Example of Using Product Category Fiscal Classifications

Many tax regimes use product classification to control tax applicability as well as the rate to be applied.

This scenario illustrates how tax is determined and reported for newspapers, books, and periodicals in Luxemburg without configuring Oracle Fusion Inventory.

Scenario

In Luxemburg, transactions involving newspapers, books, and periodicals are invoiced with VAT at a reduced rating, currently 3 percent.

To model this specific requirement, use the product category fiscal classification and follow these steps:

1. Configure product category fiscal classification based on the following table:

   Level	Code	Name	Country	Start Date
   1	LUG01	Goods	Luxemburg	1-Jan-1970
   2	LUG0100	Normal Rated Goods	Luxemburg	1-Jan-1970
   2	LUG0101	Zero Rated Goods	Luxemburg	1-Jan-1970
   2	LUG0102	Exempt Goods	Luxemburg	1-Jan-1970
   2	LUG0103	Reduced Rate Goods	Luxemburg	1-Jan-1970
   3	LUG0103-01	Reduced Rate 1 Goods	Luxemburg	1-Jan-1970
   3	LUG0103-02	Reduced Rate 2 Goods	Luxemburg	1-Jan-1970
   3	LUG0103-03	Reduced Rate 3 Goods	Luxemburg	1-Jan-1970
   1	LUS01	Services	Luxemburg	1-Jan-1970
   2	LUS0100	Normal Rated Services	Luxemburg	1-Jan-1970
   2	LUS0101	Zero Rated Services	Luxemburg	1-Jan-1970
   2	LUS0102	Exempt Services	Luxemburg	1-Jan-1970
   2	LUS0103	Reduced Rate Services	Luxemburg	1-Jan-1970
   3	LUS0103-01	Reduced Rate 1 Services	Luxemburg	1-Jan-1970
   3	LUS0103-02	Reduced Rate 2 Services	Luxemburg	1-Jan-1970
   3	LUS0103-03	Reduced Rate 3 Services	Luxemburg	1-Jan-1970

   Tip:

   While using the product category fiscal classification, only classify the nonstandard items of your business. Handle standard items by using default tax rules. Thus, for a standard item, none of the explicit tax rules are applicable and the default rate applies.

   The standard items are included in the table only for completeness. Modeling these standard items using default tax rules may be sufficient.

   Tip:

   Don't add the explicit percentage to the naming or coding convention used for product category fiscal classification. When the rate changes, you change the rate period on the specific rate and you don't have to change classifications or associated tax rules.

2. Create the determining factor set which refers to this product category fiscal classification.

   Use Product noninventory linked as the determining factor class, the level to be defined in the rule as the class qualifier, and the product category as the determining factor as shown in the following table:

   Determining Factor Class	Class Qualifier	Determining Factor Name
   Product noninventory linked	Level 3	Product Category

3. Create the condition set that refers to this product category fiscal classification as shown in the following table:

   Determining Factor Class	Class Qualifier	Determining Factor Name	Value
   Product noninventory linked	Level 3	Product Category	Reduced Rate 1 Goods

4. Create the tax status rule based on the determining factor set and condition set with zero tax rate status as the result as shown in the following table:

   Determining Factor Class	Class Qualifier	Determining Factor Name	Value	Result
   Product noninventory linked	Level 3	Product Category	Reduced Rate 1 Goods	LU Reduced Rate 1 Status