Tax Determination Processes Method for Tax Calculation

This section discusses how to use the tax determination process method for tax calculation.

Here' s an example.

The manufacturer creates a transaction in Receivables that initiates a tax determination process. This operation calculates the applicable ICMS and ICMS-ST tax amounts and creates the respective tax lines.

Receivables Transaction Lines

Line	Item	Unit Price	Quantity	Line Amount	Ship To	Ship From
-	Total in BRL	-	100.00	-	-	-

Tax Determination Process

Process Name	Activities Included	Components Used	Result
Determine Applicable tax regimes	Identify applicable tax regimes	Based on the location (Country) involved in the transaction	Applicable regime = ICMS
Determine Place of Supply and Tax Jurisdiction	Identify the jurisdiction and place of supply	ICMS and ICMS-ST tax definition > tax rule defaults > place of supply = ship from party	Tax jurisdiction = SP Place of supply = SP
Determine Tax Applicability	Consider the taxes based on the tax applicability rule for each tax	Tax Applicability Rules Tax conditions - Registration Status (Qualifier Ship-from party) = Registered Product Type = Goods	Applicable taxes: ICMS ICMS-ST
Determine Tax Registration	Determine the party type to derive the tax registration for each applicable tax	ICMS tax definition > tax rule defaults > tax registration = ship-from party	Ship-from party
Determine Tax Status	Consider the tax statuses of applicable taxes	ICMS tax rule defaults > Indirect defaults > tax status= Standard	Standard
Determine Tax Rate	Consider the tax rates of each applicable tax status of each applicable tax	Tax Rate Rules Tax conditions for ICMS and ICMS-ST Ship From = SP Ship To = SP Product = Item A	Applicable ICMS and ICMS-ST tax rates = 18%
Determine Taxable Basis	Determine the taxable basis on which the tax rate for each tax is applied	ICMS Standard taxable basis formula = STANDARD_TB ICMS-ST MVA taxable basis formula defined Define the taxable basis rule by using the appropriate tax determining factor set to default the newly defined taxable basis formula in the tax determination process	ICMS Taxable basis = Line amount 100 BRL ICMS-ST Taxable basis = Line amount + MVA (100+80) = 180 BRL
Calculate Taxes	Identify the tax calculation formula to calculate taxes	ICMS Standard tax calculation formula = STANDARD_TC ICMS-ST Tax calculation formula newly defined with a compounding rule for subtracting the ICMS tax. Define the tax calculation rule by using the appropriate tax determining factor set for the default formula in the tax determination process.	ICMS Taxable basis * tax rate 100*18% = 18 BRL ICMS-ST Taxable basis * tax rate 180*18% = 32.40 BRL Deduct ICMS from ICMS-ST 32.40 BRL – 18 BRL = 14.4 BRL

Tax Lines

After the tax determination process successfully completes, Oracle ERP Cloud adds the tax lines. There are two tax lines for ICMS and ICMS-ST:

Rate Name	Rate	Tax Amount	Tax Regime	Tax Name	Tax Status	Tax Jurisdiction
ICMS_18	18	18.00	ICMS	ICMS	Standard	SP
ICMS-ST_18	8	14.40	ICMS	ICMS-ST	Standard	SP