Set up tax profiles for the parties involved in your transactions. Parties include:
All legal entities, legal establishments, and operating units in your organization that have a transaction tax requirement.
Your customers and suppliers and their locations.
Tax authorities that administer tax rules and regulations.
A tax profile is the body of information that relates to a party's transaction tax activities. A tax profile can include tax registration, tax exemptions, configuration options, main and default information, party fiscal classifications, tax reporting codes, and account tax details.
The tax registration contains information related to a party's transaction tax obligation with a tax authority for a tax jurisdiction where it conducts business. The tax registration is part of the tax profile of a first party legal establishment and a third party and third party site. A tax exemption defines, for a customer or a customer and product, a discount or replacement percentage that reduces the applicable tax. The configuration options identify the tax regimes associated with a first party and the configuration owner and service provider settings associated with each tax regime. The configuration options are part of the tax profile of configuration owners, that is, first party legal entities and operating units owning tax content. The main and default information identify characteristics of and default values for the transactions associated with a party. The party fiscal classifications optionally assigned to a party are used as determining factors in tax rules. The tax reporting codes optionally assigned to a party capture tax information from party transactions for both internal and tax authority reporting requirements. The account tax details maintain Release 11i migrated tax information for customer and supplier accounts.
Set up legal entities and establishments using the Oracle Legal Entity Manager. You can also enter tax profile and tax jurisdiction information when you create and update legal entities, as well as tax-related information for associated business entities. If you set up country defaults for the countries where you do business, then these values default to the legal entities and associated tax profiles created within the applicable country. See: Setting Up Country Default Controls for more information.
You can let a first party self-assess the taxes calculated on the Payables invoices it receives. A self-assessed tax is a tax calculated and remitted for a transaction, where tax was not levied by the supplier but is deemed as due (and therefore needs to be paid by the purchaser). In such cases the purchaser is responsible for calculating and remitting the tax. Self-assessment is also known as reverse charge or use tax in certain tax regimes.
When self-assessment applies to a tax line, E-Business Tax creates the recoverable and/or non-recoverable distributions, and Payables creates an additional accounting distribution to record the liability for the self-assessment.
You can set the self-assessment option:
At the tax profile level to default to the tax registrations that you create for this party.
At the tax registration level.
On an individual tax line.
E-Business Tax applies self-assessment to Payables invoices received by the first party according to the tax registration setting of the Set for Self Assessment/Reverse Charge option. The specific tax registration record that E-Business Tax uses is derived either from Determine Tax Registration rules or from the default tax registration.
Under normal circumstances, the Determine Tax Registration rules or default tax registration will derive the Bill From party as the place of supply for purchase transactions where the supplier is responsible for calculating the transaction tax and collecting it from the customer. In the case of Self Assessment, Reverse Charge, or, in the United States, Use tax, customers are responsible for self-assessing the tax. Customers will therefore self-assess under their own tax registration, and the Determine Tax Registration rules or default tax registration will derive instead the Bill To party registration. In this case, you expect to see the Set for Self Assessment/Reverse Charge option set on the applicable first party establishment registration record.
Depending on the level at which this first party establishment tax registration is created, the self-assessment will apply to:
All taxes of the tax regime, if the tax registration is defined for the tax regime only.
All tax jurisdictions of the tax, if the tax registration is defined for the tax regime and tax.
A specific tax jurisdiction of the tax, if the tax registration is defined for the tax regime, tax, and tax jurisdiction.
See: Tax Determination Processing for more information.
Set up tax profiles for your first party legal entities and legal establishments. First party legal entities identify your organization to the relevant legal authorities, for example, a national or international headquarters. First party legal establishments identify each office, service center, warehouse and any other location within the organization that has a tax requirement. When you create a legal entity, the system automatically creates a legal entity establishment. You can create additional legal establishments according to your needs. For each legal establishment there are one or more tax registrations, depending upon the tax requirements of the applicable tax authority.
Before you can set up first party tax profiles, you may need to complete one or more of these tasks:
Set up legal entities and legal establishments. (mandatory)
Set up legal entity secondary establishments. (optional)
Set up tax regimes. (mandatory)
Set up taxes. (optional)
Set up tax jurisdictions. (optional)
Set up lookup codes. (optional)
Set up party fiscal classifications. (optional)
Set up tax reporting types. (optional)
To set up a party tax profile for a first party legal entity or first party legal establishment:
Navigate to the Party Tax Profiles page.
