Example of Using Tax Simulator to Analyze Tax Not Calculating as Expected

Use the Tax Simulator to create a simulated transaction and analyze the tax calculations of your transaction before you enable your setup for live data or to troubleshoot existing tax setup.

Use the header level details in the Tax Simulator to troubleshoot issues where tax is not calculated as expected.

The following scenario illustrates when you can use the Tax Simulator to evaluate a Payables invoice where you expect tax to be calculated but it isn't calculated.

Scenario

If a transaction in the subledger work area isn't calculating tax, you can simulate the transaction in the Tax Simulator.

Note: The transaction date in the Tax Simulator is updated to the system date, so modify the transaction date to the expected date of tax calculation.

The following attributes help you identify the issue:

• Document Date: Ensure that the:

  • Document date is correct.

  • Regime to rate setup and applicable tax rules are effective on the tax calculation date.

• Configuration Owner: Determine if the:

  • Configuration owner is the legal entity or the business unit.

  • Configuration owner has a subscription definition to the tax regime when you're expecting tax to calculate.

  • Subscription is effective on the document date.

• Document Event Class and Source: Determine if the source is accurately reflected. The source identifies if the tax options are derived from the:

  • Predefined event class

  • Configuration owner tax options that are defined

    If they're derived from the configuration owner tax options, you can:

    • Query the configuration owner tax option definition by the configuration owner and document event class.

    • View the options based on transaction date effectivity.

    Other attributes and options, such as Allow Tax Applicability, Tax Regime Determination, and Enforce tax from reference document are included in configuration owner tax options.

    Issues with tax calculation may occur if the regime determination isn't defined properly. Select either the standard tax classification code or the TAXREGIME determination, but not both. If the transaction is between different countries, verify the precedence of regime determination points to the expected country of taxation.

• Allow Tax Applicability: Ensure that this option is set to Yes to calculate tax. This is the value defined on the source value in the Document Event Class and Source attribute. There is another Allow Tax Applicability attribute in this region that checks the value from the applicable party.

• Regime Determination Set: Ensure this attribute is set accurately to indicate if tax calculation is determined by the standard tax classification code or by the predefined TAXREGIME regime determination set.

• Default Rounding Level: This doesn't impact tax calculation but identifies the rounding derivation.

• Third-party location: Determine if the third-party locations are accurately reflected. These attributes help identify locations on the transaction that may influence regime determination and tax calculation based on location. There may be other locations set at a line level that may impact tax calculation as well.

• Allow Tax Applicability: Ensure that this option is set to Yes to calculate tax. This option is derived from supplier, supplier site, third party, and third-party site tax profile depending on the event class. Tax applicability must be set to Yes for all relevant party tax profiles in order to calculate tax. If tax applicability is set to No for either attribute then tax is not processed.

• Evaluate Taxes: Verify the status of the tax you are expecting to calculate. You can select which types of taxes to evaluate for applicability: taxes Enabled for transactions, Enabled for simulation, or Enabled for transactions and simulation. This helps identify what status of taxes is evaluated for calculating tax.