Set up tax rules to define the factors that can apply to the calculation of a tax on a transaction. You need to set up tax rules when default values alone cannot satisfy all of the potential tax requirements for the given tax.
You create a separate set of tax rules for each combination of configuration owner, tax regime, and tax. If a party configuration option is set to Common Configuration with Party Overrides, then at transaction time E-Business Tax considers the tax rules of both the party and the Global Configuration Owner for the same tax regime and tax. See: Setting Up Configuration Options for more information.
You can create one or more tax rules for each rule type, according to the requirements of the tax regime. You can also designate a default value for certain rule types to use if none of the active tax rules satisfy the requirements of the transaction.
A tax rule is defined by:
Ownership information - Identifies the tax rule configuration owner. If the configuration owner is a legal entity or operating unit, then the rule only applies to the transactions of this legal entity or operating unit. If the configuration owner is the Global Configuration Owner, then the rule applies to the transactions of all legal entities and operating units with a configuration option setting for the tax regime of either Common Configuration or Common Configuration with Party Overrides.
Context information - Identifies the tax regime, tax, and rule type for which a rule is defined.
Rule order - Identifies the order in which a rule is evaluated.
You cannot repeat a rule order for the same tax regime, tax, and rule type for the same configuration owner. If the configuration option setting is Common Configuration with Party Overrides, you cannot repeat a rule order for the same tax regime, tax, and rule type for either the same configuration owner or the Global Configuration Owner.
Additional context information - Applies further restrictions to a rule:
Transactions belonging to a specific application event class.
Transactions belonging to a specific application tax event class.
Transactions belonging to a specific location.
Determining factor set - Identifies the factors to consider when evaluating the tax rule. See: Setting Up Tax Determining Factor Sets for more information.
Tax condition set - Identifies the conditions (from one or more of the determining factors belonging to the determining factor set) to satisfy in order evaluate a tax condition set successfully. See: Setting Up Tax Condition Sets for more information.
Result - The value that results when the tax conditions are satisfied.
For the direct tax rate determination rule type, multiple results may apply to the successful evaluation of a tax condition set. See: Using Direct Tax Rate Determination for more information.
If you associated tax or legal justification reporting types with tax rules, then enter any applicable tax reporting codes.
Before you can set up a tax rule, you may need to complete one or more of these tasks:
Set up tax regimes. (mandatory)
Set up taxes. (mandatory)
Set up tax statuses. (mandatory)
Set up tax jurisdictions (optional)
Set up tax rates and enable the Allow Tax Rate Rules option. (mandatory)
Set up TCA geography hierarchy structures. (mandatory, if required by the tax rule)
Set up tax zones. (mandatory, if required by the tax rule)
Set up fiscal classifications. (mandatory, if required by the tax rule)
Set up determining factor sets. (conditionally mandatory - you can set up during expert or guided tax rule entry)
Set up tax condition sets. (conditionally mandatory - you can set up during guided tax rule entry only)
Set up taxable basis tax formulas. (mandatory for the rule type Determine Taxable Basis)
Set up tax calculation tax formulas. (mandatory for the rule type Calculate Tax Amounts)
Set up tax recovery rates. (mandatory for the rule type Determine Recovery Rate)
Use the tax rules guided rule entry to set up both a tax rule and the determining factor set and tax condition set that the tax rule uses at the same time. The guided rule entry provides step-by-step guidance to build a tax rule according to the context information, determining factors, and default values that you want to use. When you are more conversant with rule concepts, you can use the expert rule entry to define tax rules more quickly.
This table indicates how to find each determining factor class in the guided rule entry: You use determining factors to enter one or more tax conditions that need to be satisfied for the result to apply. The tax conditions are separated into three tabs:
Transaction - Conditions that relate to the transaction itself.
Party - Conditions that relate to the parties of the transaction.
Product - Conditions that relate to the product that is transacted.
| Tab | Region | Determining Factor Class and Names |
|---|---|---|
| Transaction | Locations |
|
| Transaction | Additional Factors available on Transaction line |
|
| Transaction | Documentation Classification |
|
| Transaction | Transaction Business Category |
|
| Transaction | Transaction Fiscal Classifications |
|
| Party | Party Classification |
|
| Party | Legal Classification Tax Usage |
|
| Party | Registration Status |
|
| Product | Product Classification |
|
| Product | Non-Inventory based Product Classification |
|
| Product | Intended Use |
|
| Product | Account based Intended Use |
|
To set up a tax rule using the guided rule entry:
Navigate to the Tax Rules page.
Enter the configuration owner, tax regime code, and tax.
E-Business Tax displays the rule type HGrid, with the current list of tax rules and default values already defined for the tax, if any.
If applicable, set the default value for the applicable rule type. E-Business Tax uses this value if no rule provides a value that applies to the transaction.
Navigate to the Create Tax Rule: General Information page by selecting the Guided Rule Entry icon for the rule type that you want.
If applicable, enter tax law information:
Enter a code to identify the reference to the tax authority tax law on which the tax rule is based. Create a coding method that clearly identifies the tax laws that you want to reference.
Enter a description of the tax law reference.
Optionally check the "Use the Tax Law Reference and Description as Tax Rule Code and Rule Name" box to use the tax law values as the rule code and name.
If you did not use tax law information, enter a rule code and name.
Enter the effective date range for this tax rule.
You must enter a date range that is within the date range of the tax regime and tax.
If this tax rule applies to specific transactions only, select the event class category for this tax rule:
Event Class - The tax rule applies to transactions of the application that you select. You can apply the tax rule either to a Payables or Receivables application, or to a source application that feeds data into Payables or Receivables for tax processing. See: Tax Handling on Transactions for more information.
You can optionally apply the tax rule to one event class only within the application.
Tax Event Class - The tax rule applies to transactions of the tax event class that you select.
See: Managing Event Class Settings for a description of the event class categories and settings.
If this tax rule applies to a specific geographical location only, enter the geographical information:
Enter the transaction location type to consider for this tax rule. E-Business Tax uses the geography of the location type to evaluate the rule applicability.
If you use a TCA master reference geography type, enter the parent geography type and parent geography name.
Enter the geography type and name to use for this tax rule. You can enter a TCA master reference geography type or a tax zone.
See: Rule Order and Rule Evaluation for a description of how E-Business Tax evaluates tax rules for specific transactions and locations.
Navigate to the Create Tax Rule: Determining Factors and Conditions page.
Create the tax conditions for this tax rule by entering the determining factor, operator, and value for each condition.
You must enter at least one condition to create a tax rule.
Navigate to the Create Tax Rule: Condition Results page.
Enter the tax rule result to use if the conditions you entered in the previous step are satisfied.
See: Process Checklist for Tax Determination and Tax Calculation for an explanation of the available rule results for each rule type.
Navigate to the Create Tax Rule: Rule Order page:
Assign a rule order to this tax rule.
Enable the tax rule for use on transactions.
Note: The actual order in which E-Business Tax evaluates the rules belonging to a rule type also depends on the additional context information defined for the rule, if any. See: Rule Order and Rule Evaluation for more information.
Navigate to the Create Tax Rule: Rule Templates page.
Assign names and save the determining factor set and tax condition set that you created for this tax rule:
The determining factor set contains the determining factor classes, determining factor names, and class qualifiers that you selected. See: Setting Up Tax Determining Factor Sets for more information.
The tax condition set contains the tax conditions derived from the determining factors that you used to create this rule. See: Setting Up Tax Condition Sets for more information.
These sets are available for use in the creation of new tax rules of this rule type for this configuration owner, tax regime and tax.