Select a first party legal entity or establishment.
Navigate to the Create Tax Profile page.
Party main information values default to all tax registrations and invoices belonging to this party. You can update these values at the tax registration level and, if authorized, at the invoice line level.
Note: The values set at the tax registration level override the values set at the party tax profile level.
Check the Set for Self Assessment/Reverse Charge box to automatically self-assess taxes on purchases.
If applicable, enter a tax classification code to use as a determining factor in tax rules for this party or party site. See: Using Tax Classification Codes for more information.
Set the rounding level and rounding rule for this party. See: Rounding Rule Retrieval Process for more information.
Use the event class options to review the rounding precedence hierarchy for specific applications and event classes. If you updated the rounding precedence hierarchy for a specific configuration owner and event class, then the related transactions look instead for rounding level information according to the configuration owner and event class settings. See: Setting Up Configuration Owner Tax Options for more information.
If this party intends to send or receive invoices with invoice line amounts inclusive of tax, check the Set Invoice Values as Tax Inclusive box.
This option overrides the tax inclusive handling setting at the tax level, but not at the tax rate level. See: Setting Up Tax Rates for more information.
If this is a first party legal establishment, set up the tax registrations required for this party. See: Setting Up a Tax Registration.
If applicable, associate party fiscal classification codes with this party. You can use these codes as determining factors in tax rules to calculate taxes for invoices associated with this party. See: Setting Up Party Fiscal Classifications for more information.
If you associated tax reporting types with party tax profile, enter any applicable tax reporting codes. See: Setting Up Tax Reporting Types for more information.
If this is a first party legal entity, enter the tax configuration options. See: Setting Up Configuration Options.
Use the Oracle Legal Entity Manager to set up each tax authority as a legal authority for transaction tax.
Set up a tax profile for each of your tax authority party records. The tax authority party tax profile identifies a tax authority party as a collecting authority and/or a reporting authority. A collecting tax authority manages the administration of tax remittances. A reporting tax authority receives and processes all company transaction tax reports.
The collecting and reporting tax authorities appear in the corresponding list of values on all applicable E-Business Tax pages. All tax authorities are available in the list of values as an issuing tax authority.
If you associated tax reporting types with party tax profile, enter any applicable tax reporting codes. See: Setting Up Tax Reporting Types for more information.
Operating units organize your company data according to your internal accounting, financial monitoring, and reporting requirements. Legal entities let you more accurately model your external relationships to legal authorities. The relationships between first party legal entities and the relevant tax authorities normally control the setup of the transaction taxes required by your business. Under most circumstances the tax setup is used and maintained based on the configuration of the legal entity.
Release 11i tax data in Payables, Receivables, and other applications migrates to E-Business Tax as operating units containing their own tax content. To help you manage the tax content of operating units, you can use the operating unit tax profile in either of two ways:
Indicate that tax setup is used and maintained by a specific operating unit; or
Indicate that operating unit tax setup is used and maintained based on the configuration of the associated legal entity at transaction time. The tax setup of the associated legal entity setup is either specific to the legal entity or shared across legal entities using the Global Configuration Owner setup. See: Configuration Options in Oracle E-Business Tax for more information.
To use the configuration of the associated legal entity, check the Use Subscription of the Legal Entity box in the operating unit party tax profile. This is an irreversible setting--once you associate the operating unit with its legal entity, you cannot update the operating unit tax profile or maintain separate tax content for this operating unit.
If an operating unit uses the application tax options defaulting hierarchy for tax classification codes, E-Business Tax continues to use this hierarchy to default a tax classification code on transactions even if the operating unit uses the subscription of the legal entity. See: Using Application Tax Options for more information.
In cases where you need to maintain tax content for an operating unit, enter and maintain the operating unit tax configuration options. See: Setting Up Configuration Options.
For active operating unit tax profiles, if you associated tax reporting types with party tax profile, enter any applicable tax reporting codes. See: Setting Up Tax Reporting Types for more information.
Set up third party tax profiles for your customers and customer sites and suppliers and supplier sites. You can also maintain migrated tax information for your customers and suppliers for backward compatibility.
