Oracle Payables integrates with Oracle E-Business Tax, the Oracle Applications tax engine, to provide tax services for invoices. With this integration, E-Business Tax provides a central repository for your invoice tax requirements. E-Business Tax does not provide tax services for Withholding Taxes or 1099 Income Taxes. For information on these taxes see: Withholding Tax Overview or 1099 Reporting Overview.
E-Business Tax provides tax services for the following categories of Payables invoices:
Standard Invoices - includes Standard, Mixed, PO Price Adjustment, Credit Memos, and Debit Memos
Prepayment Invoices
Expense Reports
Each of these categories maps to an event class in E-Business Tax.
E-Business Tax uses your tax setups as well as information from the invoice header and line level (the tax drivers) to determine the applicable taxes, tax statuses, tax rates, taxable basis, calculations, rounding, and tolerance for each invoice.
The tax drivers E-Business Tax uses to calculate taxes can differ depending on the category of invoice and the parties involved. For example, for a Standard invoice in the U.S., the Location ID and Place of Supply on the invoice are used to determine the applicable State and County Sales Taxes. For a list of tax drivers, see: Tax Drivers on Invoices.
When you enter an invoice and click Calculate Tax, E-Business Tax calculates the following tax amounts.
Invoice Header Tax Amounts
Total Tax: Total of inclusive and exclusive tax due to the supplier.
Self-Assessed Tax: Total of self-assessed tax. Self assessed tax amounts are taxes that you are liable for, but that do not appear on the invoice. Self-assessed taxes are also known as reverse charge or use taxes in certain tax regimes. You can view self-assessed tax amounts in the Self Assessed Tax Amount field in the Invoice Header. This field is for reference only; it has no impact on the amount due to the supplier. See: Self Assessed Taxes on Invoices.
Invoice Line Tax Amounts
Exclusive Tax: Shown in separate, summarized lines on the invoice. Recoverable and Non Recoverable exclusive taxes are shown in separate distributions and are summarized in a tax line. You can view exclusive tax amounts in the Invoice window, the Invoice Workbench, Distributions (All Distributions), or the Tax Lines Summary window.
Inclusive Tax: Shown in the Included Tax Amount column for the line. The line amount is the total of the item amount and the inclusive tax amount. The inclusive tax amount is provided for reference only. Recoverable and Non Recoverable inclusive taxes are shown in distributions under a non-tax line. To view the inclusive tax amounts as separate lines, use the Tax Lines Summary window or the Distributions window. For Prepayments, inclusive tax amounts are also shown in the Tax Amount Applied field in the Apply Prepayments window.
When you validate an invoice, E-Business Tax recalculates the tax and places any tax-related holds on the invoice. If you update a tax driver on a validated invoice, you must revalidate it. In general, E-Business Tax automatically calculates all applicable tax amounts for invoices except in the following instances:
If you import invoices into Payables from another source, then the tax can be imported with the invoice. See: Payables Open Interface Import.
Depending on your tax setup, you can manually enter, update, or cancel some tax lines in E-Business Tax. See: Entering Manual Tax Lines on Invoices or Updating Tax Lines on Invoices.
To set up taxes for invoices, complete the following setup steps in E-Business Tax:
A tax regime is a country or geographic region where you do business and where a specific tax applies.
A tax is a classification of a tax imposed by a government through a fiscal or tax authority. For example, VAT is a type of tax.
A tax status is the taxable nature of a product in the context of a transaction for a tax. For example, there can be several tax statuses for a tax: standard rate, zero rate, exempt, and partial exempt.
A tax rate is the rate specified for a tax status. Tax rates are effective for a period of time and can be expressed as a percentage, as a value per unit quantity, or as a fixed sum per transaction.
Set Up Tax Recovery Rates (Optional)
A tax recovery rate is the rate for the partial or full reclaim of taxes paid on the purchase or movement of a product.
Set Up First Party Legal Entities
A First Party Legal Entity is a legal entity involved in transaction taxes.
Define the Defaults and Controls for a Country
Specify the default tax information for a given country.
