Example Scenario: Calculating Parent Tax

In Tax Reporting, enabling the Parent Tax Calculation feature for a parent entity allows tax calculations to be performed directly at the parent level. This configuration is particularly useful when you have to apply tax rates or adjustments at the consolidated level, rather than aggregating tax data from individual child entities.

See the following example scenario:

Entity Structure:

  • ENT_PAR (Parent Entity)
  • ENT_CHILD1 (Child Entity 1)
  • ENT_CHILD2 (Child Entity 2)

Amounts:

  • ENT_CHILD1: 100
  • ENT_CHILD2: 200

Without Parent Tax Calculation Enabled:

By default, during consolidation, the amounts from ENT_CHILD1 and ENT_CHILD2 roll up to ENT_PAR.

Therefore, ENT_PAR would display a consolidated amount of 300 (100 from ENT_CHILD1 + 200 from ENT_CHILD2).

With Parent Tax Calculation Enabled:

When the Parent Tax Calculation feature is enabled for ENT_PAR, you can input tax data directly at the parent level.

In this configuration, the system does not aggregate tax data from ENT_CHILD1 and ENT_CHILD2 during consolidation. Instead, it uses the data entered directly at ENT_PAR.

For example, if you enter a value of 400 directly at ENT_PAR, the consolidated amount for ENT_PAR will be 400, disregarding the amounts from ENT_CHILD1 and ENT_CHILD2.

Configuration Steps:

To enable Parent Tax Calculation for ENT_PAR:

  1. Set Entity Properties:
    • Allow Upper-Level Entity Input: Yes
    • Data Storage: Never Share
    • Parent Tax Calculations Attribute: TaxCalcYes
    • Domicile: Assign the appropriate domicile for ENT_PAR
  2. Assign Child Entities:

    Add ENT_CHILD1 and ENT_CHILD2 as child members to ENT_PAR.

  3. Refresh Database:

    After making these changes, refresh the database to apply the new settings.

For more, please refer to doc on Calculating Parent Tax for National and Regional .

Considerations:

  • Data Entry: With Parent Tax Calculation enabled, ensure that tax data is entered directly at the parent entity level (ENT_PAR). Data entered at child entities (ENT_CHILD1 and ENT_CHILD2) will not roll up to the parent for tax calculations.
  • Consolidation Process: The consolidation process will use the data entered at the parent level. Child entity data will not be aggregated into the parent entity's tax calculations.

Note:

Tax Automations rules at the parent tax calculations enabled entity calculates values in Entity Consolidation, when the trial balance from base entity is available. For example, if the trial balances are loaded at the base entity and parent entity is setup with tax automation rule, then tax automation rules will pull trial balance data in Entity Consolidation and postes to Tax Account and Entity Consolidation.