How You Set Up Tax Regime

A tax regime associates a common set of default information, regulations, fiscal classifications, and optionally, registrations, to one or more taxes. Set up tax regimes in each country and geographical region where you do business and where a separate tax applies.

The tax regime setup details include:

• Designating the geography to which taxes within a tax regime apply

• Defining the controls and defaults that apply to taxes and associated lower level information

• Specifying configuration options and service subscriptions

Designating the Geography

The common tax regime setup is one tax regime per country per tax type. However, you can also have tax regimes based on parts of a country or more than one country. Select the regime level as:

• Country: The tax regime is applicable to a specific country.

• Tax zone: The tax regime is applicable to parts of a country or multiple countries. Enter the tax geography type and tax geography name associated with the group of countries or the tax zone that you want. The tax geography type and tax geography name correspond to the tax zone type and tax zone respectively.

If applicable, designate the tax regime as a parent regime or indicate the parent regime name if the tax regime belongs to a parent regime. Use a tax regime defined as a parent tax regime to group other nonparent tax regimes for reporting purposes.

Defining Controls and Defaults

Set tax-level controls to enable the options that you want to make available to the taxes in this tax regime. If necessary, you can disable the options that you enable here for individual taxes within the tax regime. Enter default values for the taxes in this tax regime. You can update the default values at the tax level. If you disable a controlled option at the tax regime level it is not available as an option at the tax level.

The following table describes the defaults and controls available at the tax regime level.

Defaults Region

Field	Description	Default Derived from	Default Appears on	Controls
Tax Currency	The default currency of the taxes within this tax regime	None	Tax	None
Minimal Accountable Unit	The minimal unit of currency that is reported to the tax authority, for example, 0.05 GBP indicates that 5 pence is the minimal unit	None	Tax	None
Tax Precision	A one digit whole number to indicate the decimal place for tax rounding	None	Tax	None
Tax Inclusion Method	A method that describes whether the line amount includes tax or excludes tax	None	Tax	None
Conversion Rate Type	The specific conversion rate table that is used to convert one currency into another. For example, the Association of British Travel Agents conversion rate used in the travel industry	None	Tax	None
Rounding Rule	The rule that defines how rounding is performed on a value. For example, up to the next highest value, down to the next lower value, or to the nearest value	None	Tax	None
Allow tax rounding override	Allow the override of the rounding defined on the tax registration records	None	Tax	None
Reporting Tax Authority	The default tax authority to whom the tax reports are sent	None	Tax Tax registration	None
Collecting Tax Authority	The default tax authority to whom the tax is remitted	None	Tax Tax registration	None
Rounding Conversion Option	The default rounding conversion option to use for taxes in the tax regime. Select one of the following default options: Blank Functional Currency Transaction Tax Both	None	None	Controls if unrounded amounts in the entered currency is used for tax conversion calculation to the ledger currency or if internal transaction amount field (TAX_AMT_TAX_CURR) stores the tax amount in the ledger currency.
Use legal registration number	Option that controls whether the tax registration number is the same as the legal registration number of the party	None	Tax	None

General Controls Region

Field	Description	Default Derived from	Default Appears on	Controls
Allow override and entry of inclusive tax lines	Option that controls whether you can override and enter inclusive or exclusive line amounts	None	Tax	None
Use tax reporting configuration	Option that controls whether the tax reporting details are available on the first-party tax registration record for this tax regime	None	None	Controls whether you can enter tax reporting configuration details on the tax registration for this tax regime for your first parties

Compounding Level Controls Region

Field	Description	Default Derived from	Default Appears on	Controls
Allow cross regime compounding	Option that controls whether cross regime compounding is needed for this tax regime	None	None	Controls whether this tax regime is compounded based on the tax calculated from another tax regime
Compounding Precedence	Defines the order in which taxes within the compound tax regimes need to be calculated. A tax within a tax regime with a lower value is calculated first.	None	None	Controls the order in which taxes within tax regimes are calculated

Note: Oracle Fusion Tax provides features at the tax regime level to streamline your implementation by selecting the features that are applicable to the tax regime in scope. You must enable the features to use that functionality for the tax regime and related taxes.

Specifying Configuration Options and Service Subscriptions

Set up configuration options to associate tax regimes with the parties in your company that have a tax requirement under these tax regimes. You can set up tax configuration options when you create a tax regime or when you create a party tax profile for a first-party legal entity or business unit. Both tax regime and party tax profile setup flows appear and maintain the same party and tax regime association. Configuration options only apply to tax regimes directly linked to taxes and not to tax regimes that are used to group other tax regimes.

A service subscription is used to reference a specific transaction tax offering or offerings provided by an external tax partner. The transaction tax offering provided by an external tax partner can be related to content, calculation services, or both. Oracle Fusion Tax supports the use of transaction tax offerings provided by external tax partners for transaction tax calculation processing. Depending on the specific depth and scope of an individual tax partner's offerings, you can use either Oracle Fusion Tax or a Partner Tax application to perform the transaction tax calculation.