Define the Defaults and Controls for a Configuration Owner
Specify the default tax information for a given configuration owner. A configuration owner is any First Party Legal Entity, First Party Legal Establishment, or operating unit involved in transaction taxes.
Define the Default Application Tax Options
Specify the default tax information for Payables event classes (Standard Invoices, Prepayments, Expense Reports).
For more information on setting up taxes, see: Setting Up Taxes in Oracle E-Business Tax.
To enter manual tax lines on invoices, enable the following manual tax options in E-Business Tax. You can set these options at the Event Class, Configuration Owner, or Tax level. Setting these options at the Event Class level is the most generic; the Configuration Owner is more specific; and the Tax level is the most specific. The more specific settings override the more generic settings.
Event Class
Allow Entry of Manual Tax Lines
Allow Recalculation for Manual Tax Lines
Allow Override for Calculated Tax Lines
Allow Manual Tax Only Lines - A tax only line is a tax line that is not related to the transaction or any item line on the invoice.
Configuration Owner
Allow Entry of Manual Tax Lines
Allow Override for Calculated Tax Lines
Allow Recalculation for Manual Tax Lines
Tax - Controls and Defaults
Allow Override for Calculated Tax Lines
Allow Manual Tax Only Lines
You can only enter manual tax lines in Payables if:
The tax amount applies proportionally to the invoice items
The tax amount is exclusive
The tax line is entered before 'Calculate Tax is clicked.
The tax line is entered before the invoice is validated or accounted.
When you enter a manual tax line, enter an amount in the Tax Control Amount field in the invoice header. E-Business Tax uses the Tax Control Amount to prorate automatically calculated tax amounts. For example, if you enter a Tax Control Amount of $10 and E-Business Tax calculates a total tax amount of $12, then E-Business Tax will prorate the calculated tax amounts so the total tax amount matches the Tax Control Amount you entered.
See: Entering a Manual Tax Line
To update tax lines on invoices, enable the Allow Override for Calculated Tax lines tax option in E-Business Tax. You can set this option at the following levels:
Event Class
Configuration Owner
Tax
Setting this option at the Event Class level is the most generic setting; Configuration Owner is more specific; and Tax level is the most specific. The more specific settings override the more generic settings.
If your suppliers can enter invoices using Oracle iSupplier Portal, then set the Allow Override for Calculated Tax lines tax option for the supplier as well. See: Oracle iSupplier Portal Integration
When you enable the this option, you can update the taxes that were calculated by E-Business Tax. For example, you can update the rate or amount. You can also make a tax inclusive or self-assessed. See: Self-Assessed Taxes on Invoices.
You can only update detailed tax lines if you do not make any changes to tax lines in the Tax Lines Summary window. See: Changing Existing Tax Line Information.
If you override the tax amount and it falls outside of the tolerances specified, then a hold will be placed on the invoice. See: Defining Tax Tolerances.
If you do not want to include taxes in your discounts, then enable the Exclude Tax From Discount Calculation Payables Option. Note that if you enable this option, you cannot set the Discount Distribution Method Payables Option to Prorate.
At validation, E-Business Tax calculates the total tax for the invoice. Next, Payables calculates the discountable amount, which is Invoice Amount minus the Total Tax Amount. Then, if the invoice has scheduled payments, Payables updates those payments accordingly. Payment schedules are not updated if there are changes to taxes after validation, because the taxes were not considered when calculating the discount. Payables can only calculate the discountable amount if the invoice is not paid (partially or fully paid). If an invoice is paid, you must manually adjust the payment schedules as required. The only exceptions to this are:
Offset (Reverse Charge) Taxes - Any taxes with corresponding reverse charge taxes are not excluded from the discount application.
Taxes on Prepayments - When you create or pay a Prepayment, Payables takes the applicable discount; however, when the Prepayment is applied to the invoice, the tax on the prepayment is not excluded.
To implement self-assessed taxes on invoices, enable the Set for Self Assessment/Reverse Charge option when you define the tax registration information for the Party Tax Profile for any First Party Legal Entity or First Party Legal Establishment. You can enable this option at the following levels:
Regime
Regime, Tax
Regime, Tax, Tax Jurisdiction
Setting the Self Assessment/Reverse Charge option at the Regime level is the most generic; Regime, Tax is more specific; and Regime, Tax, Tax Jurisdiction level is the most specific. Any specific settings override the more generic settings. See: Setting Up Parties for Self Assessment.
