Cost Management for Inclusive Taxes

To comply with country-specific regulatory requirements, you can capture item prices and all calculated exclusive and inclusive taxes in your purchases, with receipt costs adjusted to account for amounts of inclusive taxes that were incorporated in the item purchase price.

The amounts of inclusive taxes are booked to a tax liability or recovery account. Procurement flows for both delivery and non-delivery inclusive taxes are supported, as follows.

• Tax Point Basis Set to Receipt. In the case of delivery based taxes, where the Tax Point Basis is set to Receipt, the tax call is made during the receipt transaction, and inclusive taxes are calculated. Based on the recoverable percentage defined, inclusive tax can have recoverable and nonrecoverable amounts. On the purchase order line, the total amount calculation incorporates the receipt quantity. During invoicing, the receipt values are copied to the invoice, therefore cost variance is not applicable.

• Tax Point Basis Set to Invoice. In the case of non-delivery based taxes, where the Tax Point Basis is set to Invoice, recoverable and nonrecoverable inclusive taxes on the purchase order are copied during the receipt transaction. Any difference between the amounts on the receipt and the invoice are considered as variances, and are applied to the item cost.

Cost Management supports the following cost adjustments and accounting events for inclusive taxes:

Cost Adjustments and Accounting Events	Description
Adjust Receipt and Inventory Cost for Inclusive Taxes on Purchase Orders.	Segregate and account for recoverable and nonrecoverable inclusive tax. When the item price on a purchase order line includes taxes, Receipt Accounting separates the item price into basic item price, inclusive recoverable tax, and inclusive nonrecoverable tax. This lets you account for nonrecoverable tax in the item cost when the price on the purchase order line contains inclusive tax.
Adjust Receipt and Inventory Cost for Inclusive Taxes on Global Procurement Purchase Orders.	Segregate and account for recoverable and nonrecoverable inclusive tax. When the item price on a global procurement purchase order line includes taxes, Receipt Accounting separates the item price into basic item price, inclusive recoverable tax, and inclusive nonrecoverable tax. Inclusive tax adjustments are now performed on logical transactions in the supplier-facing inventory organization when you physically receive the items in an inventory organization that is associated with a different business unit.
Adjust Receipt and Inventory Cost for Inclusive Taxes on Consignment Purchase Orders	Segregate and account for recoverable and nonrecoverable inclusive tax. When the item price on a consignment purchase order line includes taxes, Receipt Accounting separates the item price into basic item price, inclusive recoverable tax, and inclusive nonrecoverable tax. This lets you account for nonrecoverable tax in the consigned item cost when the price on a purchase order line contains inclusive tax.