Example of Using Intended Use Fiscal Classifications

In value-added tax (VAT) regimes, the usage of the purchased product drives most recoverability.

This scenario illustrates how you can model the usage of the purchased product using intended use fiscal classifications. Consider that the Oracle Fusion Inventory functionality is available and therefore, use it to define the intended use fiscal classification codes.

Scenario

In the United Kingdom the VAT received from purchase of goods associated with VAT exempt sales can't be recovered that is, the recovery rate is zero percent (0%).

To calculate recoverability:

1. Configure Oracle Fusion Inventory catalog.

2. Create a catalog with a name of INTENDED USE for the intended use fiscal classification.

3. Create class categories such as, Linked to Exempt Sales. You can use the catalog for other classifications like business entertainment and company cars. Link all items that are associated with exempt sales to the class category as follows:

   Code	Name
   EXEMPT SALES	Linked to Exempt Sales
   BUS ENTERTAINMENT	Business Entertainment
   COMPANY CARS	Company Cars

   Tip: While using the intended use fiscal classification, classify the nonstandard items of your business as standard items. You can model this as a default tax rule which 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 rules are applicable and the default rate applies.

4. Create an Inventory-based intended use fiscal classification and link it to the catalog using the code INTENDED USE.

5. Create the determining factor set and condition set that refer to the intended use fiscal classification.

6. Create a tax recovery rule based on the determining factor set and the condition set with zero recovery rate as the result.