You can also enable self assessment for Third Parties. If you enable self-assessed taxes for Third Parties, then the taxes will only be assessed for the supplier at the level specified and not for other suppliers in that tax regime, tax, or jurisdiction.
The following example illustrates how E-Business Tax applies self-assessed taxes to invoices.
Assume you enter an invoice from a supplier for $1000.00. The supplier did not charge tax on the invoice; however, assume that according to tax rules, as the purchaser you are liable to pay a 5% tax on the item to your tax authority.
Standard Invoice
| Invoice Amount (including tax) | Tax Rate | Tax Amount |
|---|---|---|
| 1000.00 | 0.00 | 0.00 |
When you click Calculate Tax or validate the invoice, E-Business Tax uses the tax drivers on the invoice, such as Ship To, Product Type, Primary Intended User, Business Category and Product Fiscal Classification to calculate taxes and determines if any self-assessed tax should be applied.
In this case, provided the tax setup allows, a Self-Assessed Tax Amount of $50.00 is applied to the invoice. The Self Assessed Tax Amount field in the Invoice Header is updated to reflect the amount of self-assessed tax due. This field is for reference only; it has no impact on the amount due to the supplier. Note that the Tax Amount for the supplier's invoice is $0.00 and the Invoice Amount is $1000.00.
Standard Invoice - Calculated Self-Assessed Tax
| Invoice Amount (including tax) | Tax Rate | Tax Amount | Self Assessed Tax Amount |
|---|---|---|---|
| 1000.00 | 0.00 | 0.00 | 50.00 |
You can view the self-assessed tax details in the Tax Lines Summary window. You can also use the View Accounting report to see how the self-assessed tax amounts are accounted. The following table illustrates the accounting for this self-assessed tax.
Accounting - Self-Assessed Tax
| Ledger | Account | Accounting Class | Accounted DR | Accounted CR |
|---|---|---|---|---|
| Vision Operations | 01-580-7740-0000-000 | Item Expense | 1000.00 | |
| Vision Operations | 01-000-2210-0000-000 | Liability | 1000.00 | |
| Vision Operations | 01-580-7740-0000-000 | Self Assessed Tax | 50.00 | |
| Vision Operations | 01-000-2340-0000-000 | Self Assessed Tax | 50.00 |
In this accounting example, the credit is the self-assessed tax liability and the debit is the non-recoverable self-assessed tax amount.
You cannot use the Distributions window to view self-assessed tax amounts, because they are not represented on the supplier's invoice.
Depending on your E-Business Tax setup, you can use the Tax Lines Summary window to update calculated tax lines and mark them as self-assessed or to manually enter self-assessed tax lines. If you update a calculated tax line and mark it as self-assessed, the invoice will be updated to remove the calculated tax line from the invoice line and the distribution details. Also, the Self Assessed Tax Amount field in the invoice header will be updated with the self-assessed tax amount, as shown in the previous example. See: Updating Tax Lines on Invoices, or Entering Manual Tax Lines on Invoices.
To report on self-assessed taxes, use the following Subledger Accounting reports:
If you are using Offset or Use taxes, see: Setting Up Offset Taxes.
In some cases, recoverable taxes can only be accrued and accounted for after the invoice is paid; this is known as deferred recoverability. You can set up taxes with deferred recoverability by enabling the following options at the Tax Regime, Tax, Tax Status, or Tax Rate levels in E-Business Tax. Tax Regime is the most generic level; Tax Rate is the least specific. If you set the options at the Tax Rate level it will override any settings at a more generic level.
Tax Regime:
Allow Tax Recovery
Default Recovery Settlement - Set the option to Deferred.
Tax:
Allow Tax Recovery
Default Recovery Settlement - Set the option to Deferred.
Tax Accounts - set up the following tax accounts in GL to manage the deferred recoverable taxes:
Tax Expense
Recoverable Tax
Interim Tax - this account is used for deferred recoverable taxes until the invoice is paid. In Cash-Based accounting, an interim tax account is not used because the accounting will only be done at the time of actual payment and receipt.
