Set up tax formulas to use in tax rules for taxable basis determination and tax calculation. You set up tax formulas in cases where the tax amount is other than the line amount multiplied by the tax rate.
If a tax does not require a more complex formula for taxable basis determination or tax calculation, you can set up E-Business Tax to use the standard formulas.
You can set up a tax formula for these tax rules:
Determine Taxable Basis. This rule determines the amount or quantity on the transaction line that E-Business Tax uses to apply the tax rate. The standard taxable basis formulas are Taxable Basis = Line Amount and, for quantity-based rates, Taxable Basis = Quantity. If the tax requires a taxable basis other than the line amount or the line quantity, then create a taxable basis tax formula, and either associate it with a Determine Taxable Basis tax rule for the applicable tax regime and tax or set it as the default taxable basis for a tax.
For example, if the tax requires compounding with other taxes, then define a taxable basis formula and specify these taxes in the formula. If the taxable basis needs to be multiplied by a factor, you can specify this as a base rate modifier.
Calculate Tax Amounts. This rule determines the calculation E-Business Tax uses to calculate the tax amount on the transaction line. The standard tax calculation formula is Tax Amount = (Taxable Basis) * (Tax Rate). If the tax amount is to be altered by adding or subtracting the tax amount of another tax , then create a tax calculation tax formula, and either associate it with a Calculate Tax Amounts tax rule for the applicable tax regime and tax or set it as the default tax calculation formula for a tax.
The formula details of a taxable basis tax formula specify how the information on the transaction line is used to derive the taxable base amount. E-Business Tax then calculates the tax amount using the taxable base amount. Taxable basis tax formulas always apply to a specific tax regime and tax.
A tax calculation tax formula first applies the tax rate percentage to the taxable basis and alters the resulting (provisional) tax amount by adding or subtracting the tax amounts of taxes you entered in the compounding details. You can create a tax calculation tax formula for a specific tax regime and tax, or you can create a generic tax calculation tax formula without a tax assignment. At transaction time, E-Business Tax selects the tax calculation formula to use based upon a successfully evaluated tax rule.
Before you can set up a tax formula, you may need to complete one or more of these tasks:
Set up tax regimes. (mandatory)
Set up taxes. (mandatory)
Enable the applicable cross-regime compounding and compounding precedence. (optional)
To set up a tax formula:
Navigate to the Create Tax Formula page.
Enter the configuration owner for this tax formula.
All tax formulas refer to the tax regimes and taxes of the configuration owner.
Enter the tax formula code and name to identify this tax formula.
Use a naming convention that identifies both the use and ownership of this tax formula. This can include the formula type, the taxable basis, the tax regime, and the tax.
If applicable, enter the regime code to associate with this tax formula. You must enter a regime code if:
Configuration owner is a legal entity or operating unit, that is, the tax formula is not shared with other configuration owners.
Tax formula applies to a specific tax regime only.
This is a taxable basis tax formula.
If applicable, enter the tax to associate with this tax formula. These rules apply to entering a tax:
Enter a tax if the tax formula applies only to a specific tax within a tax regime.
Enter a tax if this is a taxable basis tax formula.
Enter the effective date range for this tax formula.
Depending upon the use of the tax formula, enter a date range that is within the date range of the tax regime, tax, and the tax rules that use this formula.
Select the formula type of Tax Calculation or Taxable Basis.
If this is a taxable basis tax formula, select the taxable basis type:
Assessable Value - Taxable base amount is the special value associated with the transaction item.
Line Amount - Taxable base amount is:
Transaction line amount.
Line amount plus any associated charges and/or minus any associated discounts.
Line amount plus the calculated tax amount of another tax or taxes.
Prior Tax - Taxable base amount is based on the calculated tax amount of a another tax or taxes not part of the line amount.
Quantity - Taxable base amount derives from the number of units per measure for a tax associated with a quantity-based rate.
If the taxable basis type is Line Amount, complete the Line Amount Options region. If you leave the region fields blank and do not enter compounding details, E-Business Tax uses the standard formula Taxable Basis = Line Amount:
Base Rate Modifier - Enter the percentage rate (without using the percent sign) by which the line amount is increased or decreased. Enter a negative base rate to decrease the line amount. For example:
To increase the taxable basis from 1000 to 1500, enter 50.
To decrease the taxable basis from 1000 to 400, enter -60.
Subtract Cash Discount - Subtract any cash discount specified on the transaction line from the line amount (Receivables transactions only).
If the taxable basis type is Line Amount or Prior Tax, or if this is a tax calculation tax formula, enter the compounding regime code and compounding tax in the Create Tax Formula Compounding Details region:
If the tax regime entered in the formula header region does not have cross-regime compounding enabled, then you can only enter this tax regime. The available taxes are limited to the taxes in this tax regime with a lower compounding precedence than the compounding precedence of the tax entered in the formula header region.
If the tax regime entered in the formula header region has cross-regime compounding enabled, then you can enter any tax regime that has a lower compounding precedence than the tax regime entered in the header region.
If the taxable basis type is Line Amount, the tax is calculated based on the transaction line amount plus the compounding tax amount.
If the taxable basis type is Prior Tax, the tax is calculated based on the calculated tax amount of the compounding tax.
If this is a tax calculation tax formula, use the compounding rule to add or subtract the tax amount of a compounding process to or from the standard or provisional tax amount. (The standard or provisional tax amount is arrived at by applying the tax rate to the taxable basis.)
If applicable, enter any additional tax regimes and taxes. Taxes are compounded in ascending order, beginning with the first tax regime and tax entered.
Set the Enforce Compounding option to Yes if you want E-Business Tax to display an error message if, during tax calculation, this compounded tax is not considered applicable to the transaction line.
Use the Update Tax Formula page to update the details of a tax formula. By default, a tax formula is enabled for use according to the effective date range. If an active tax rule is using the tax formula, then you can only disable the tax formula, or apply an end date if one did not exist. A disabled tax formula also disables all parts of the tax rules that use this formula.
These rules apply to updating the other fields of a tax formula:
If you change the formula type, then complete the required setup for the new formula.
If you change the tax and/or tax regime assigned to the tax formula, then update any cross-regime compounding according to the new tax regime/tax assignment.