Tax Calculation on Intercompany Transactions

Intercompany transactions occur between two related legal entities in an enterprise or between business units in the same legal entity. Transactions occurring between two legal entities are called intercompany transactions, and transactions occurring between two groups within one legal entity are called intracompany transactions.

It's a legal requirement in some countries to generate Receivables and Payables invoices and credit memos between the transacting entities during intercompany transactions. In certain scenarios taxes are applicable on these transactions. Oracle Fusion Tax interfaces with the intercompany Oracle Fusion Receivables and Oracle Fusion Payables transactions and calculates taxes on them, as applicable.

Intercompany transactions are generated through:

• Oracle Fusion Intercompany: Handles noninventory-linked transactions

• Oracle Fusion Inventory: Handles inventory-linked transactions involving multiple entity processes, such as global procurement and drop shipment

Oracle Fusion Tax supports the calculation of taxes on the Receivables and Payables transactions generated through both inventory and noninventory processes.