Tax Status:
Allow Tax Recovery
Default Recovery Settlement - Set the option to Deferred.
Tax Rate:
Allow Tax Recovery
Default Recovery Settlement - Set the option to Deferred.
The default account for recoverable taxes in Subledger Accounting is Accounts Payable deferred. You can change this account if necessary.
The following example illustrates how deferred recoverability works in Payables.
Assume you have an invoice for $1100.00, with a total tax amount of $100.00. Assume that the tax is 55% recoverable.
Standard Invoice
| Invoice Amount (including tax) | Tax Amount |
|---|---|
| 1100.00 | 100.00 |
After the invoice is validated, the recoverable portion of the tax is placed in an interim tax account until the invoice is paid.
Accounting - Deferred Recoverable Tax Before Invoice is Paid
| Ledger | Account | Accounting Class | Accounted DR | Accounted CR |
|---|---|---|---|---|
| Vision Operations | 01-580-7740-0000-000 | Item Expense | 1100.00 | |
| Vision Operations | 01-000-2210-0000-000 | Liability | 1100.00 | |
| Vision Operations | 01-000-2800-0000-000 | Recoverable Tax | 55.00 | |
| Vision Operations | 01-000-7740-0000-000 | Non-Recoverable Tax | 45.00 |
Once the invoice is paid, the deferred tax amount is credited and debited to deferred recoverable tax.
Accounting - Deferred Recoverable Tax After Invoice is Paid
| Ledger | Account | Accounting Class | Accounted DR | Accounted CR |
|---|---|---|---|---|
| Vision Operations | 01-000-2210-0000-000 | Liability | 1100.00 | |
| Vision Operations | 01-000-1110-0000-000 | Cash Clearing | 1100.00 | |
| Vision Operations | 01-000-2800-0000-000 | Deferred Recoverable Tax | 55.00 | |
| Vision Operations | 01-000-2520-0000-000 | Deferred Recoverable Tax | 55.00 |
If you were entering a Credit Memo with deferred recoverable taxes, then these entries would be reversed.
Accounting - Deferred Recoverable Tax on Credit Memo
| Ledger | Account | Accounting Class | Accounted DR | Accounted CR |
|---|---|---|---|---|
| Vision Operations | 01-000-2210-0000-000 | Liability | 1100.00 | |
| Vision Operations | 01-000-1110-0000-000 | Cash Clearing | 1100.00 | |
| Vision Operations | 01-000-2800-0000-000 | Deferred Recoverable Tax | 55.00 | |
| Vision Operations | 01-000-2520-0000-000 | Deferred Recoverable Tax | 55.00 |
Prepayments have the following special considerations related to tax.
Taxes can be set up for Prepayments in general, or for specific types of prepayments such as contract financing, advances and automatic and manual prepayment applications.
Taxes are not always applied to Prepayments. If you want to apply taxes to Prepayments, enable the Allow Tax Applicability option for the Prepayment Event Class in E-Business Tax. See: Managing Event Class Settings.
Define tax rules to set up specific tax rates for different types of prepayments. For example, to tax Contract Financing prepayments but not Advances, you can create a tax rule which will look specifically for line classes of P2P Advance or P2P Contract Financing to assign a specific tax rate. See: Tax Rules in E-Business Tax
Tax rules also affect how taxes are applied to a prepayment. In particular, it is affected by how you set the Applied Amount Handling option for the tax. You can set this option to either Recalculated or Prorate.
The following examples illustrate how the Applied Amount Handling option affects Prepayments.
Recalculated Examples
If the the Applied Amount Handling option is Recalculated, when a Prepayment is applied to a Standard Invoice the tax is recalculated and, if there is a difference in tax rates no liability remains.
Assume that you enter a Prepayment for $240.00, with a 20% Tax Rate.
Prepayment Invoice
| Invoice Amount (including tax) | Tax Rate | Tax Amount |
|---|---|---|
| 240.00 | 0.20 | 40.00 |
After the prepayment is paid, the tax rate changes from 20% to 25%. Next, assume you enter a Standard Invoice for $250.00, the 25% tax rate is automatically applied to the invoice.
