1. Using Financials for EMEA
  2. Tax Box Allocations and Reporting

Tax Box Allocations and Reporting

Use the Tax Box Allocations and Reporting feature to automate the assignment and reporting of transaction tax and taxable amounts under the appropriate tax declaration box numbers, as required by various EU countries’ VAT returns.

The process includes rule setup, allocation, transaction processing, and a suite of reports that help ensure compliance with country-specific tax box requirements for both periodic and annual VAT reporting.

Setup

Prerequisite Setup

Before using Tax Box Allocations and Reporting, ensure your organization’s core tax and enterprise structures are in place, including:

  • Data Security
  • Geographies and Address Formats
  • Enterprise Structure
  • Tax Regime to Rate Setup
  • Tax Party Profiles
  • Tax Rules
  • Suppliers and Customers
  • Procurement Business Function
  • Common Options for Payables and Receivables

It is recommended that your Implementation Project is complete before proceeding with the feature-specific setup.

Common Setup

Tax Regime

  1. Task: Manage Tax Regimes
  2. Navigation: Navigator > Setup and Maintenance > Manage Tax Regimes

Ensure the Use tax reporting configuration option is enabled at the Tax Regime level. This enables the Tax Reporting Configuration tab on the Create/Edit Tax Registration page.

Legal Reporting Unit Tax Registration

  1. Task: Manage Party Tax Profiles
  2. Navigation: Navigator > Setup and Maintenance > Manage Party Tax Profiles > Search: Legal Reporting Unit Tax Profile > Tax Registrations
  3. Create a legal reporting unit tax registration with the Registration Number. This is required for the Tax Reporting Configuration.

Tax Reporting Configuration

  1. Navigate to Setup and Maintenance > Manage Party Tax Profiles > Legal Reporting Unit Tax Profile > Tax Registrations > Tax Reporting Configuration
  2. Look for Manage Party Tax Profiles task.
  3. Enable the Use tax reporting configuration option at the Tax Regime level.
  4. Enter the Tax Registration Number for the LRU Tax Registration.
  5. On the Tax Reporting Configuration tab, enter the tax calendar (must not have adjustment periods).
  6. Enable allocations option.

Tax Box Allocation Rules Setup

Tax Reporting Types and Codes

  1. Navigate to Setup and Maintenance > Manage Tax Reporting Types.
  2. Look for Manage Tax Reporting Types task.
  3. Create a Tax Reporting Type with Purpose set to Tax box allocation.
  4. Enter Tax Reporting Codes to represent tax declaration box numbers.
  5. Assign the Amount Sign (Plus/Minus) for each code.
  6. Enter the Box Type such as, recoverable tax amount, non-recoverable tax amount, recoverable taxable amount, non-recoverable taxable amount, total amount.

Tax Determining Factor Sets

  1. Navigate to Setup and Maintenance > Manage Tax Determining Factor Sets.
  2. Look for Manage Tax Determining Factor Sets task.
  3. Create a Tax Determining Factor Set with Tax box allocation rule usage.
  4. Add desired tax determining factors such as, Product Type, Line Class, Tax Jurisdiction Code, Tax Rate.

Tax Condition Sets

You can also create the Tax conditions set from the Tax Box Allocation Rules page. The following are the steps to create tax conditions sets:

  1. Task: Manage Tax Condition Sets
  2. Create a Tax Condition Set based on your Tax Determining Factor Set.
  3. Define sets for all required scenarios such as, purchase invoice, sales invoice, different product types.

Tax Box Allocation Rules

  1. Task: Manage Tax Box Allocation Rules
  2. Navigate to Setup and Maintenance > Manage Tax Box Allocation Rules
  3. Define rules for a specific legal entity or globally. Legal entity rules override global rules.
  4. Set the Report Periodicity (Periodic or Annual).
  5. Choose the Tax Reporting Type.
  6. Associate the Tax Determining Factor Set.
  7. Add Tax Condition Sets and allocate appropriate tax boxes.
  8. Enable and order rules as needed. Only 10 boxes per tax line can be allocated.

Transaction Entry

Payables

  1. Create purchase invoices in Payables Invoices > Create Invoice.
  2. Use Product Type and Line Class as determining factors.
  3. Validate and account invoices before running allocation.

Receivables

  1. Create sales invoices in Receivables Billing > Create Transaction.
  2. Use Product Type and Line Class as determining factors.
  3. Complete, account, and post each transaction.

Processing and Reporting

Select Transactions for Tax Reporting

  1. Navigate to Tools > Scheduled Processes > Select Transactions for Tax Reporting.
  2. Specify the reporting entity, period, and source.
    • No report is produced, the process assigns reporting batch IDs.

Tax Allocation Process

  1. Navigate to Tools > Scheduled Processes > Tax Allocation Process.
  2. Allocate tax box numbers to transactions selected in the previous step.
    • Run with Reallocate = Yes to override previous allocations, or No for new allocations only.
    • No report is produced.

Tax Allocations Listing Report

  • Navigate to Tools > Scheduled Processes > Tax Allocations Listing Report.
  • Lists all transaction lines with allocated tax box numbers.

Tax Allocation Exceptions Report

  • Navigate to Tools > Scheduled Processes > Tax Allocation Exceptions Report.
  • Lists all lines not allocated with any tax box numbers.

Tax Box Return Preparation Report

  • Navigate to Tools > Scheduled Processes > Tax Box Return Preparation Report.
  • Reports tax box numbers at detail and summary levels.
  • Use Tax Calendar Year for annual, Tax Calendar Period for periodic reporting.
  • Choose the Summarization Level (Detail, Summary, Both).

Finalize Transactions for Tax Reporting

  1. Navigate to Tools > Scheduled Processes > Finalize Transactions for Tax Reporting.
  2. Update tax records as finally reported for the period.
  3. The first run of the tax box or country-specific reports after this step is considered the final reporting.

Recommendations and Restrictions

  • Always close periods chronologically, do not skip periods.
  • Do not change the reporting level or period type after finalizing a period.
  • For corrections, use separate adjusting transactions, for example, Credit Memos in open periods. Do not cancel or modify finally reported transactions.
  • Only run reporting processes on open or current periods.