Example of Setting Up Tax Box Allocation Rules
Many European countries commonly record domestic purchase or sales transactions with a particular tax rate. They then report the transaction taxable and tax amounts to the tax authorities. They use a specific tax box according to the tax rate that applies to the transaction.
This example illustrates how to configure tax box allocation rules and allocate tax box numbers to domestic purchase transactions.
This table summarizes key decisions for this example:
Decisions to Consider |
In this example |
---|---|
Tax reporting codes |
These factors determine the transactions that are reported:
|
Tax condition set |
These values must be assigned to the tax determining factors:
|
Tax box allocation rules |
Define a rule that assigns tax box number 11 when these conditions mentioned are met. |
In this example, your company is registered in Italy for tax purposes, and does business with Italian suppliers. You must report the recoverable taxable amount for purchase transactions from Italian suppliers that are taxed on the standard VAT rate. The tax authority requires that you report these amounts using tax box number 11.
Define Tax Reporting Codes
Use the Create Tax Reporting Type page to define tax boxes. Use these tax boxes to report the tax and taxable amounts of all eligible transactions to the tax authorities.
Perform these steps to create a tax reporting type:
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Go to the Manage Tax Reporting Types page.
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Click the Create icon.
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Enter the tax reporting type code and name.
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In the Tax Reporting Type Purpose field, select Tax box allocation.
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In the Tax Reporting Codes section, click the Add Row icon and then enter these values:
Tax Reporting Codes
Description
Amount Sign
Box Type
Effective Start Date
11
Provide a description for the tax reporting code.
Plus
Recoverable taxable amount box
1/1/70
Define a Tax Determining Factor Set
Various Determining Factor Classes, such as Derived, Registration, and Geography, are used to define the tax determining factor sets.
Here's what you do to define a tax determining factor set:
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Go to the Manage Tax Determining Factor Sets page.
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Click the Create icon.
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Enter the tax determining factor set code and name.
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In the Set Usage field, select Tax box allocation rule.
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Enter these values in the Associate Tax Determining Factors table:
Determining Factor Class
Tax Class Qualifier
Determining Factor
Derived
Tax Rate Name
Geography
Ship from
Country
Geography
Ship to
Country
Registration
Bill-from party
Registration Status
Transaction generic classification
Level 1
Transaction Business Category
Define a Tax Condition Set
Tax condition sets help you map the Tax Determining Factor Set using specific values.
In this example, you provide specific values that are associated with the determining factors defined in the previous step.
Perform these steps to define a tax condition set:
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Go to the Manage Tax Condition Sets page.
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Click the Create icon.
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Enter the tax condition set code and name.
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In the Tax Determining Factor Set Code field, select the tax determining factor set you defined earlier.
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Enter these values in the Tax Condition Set Details table:
Tax Determining Factor Class
Tax Class Qualifier
Tax Determining Factor Name
Operator
Value or From Range
Transaction generic classification
Level 1
Transaction Business Category
Equal to
PURCHASE_TRANSACTION
Registration
Bill-from party
Registration Status
Equal to
REGISTERED
Geography
Ship to
Country
Equal to
Italy
Geography
Ship from
Country
Equal to
Italy
Derived
Tax Rate Name
Equal to
IT VAT STANDARD RATE
Define Tax Box Allocation Rules
Finally, you can define the tax box allocation rules. Use the tax reporting type and tax determining factor set you defined in the earlier steps.
Here's what you do to define tax box allocation rules:
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Go to the Manage Tax Box Allocation Rule page.
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Click the Create icon.
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Enter these values in the Rule Details section on the Tax Determining Factors page:
Field
Value
Notes
Configuration Owner
Global configuration owner
Decide whether you want to define rules globally or for a specific legal entity.
Tax Regime Code
IT VAT
Tax
IT VAT
Rule Code
TBA Domestic purchase rate
Report Periodicity
Periodic allocation
Rule Name
TBA Domestic purchase transaction
Start Date
1/1/70
Tax Reporting Type
Select the name of the tax reporting type that you gave while defining tax reporting type.
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In the Tax Determining Factor Set section, select the tax determining factor set that you defined in the previous step as the Code.
You can see the tax determining factor set details that you provided earlier in the Tax Determining Factor Set Details table.
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Click Next.
Use the Tax Condition Set page to associate the Tax Condition Set created in the previous step with the tax box allocation rule.
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Select the Tax Condition Set Code that you specified while defining the tax determining factor set in the previous step.
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Enter the New Condition Set Order as 1.
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Click the Selected Results button.
Select the tax boxes you defined while creating the tax reporting type. This action associates these tax boxes to the tax box allocation rule.
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Select the Enabled check box.
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Click Save and Next.
Use the Rule Status and Order page to set the order of the tax box allocation rules.
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Select the Enabled check box for the rules you want to apply.
You can also enter new rule order for the tax box allocation rules you see, or leave the order unchanged.
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Click Submit.
Run the Tax Box Allocation process. It applies the tax box allocation rule to the invoice and assigns tax box number 11 to the invoice. You can review this using the Tax Allocation Listing Report.