Standard Invoice
| Invoice Amount (including tax) | Tax Rate | Tax Amount |
|---|---|---|
| 250.00 | 0.25 | 50.00 |
When you apply the Prepayment to the Standard Invoice, the system applies the Prepayment at the current tax rate, leaving no liability. However, if you view the accounting, the difference of $10.00 is credited to the Tax Difference Account.
Accounting - Recalculated Prepayment
| Ledger | Account | Accounting Class | Accounted DR | Accounted CR |
|---|---|---|---|---|
| Vision Operations | 01-580-7740-0000-000 | Item Expense | 200.00 | |
| Vision Operations | 01-580-7740-0000-000 | Non-Recoverable Tax | 50.00 | |
| Vision Operations | 01-000-2210-0000-000 | Liability | 250.00 | |
| Vision Operations | 01-000-2210-0000-000 | Liability | 250.00 | |
| Vision Operations | 01-000-1340-0000-000 | Prepaid Expense | 240.00 | |
| Vision Operations | 01-000-7826-0000-000 | Tax Difference Account | 10.00 |
In another example, assume you enter a prepayment of $100.00, with 10% tax and the tax is 60% recoverable. In that case $6.00 is recoverable and $4.00 is non-recoverable. If the tax rate changes to 15%, then the recoverable tax amount is 9.00 and the non-recoverable tax amount is 6.00. A tax different of 2.00 is credited to the tax difference account. The accounting for this scenario is shown in the following table.
Accounting - Recalculated Prepayment
| Ledger | Account | Accounting Class | Accounted DR | Accounted CR |
|---|---|---|---|---|
| Vision Operations | 01-000-1340-0000-000 | Item Expense | 100.00 | |
| Vision Operations | 01-000-1340-0000-000 | Non-Recoverable Tax | 6.00 | |
| Vision Operations | 01-000-1340-0000-000 | Recoverable Tax | 9.00 | |
| Vision Operations | 01-000-2210-0000-000 | Liability | 115.00 | |
| Vision Operations | 01-000-2210-0000-000 | Liability | 115.00 | |
| Vision Operations | 01-000-1340-0000-000 | Prepaid Expense | 100.00 | |
| Vision Operations | 01-000-1340-0000-000 | Prepaid Expense | 4.00 | |
| Vision Operations | 01-000-1340-0000-000 | Prepaid Expense | 9.00 | |
| Vision Operations | 01-000-7826-0000-000 | Tax Difference Account | 2.00 |
Prorate Example
If the Applied Amount Handling option is Prorate, then the tax is applied at the Prepayment rate and the difference between the tax on the Prepayment and the Standard Invoice is a liability. This example uses the same assumptions as the Recalculated example and illustrates what happens when there is a tax rate increase.
Prepayment Invoice
| Invoice Amount (including tax) | Tax Rate | Tax Amount |
|---|---|---|
| 240.00 | 0.20 | 40.00 |
Standard Invoice
| Invoice Amount (including tax) | Tax Rate | Tax Amount |
|---|---|---|
| 250.00 | 0.25 | 50.00 |
Standard Invoice After Prepayment is Applied - Prorate
| Invoice Amount (including tax) | Tax Amount | Tax Liability Remaining |
|---|---|---|
| 10.00 | 10.00 | 10.00 |
In this case, the difference between the Prepayment Tax Amount and the Standard Invoice Tax Amount is accounted in the Tax Difference Account and Liability has a credit balanced of $10.00.
