Period Based Threshold Computations
A period based threshold has a minimum or maximum tax amount that are applied for a definite period as stipulated by the tax authority. In Brazil, the threshold amounts are applicable during withholding tax calculation.
Thresholds can apply at different levels: Some withholding taxes such as PIS, COFINS, and CSLL have a minimum taxable base amount. Other withholding taxes have minimum or maximum withholding amounts that you must compare with the final calculated withholding amount. For example, INSS_PF withholding tax applies to services provided by a person to a company. The maximum INSS_PF tax amount to withhold for a month is 406.09 BRL.
Oracle ERP Cloud provides support for thresholds and schedule-based tax calculation for withholding taxes. Tax authorities define thresholds at individual tax levels that are supported in Oracle ERP Cloud. You can define thresholds based on period or document level, taxable amount, and tax amount level. You can configure them on the Manage Taxes page and the Manage Jurisdictions page.
To configure Thresholds, follow these steps:
- Sign in as a Tax Manager.
- Click Navigator, Setup and Maintenance.
- Search for Manage Taxes.
- Search for INSS_PF Tax.
- Configure Thresholds in the Threshold Controls tab of INSS_PF Tax.
- Enter these values:
| Attributes | Value | Comments |
|---|---|---|
| Threshold Buckets Level | All | Threshold applicability set to accommodate tax withheld by all the customers of the supplier in the month. |
| Threshold Basis | Period | Period based threshold is required for this example. |
| Withholding Tax Calendar | User Defined Calendar | INSS_PF threshold is applicable for a month. |
| Threshold Type | Tax Amount | |
| Minimum Value | - | No minimum threshold value for INSS_PF. |
| Maximum Value | 406.09 | Maximum threshold value for INSS_PF is 406.09 BRL. |
This tax configuration sets the total INSS_PF withheld amount to not exceed 406.09 in a month.
The supplier as a person provides services to a company and invoices for the services rendered during the month. A clerk enters and validates these three invoices in Payables.
- First Payables Invoice Transaction Line
- Second Payables Invoice Transaction Line
- Third Payables Invoice Transaction Line
First Payables Invoice Transaction Line
This is the First Payables Invoice transaction line:
| Invoice Date | Invoice Type | Product Type | Amount |
|---|---|---|---|
| 04/28/17 | 501 | Service | 3000.00 |
| Total | 3000.00 BRL |
The INSS_PF standard rate of 11% is applied on the line amount and the withholding tax amount is 330 BRL. The tax amount bucket is 330 BRL.
Withholding Tax Line
After the tax determination process successfully completes, it creates the withholding tax line:
| Tax | Tax Regime | Tax Name | Tax Status | Tax Jurisdiction | Tax Rate | Tax Amount |
|---|---|---|---|---|---|---|
| 1 | <User-defined withholding tax regime> | INSS_PF | Standard | Brazil | 11% | -330.00 BRL |
The clerk enters and validates the second invoice for the same supplier for the same period.
Second Payables Invoice Transaction Line
This is the Second Payables Invoice transaction line.
| Invoice Date | Invoice Number | Product Type | Amount |
|---|---|---|---|
| 04/28/17 | 502 | Service | 2000.00 |
| Total | 2000.00 BRL |
Tax Determination Process
The INSS_PF standard rate of 11% is applied on the line amount and the withholding tax amount is 220 BRL. The tax amount bucket is 330 BRL after validation of the first invoice, and the remaining balance is 76.09 BRL (based on 406.09-330.00). The following tax line is created for 76.09 BRL, the remaining balance in the tax amount bucket.
Withholding Tax Line
After the tax determination process successfully completes, it creates the withholding tax line:
| Tax Line | Tax Regime | Tax Name | Tax Status | Tax Jurisdiction | Tax Rate | Tax Amount |
|---|---|---|---|---|---|---|
| 1 |
<User-defined withholding tax regime> |
INSS_PF | Standard | Brazil | 3.804% | -76.09 BRL |
The clerk enters and validates the third invoice for the same supplier for the same period.
Third Payables Invoice Transaction Line
This is the Third Payables Invoice transaction line:
| Invoice Date | Invoice Number | Product Type | Amount |
|---|---|---|---|
| 04/29/17 | 503 | Service | 3000.00 |
| Total | 3000.00 |
Tax Determination Process
The INSS_PF standard rate of 11% is applied on the line amount and the withholding tax amount is 330 BRL. The tax amount bucket is now 406.09 BRL, which is the maximum withholding amount, and there is no remaining balance. As such, there won’t be any additional withholding tax for this invoice and subsequent invoices.
Withholding Tax Line
After the tax determination process successfully completes, it creates the withholding tax line:
| Tax Line | Tax Regime | Tax Name | Tax Status | Tax Jurisdiction | Tax Rate | Tax Amount |
|---|---|---|---|---|---|---|
| 1 | <User-defined withholding tax regime> | INSS_PF | Standard | Brazil | 0 | 0.00 BRL |