The legal entities and operating units in your company are each subject to specific sets of tax regulations as designated by the tax authorities where you do business. Often these tax regulations apply to all parties of the company doing business under a certain jurisdiction. In other cases, individual parties may be subject to special regulations or receive special dispensations or rates.
The tax regimes that you create identify the taxes and the set of regulations that make up each tax requirement. Configuration options identify the relationships between parties and tax regimes to reflect the tax requirements of each party.
Use configuration options to associate legal entities and operating units with their applicable tax regimes. The association between a party and a tax regime includes these definitions:
Configuration for Taxes and Rules - The setup that the party uses for taxes, tax statuses, tax rates, tax recovery rates, and tax rules.
Configuration for Product Exceptions - The setup that the party uses for product tax exceptions.
Service Subscriptions - The external service providers that the party uses in place of Oracle E-Business Tax to provide tax calculation services for US Sales and Use Tax. See: Setting Up Service Subscriptions for more information.
Your tax setups reflect the tax regulations that a party is subject to in each separate tax jurisdiction. You can apply the tax setups that you create to the entire company, or you can let individual parties within the company supplement parts of the tax setup to fulfill specific requirements. You can also let a party create and maintain its own tax setup. When a party supplements tax setup, or creates and maintains tax setup, it becomes a configuration owner of this setup. Otherwise, the party shares the tax setup of the global configuration owner.
E-Business Tax provides the global configuration owner to represent ownership of all tax setups at the company level. The configuration options that you set for each party/regime combination are in relation to the global configuration owner. These options are:
Common Configuration - The party uses the company tax setups for the applicable regimes. All parties with a Common Configuration option share the same tax setup.
When setting up taxes, tax details, and configuration owner tax options, the global configuration owner represents any party with a Common Configuration. Authorized updates to the tax setup affect all users of the Common Configuration.
Common Configuration with Party Overrides - The party uses the company tax setups for the applicable regimes, but with the ability to change, or override, portions of the company tax setup with tax setup specific to the party's requirements.
Party-Specific Configuration - A legal entity or operating unit party does not share the company tax setup, but instead creates and maintains its own tax setup for the applicable regimes. In this case, only this party can use the tax setup it creates.
You may need to analyze the specific tax requirements of each legal entity and operating unit in your company for each tax regime and country, to determine how to designate each party as a configuration owner. Tax regulations within a tax regime may apply to all or most parties, with individual exceptions, while other parties, because of line of business, places of operation, or some other reason, may have unique tax requirements that demand a separate tax setup.
The Common Configuration option provides the maximum sharing of tax setup among the parties in your company with the minimum amount of maintenance. All parties that are subject to the tax regulations of a given tax regime should use the Common Configuration option, unless it is necessary to create party-specific overrides. When you set up taxes in a tax regime, the available list of configuration owners is limited to the configuration owners associated with the tax regime. If the configuration owner is the global configuration owner or a Party-Specific Configuration, the statuses, rates, recovery rates, and rules belonging to the tax inherit the same configuration owner.
For Release 11i migrated data, the configuration owner of the tax setup converts to E-Business Tax in this way:
Tax codes. Party-Specific configuration, with the operating unit owning its tax setup.
Location-based tax codes. Common Configuration, with the global configuration owner owning the location-based tax setup.
The Configuration Owner Tax Options page displays the E-Business Tax tax option settings for each migrated operating unit. You can update certain of these settings according to your requirements. See: Setting Up Configuration Owner Tax Options for more informations.
Where applicable, you can also update the party tax profile of migrated operating units to use the shared tax setup of the legal entity to which it belongs. E-Business Tax uses the legal entity setting to calculate taxes on transactions for the operating unit. See: Party Tax Profiles in Oracle E-Business Tax for more information.
The configuration option setting for product exceptions determines whether the product tax exceptions defined for this tax regime are shared with other parties or remain specific to one party.
If the configuration option for taxes and rules is Common Configuration or Party-Specific Configuration, then E-Business Tax assigns the same setting to the configuration option for product exceptions.
If the configuration option for taxes and rules is Common Configuration with Party Overrides, you can set the configuration option for product exceptions to Common Configuration to let the party use the product tax exceptions of the global configuration owner; or Party-Specific Configuration to let the party set up its own product tax exceptions that are not shared with any other party.
With configuration options, you can define relationships between parties and tax requirements that reflect the specific taxation needs of your company and the way it is organized. These include:
One legal entity owns and maintains its tax configuration.
Multiple operating units of one legal entity share the legal entity tax configuration.
Multiple legal entities share the same tax configuration.
Multiple legal entities share the same tax configuration, with individual legal entities able to override the shared tax configuration for requirements specific to the legal entity, including tax, tax status, tax rate, and tax rules and formulas.
One or more operating units of one legal entity own and maintain a separate tax configuration.
A legal entity, or an operating unit that owns and maintains a separate tax configuration, uses third party tax services for specific transaction events.
Set up configuration options to associate tax regimes with the parties in your company that have a tax requirement under these tax regimes. You can set up tax configuration options when you create a tax regime or when you create a party tax profile for a first party legal entity or operating unit. Both setup flows display and maintain the same party/regime definitions.
Configuration options only apply to tax regimes directly linked to taxes and not to tax regimes that are used to group other tax regimes.
You must set the eBTax: Read/Write Access to GCO Data profile option before you set up configuration options. Any authorized user can maintain the common tax setup associated with the global configuration owner. See: Setting Profile Option Values for more information.
Before you can set up configuration options, you may need to complete one or more of these tasks:
Set the eBTax: Read/Write Access to GCO Data profile option. (mandatory for Global Configuration Owner setup)
Set up tax regimes. (mandatory)
Set up party tax profiles. (mandatory)
To set up a configuration option:
Navigate to the Configuration Options page.
If you are setting up a tax regime, enter the party name. If you are setting up a party tax profile, enter the tax regime code.
Select the configuration option for taxes and rules and the configuration option for product exceptions for this combination of party and tax regime.
Unless you select the taxes and rules configuration option Common Configuration with Party Overrides, the product exception configuration option defaults to the taxes and rules configuration option.
If you select the taxes and rules configuration option Common Configuration with Party Overrides:
Select Common Configuration to let the party use the product tax exceptions of the global configuration owner for this tax regime.
Select Party-Specific Configuration to let the party set up its own product tax exceptions for this tax regime that are not shared with any other party.
If you select the taxes and rules configuration option Common Configuration with Party Overrides, E-Business Tax enables the Copy and Override icon on the regime to rate flow for this configuration owner and tax regime.
Enter the effective date range for this configuration option. Enter a date range that is within the date range of both the party tax profile and the tax regime.
If you want to use an external service provider for this configuration option, navigate to the Service Subscriptions page. See: Setting Up Service Subscriptions for more information.