Accounting - Recalculated Prepayment
| Ledger | Account | Accounting Class | Accounted DR | Accounted CR |
|---|---|---|---|---|
| Vision Operations | 01-000-1340-0000-000 | Prepaid Expense | 240.00 | |
| Vision Operations | 01-000-2210-0000-000 | Liability | 240.00 | |
| Vision Operations | 01-000-2210-0000-000 | Liability | 240.00 | |
| Vision Operations | 01-000-1110-0000-000 | Cash Clearing | 240.00 | |
| Vision Operations | 01-580-7740-0000-000 | Item Expense | 200.00 | |
| Vision Operations | 01-580-7740-0000-000 | Non-Recoverable Tax | 50.00 | |
| Vision Operations | 01-000-2210-0000-000 | Liability | 200.00 | |
| Vision Operations | 01-000-2210-0000-000 | Liability | 50.00 | |
| Vision Operations | 01-000-2210-0000-000 | Liability | 250.00 | |
| Vision Operations | 01-000-1340-0000-000 | Prepaid Expense | 240.00 |
If the Applied Amount Handling option is Prorate, and the tax rate decreases, then when you apply the prepayment to the invoice the result is a credit balance. To avoid a tax decrease from causing a credit balance, unapply the prepayment and enter a lesser prepayment, so the invoice total after the prepayment is applied is 0.
If you anticipate that tax decreases will occur and do not want to unapply and reapply prepayments as described, then consider setting up inclusive taxes in E-Business Tax. It is easier to partially apply prepayments that have inclusive taxes; therefore, it is easier to manage prepayments when tax decreases occur.
A tax variance occurs when there is a difference between the tax on the invoice and the tax on the PO matched to the invoice. When you match a PO to an invoice, there are three tax-related variances that can occur:
Tax Exchange Rate Variance (TERV) - when there is a difference between the invoice and PO distributions due to exchange rate variance.
Tax Invoice Price Tax Rate Variance (TIPV) - when there is a difference between th invoice and PO distributions due to price variance.
Tax Rate Variance (TRV) - when there is a difference between invoice and PO distributions due to difference in tax applicability.
In addition, Tax Quantity Variance (TQV) is calculated, but is shown as a non-variance distribution.
Variances are calculated for all taxes that are enabled in E-Business Tax.
The following example illustrates how variances are determined.
Purchase Order
| Quantity | Price | Currency | Exchange Rate | Total Tax | Approval Amount |
|---|---|---|---|---|---|
| 1 | 100.00 | CAD | 0.8 | 0.00 | 100.00 |
Assume that the purchase order shown above is matched to the invoice shown below.
Invoice
| Item Amount | Payment Currency | Exchange Rate | Unit Price | Tax Amount | Invoice Amount |
|---|---|---|---|---|---|
| 100.00 | CAD | 1.1 | 100.00 | 20.00 | 120.00 |
Note that the exchange rate and tax amounts differ between the PO and the Invoice. The distributions for the invoice show a Tax Exchange Rate Variance of 0.3 and a Tax Rate Variance of $20.00.
To illustrate an Invoice Price Tax Rate Variance, assume that the invoice is the same as as above, but the Unit Price changes from $100.00, as shown on the Purchase Order, to $200.00. The Tax Amount also changes as a result of the change in Unit Price.
Invoice
| Item Amount | Payment Currency | Exchange Rate | Unit Price | Tax Amount | Invoice Amount |
|---|---|---|---|---|---|
| 100.00 | CAD | 1.1 | 200.00 | 40.00 | 120.00 |
To define tax tolerances, enabled the Allow Override for Calculated Tax Lines option in E-Business Tax. Tax Tolerances can be defined for any combination of Event Class and Configuration Owner. Tax Tolerances determine when Tax Holds are placed on an invoice. E-Business Tax places a hold on an invoice when a calculated tax line is updated and the updated tax amount exceeds the specified tolerance. Use E-Business Tax to release a tax hold.
For more information on tax tolerances and tax holds, see: Defining Tax Tolerances.
The following tax drivers appear on the invoice header and are used to determine tax applicability and calculate taxes for invoices:
Invoice Date
Supplier Name
Supplier Number
Supplier Site Invoice
Currency Related Invoice
Taxation Country
Credited Invoice (Quick Credit)
Exchange Rate
Exchange Rate Type
Exchange Rate Date
Invoice Sub-Type
The following tax drivers appear on the invoice lines and are used to determine tax applicability and calculate taxes for invoices:
Type
Quantity Invoiced
Unit of Measure
Unit Price Amount
PO Number
PO Release Number
PO Shipment Number
Receipt Number
Default Account
Inventory Item
Business Category
Primary Intended Use
Fiscal Classification
Product Fiscal Classification
Product Type
Product Category
Ship-To
Country of Supply
Assessable Value
Control Amount
You can change the tax from inclusive to exclusive or vice versa on the transaction. Payables provide an ability to make the taxes applicable as inclusive or exclusive while entering the invoices, depending on the business practice and after looking at the physical invoice available. You can decide whether a tax is inclusive or exclusive on the fly for a transaction.
