Example of Tax Treatment on Receivables Adjustments

Your Receivables activity on the adjustment determines if your adjustment is stored in the Oracle Fusion Tax repository. Adjustments you create using the Receivables activity with the Recoverable option not selected are only stored in Oracle Fusion Receivables.

The concept behind nonrecoverable adjustments is that even though you adjust tax, you still pay the calculated tax on your invoice to the tax authority. If you select the Recoverable option for your Receivables activity, adjustments are also recorded in the Oracle Fusion Tax repository, which is the foundation for tax reporting.

Only invoice adjustments, line adjustments, and tax adjustments are stored in the Oracle Fusion Tax repository depending upon the Receivables activity you entered on your adjustments.

The tax calculation for tax adjustments is similar to header level tax only Applied credit memos. The adjusted tax amount is proportionately adjusted to each tax line of the transaction.

Scenario

For example, you have a transaction with two transaction lines each having two calculated taxes:

• Transaction Line 1: 1000 CAD

  • Tax A: 100 CAD

  • Tax B: 50 CAD

• Transaction Line 2: 2000 CAD

  • Tax A: 0 CAD

  • Tax B: 100 CAD

When you create a tax adjustment of -125 CAD, the taxes are adjusted as follows:

• Transaction Line 1:

  • Tax A: -50 CAD

  • Tax B: -25 CAD

• Transaction Line 2:

  • Tax A: 0 CAD

  • Tax B: -50 CAD

In this case, the adjustment transaction stored in Oracle Fusion Tax has line amounts as zero and taxes as shown in the example.

Line adjustments adjust transaction line amounts only. Tax amounts aren't adjusted. The adjusted invoice lines amounts are stored as an adjustment transaction in Oracle Fusion Tax.

You can also create an invoice adjustment. It adjusts the entire invoice by making the balance due of zero. The adjusted amounts of the invoice lines and corresponding tax lines are stored as an adjustment transaction in Oracle Fusion Tax.