• Define the party tax profile for the third party, and specify the rounding level and rounding rule on the General tab as preferred by the third party.

• Create registration details for each tax, and specify the rounding rule if the rounding level is at the line level in the party tax profile. Also, define tax registration rules for each tax so that the tax determination process uses the third-party registration.

• Select the Allow tax rounding override option on the Create or Edit Tax page if a registration record isn't defined for the tax registration party. The application then looks at the party account site details and party tax profile details for deriving the rounding rule.

Rounding Requirements from First Parties

If rounding is based on business unit or legal entity requirements, particularly for sale transactions, and configuration owner tax options are defined, you:

• Define the configuration owner tax options for the combination of business unit or legal entity for which the transaction is registered, and the event class. In the Rounding Precedence field, enter the reference of the first party. For sale transactions it is either the ship-from party or the bill-from party.

• Ensure that the party tax profile details are available for the corresponding legal reporting unit. Specify the rounding level and rounding rule on the General tab per the first-party requirement or your business policy.

• Create registration details for each tax, and specify the rounding rule if the rounding level is at the line level in the party tax profile. Also, define tax registration rules for each tax so that the tax determination process uses the first-party registration.

• Select the Allow tax rounding override option on the Create or Edit Tax page if a registration record isn't defined for the tax registration party. The application then looks at the party tax profile details for deriving the rounding rule.

The rounding criteria applied if configuration owner tax options aren't defined and the criteria in the predefined event class options are considered include:

• For a purchase transaction, the predefined event class options use the ship-from party site and ship-from party within the rounding precedence with the default rounding level as the header level. The supplier's rounding preferences are considered first on the transaction. If there are no specific supplier preferences, for example, the party tax profile record doesn't exist, then the default rounding level of Header is considered and the corresponding rounding rule from each tax setup detail is used.

• For a sale transaction, the predefined event class options don't include any rounding precedence details. However, the default rounding level is set to Line so the rounding level is always taken as Line and the corresponding registration record for the tax registration party is considered for the rounding rule. The tax registration party is identified through the Determine Tax Registration tax rule or tax rule defaults. If a registration record doesn't exist for the tax registration party, the rounding rule defined within each tax is considered.

Rounding Requirements from Tax Legislation

If rounding is based on tax legislation, the following occurs:

• When the configuration owner tax options are defined for the combination of business unit and legal entity for which the transaction is registered, and for the event class, the default rounding level is used from the configuration owner tax options. Select Blank as the rounding precedence for the event class.

• When the rounding level is at the line level for the configuration tax options, ensure that the registration record defined for the tax registration party has the rounding rule based on the tax requirements. The tax registration party is identified through the Determine Tax Registration tax rule or tax rule defaults.