You can override the Inclusive Flag in Tax details page for the system generated tax line. The inclusive flag depends on the setup done for that particular tax in E-Business Tax. From the document (Payables Uptake of E-Business Tax) and other references, it has been noted that the behavior was changed in R12 Payable Invoices with a purpose.
You can override the tax inclusion flag at the Invoice level. In the UK Tax Regime, the law is that the supplier can issue Retail invoices, if the individual supply is more then GBP250, VAT should be shown as inclusive or exclusive values depending on his business practice. For Invoices less then GBP250, the invoice should show exclusive values. They further mentioned that freight invoices also commonly show inclusive and exclusive line items depending on the Customer's business practice. The details of the VAT laws applicable in UK is available on this link.
You can now override Inclusive flag at the Invoice workbench level before the calculation of taxes. When the tax engine used to return inclusive taxes, AP would subtract the item dist amount (net off inclusive taxes) and store tax distributions as exclusive. No more changes were allowed after this point.
On the Tax Details window, you set the taxes applicable on invoice to be inclusive or exclusive, by selecting the Includes tax option that can be overridden in the Tax Details window.
The following Business Rules apply: You can override the Includes tax option in the Tax Detail window based on the setup in the EB Tax and before the invoice is undergone any of these changes:
Accounted
Having any Prepayments Applied
Paid or Partially paid
Withholding tax is calculated
Encumbered for the first time. This implies that once encumbrance is created on an invoice, the Includes Tax flag cannot be edited.
You cannot override the Includes Tax option in the Tax Summary window.
For Tax Only Line on an invoice, the Includes Tax option is not editable.
For Expense Reports, the Includes tax option is not editable on Tax Summary window. The Taxes for expense reports will always be Inclusive.
For PO or Receipt Matched Invoices, the Includes tax option in the Tax Detail window is disabled.
For Inter-company Transactions and Manual Tax Lines entered in the Invoice Workbench, you cannot override the Inclusive Tax value.
For Self Assessed Tax lines and Offset Tax lines as well, the Inclusive Tax option cannot be overridden.
For manual tax lines entered in the tax details window, you can select the Inclusive Tax option to includes tax only at the time of entering the tax line. Once the tax line is saved, you cannot override it.
Special Inclusive tax handling is not supported. Only Standard Inclusive Handling is supported. For the Quick Credit Memo transaction type, Applied Credit Memo and Applied Debit Memo (created using corrections or Create Debit Memo From RTS transactions), which are created by copying the data from the Invoice, the Inclusive Tax option cannot be overridden.
Once an inclusive tax is calculated, you cannot split the item distributions. If you want to modify the distributions, then discard the item line.
For upgraded Invoices, you cannot override the Inclusive Tax option.
When setting up taxes, if you selected the Applied Amount Handling option as Recalculated, then for such taxes the Inclusive Tax cannot be overridden for the Prepayment type Invoices.
For Cancelled Tax lines, you cannot override the Inclusive taxes.
In the tax details window, for a tax already calculated, if you change the inclusive option and also other values such as tax rate, tax status, then the calculation is done based on the tax percentage and the most recent value of the Inclusive tax as specified on the item line before the values were modified. For example,
Item Line = 100$
Tax - Exclusive at 10% = 10$
If you change the Include Tax value in the Tax Details window and change the Tax Rate to 15%, then the application ignores the modified tax rate of 15%. The tax rate is calculated based on the value specified on the Item line prior to change which is 10% Inclusive on 100$ that comes to 9.09.
Note: For an Invoice, if a Prepayment is applied, then you cannot override the inclusive tax. You can override the Inclusive Tax option when you unapply the prepayment.
For an already paid Invoice, you cannot override the inclusive tax option. However, if you void the payment, then you can override the override the inclusive tax option.