Example of User-Defined Fiscal Classifications

Use the user-defined fiscal classifications when you need additional or more appropriate classifications to classify transactions for tax determination and reporting.

This scenario illustrates how you can use user-defined fiscal classification to identify if a customer is a foreign diplomat and therefore, exempt from value-added tax (VAT).

Scenario

To model this scenario, create a user-defined fiscal classification that is added to a transaction line only when the customer is a foreign diplomat and VAT is exempted.

In practice, it's likely that most businesses monitor such transactions and therefore, specifically create a zero (0%) rate within the exempt tax status to allow monitoring of such situations. By reporting this specific 0% rate, all applicable transaction can be identified.

Create the following user-defined fiscal classification:

Fiscal Classification Code	Fiscal Classification Name	Country	Start Date
FOREIGN DIPLOMAT EXEMPTION	Foreign Diplomat Exemption	United Kingdom	The earliest transaction date or start date of tax.

Set up the following determining factor for the tax rule that defines the condition where the sales transaction is zero percent (0%) rated using the special exempt rate, tax status, and tax rate rule:

Determining Factor Class	Class Qualifier	Determining Factor	Operator	Value
Transaction Input Factor	-	User-Defined Fiscal Classification	Equal to	FOREIGN DIPLOMAT EXEMPTION

The tax rule, to apply a zero tax rate to a transaction, is applicable only when the user-defined fiscal classification is associated with the transaction line.

Tip: Specify the country name while creating the user-defined fiscal classification. This ensures that only a limited applicable list is presented during transaction or tax rule creation.