Before you can set up third party tax profiles, you may need to complete one or more of these tasks:
Set up parties. (mandatory)
Set up tax regimes. (optional)
Set up taxes. (optional)
Set up tax jurisdictions. (optional)
Set up lookup codes. (optional)
Set up party fiscal classifications. (optional)
Set up tax reporting types. (optional)
Set up customer and supplier accounts. (optional)
To set up a party tax profile for a third party:
Navigate to the Party Tax Profiles page.
Select a third party or third party site.
Navigate to the Create Tax Profile page.
Party main information values default to all tax registrations and invoices belonging to this party. You can update these values at the tax registration level and at the invoice line level.
Note: The values set at the tax registration level override the values set at the party tax profile level.
Check the Allow Tax Applicability box to automatically calculate taxes for this party whenever the party acts as a supplier. You can set this option, for example, for customers that also act as suppliers on transactions.
Check the Allow Offset Taxes box to allow calculation of offset taxes with this party or party site.
You must also perform the related tasks for setting up offset taxes for the taxes involved in transactions for this third party or third party site. See: Setting Up Offset Taxes for more information.
If applicable, enter the default tax classification code to use as a determining factor in tax rules for this party or party site. E-Business Tax defaults a tax classification code to the transaction line according to the application tax options defaulting hierarchy defined for the combination of operating unit and application. See: Using Application Tax Options for more information.
Set the rounding level and rounding rule for this party. See: Rounding Rule Retrieval Process for more information.
Use the event class options to review the rounding precedence hierarchy for specific applications and event classes. If you updated the rounding precedence hierarchy for a specific configuration owner and event class, then the related transactions look instead for rounding level information according to the configuration owner and event class settings. See: Setting Up Configuration Owner Tax Options for more information.
If this party or party site intends to send or receive invoices with invoice line amounts inclusive of tax, check the Set Invoice Values as Tax Inclusive box.
This option overrides the tax inclusive handling setting at the tax level, but not at the tax rate level. See: Setting Up Tax Rates for more information.
Set up the tax registrations required for this party or party site:
Set defaults for all tax reporting for tax registrations of this party or party site for country, tax registration number, and tax registration type.
Complete the tax registration setup. See: Setting Up a Tax Registration.
If applicable, associate third party fiscal classification codes with this party. The party fiscal classification codes you enter become part of tax determination for invoices associated with this party. See: Setting Up Party Fiscal Classifications for more information.
If this is a customer third party or third party site, set up the applicable tax exemptions. See: Setting Up Tax Exemptions for more information.
If you associated tax reporting types with party tax profile, enter any applicable tax reporting codes. See: Setting Up Tax Reporting Types for more information.
Use the Account Tax Details region to maintain migrated account tax information. Use the third party site Supplier Site Tax Details region to maintain operating unit supplier site tax information. Use the third party site Customer Account Site Business Purpose Tax Details region to maintain operating unit customer account ship-to site and bill-to site tax information.
For each third party and third party site, E-Business Tax only displays the fields that contain migrated data. If there is no migrated data for a particular account, then the corresponding fields are not displayed. Once you create a tax registration record for the third party or third party site, E-Business Tax no longer uses the Account Tax Details region for this party/party site.
This region captures migrated third party tax details, including rounding information, tax classification codes, and third party site operating unit account details. Invoice controls defined at the tax registration level override account tax detail values.
If applicable, update third party account tax details:
Account Number - The third party account number.
Rounding Level (Header/Line) - This setting takes precedence over the Main party tax profile setting for invoices that apply to this third party.
Rounding Rule (Up/Down/Nearest) - The rounding rule defined at the tax registration level for a tax or tax jurisdiction that applies to transactions for this third party takes precedence over this setting.
Tax Classification - The tax classification code to use in tax determination for this third party. This tax classification code takes precedence over the Main party tax profile setting for invoices that apply to this third party.
If applicable, update third party supplier site tax details:
Operating Unit - The operating unit for this supplier site account.
Site Name - The name of the supplier site.
Tax Registration Number - The supplier site tax registration number.
Allow Offset Taxes (Yes/No) - If you set this option to Yes, then you must set up offset taxes for the taxes that apply to transactions for this operating unit and supplier site. See: Setting Up Offset Taxes for more information.
Rounding Rule (Up/Down/Nearest) - The rounding rule defined at the tax registration level for a tax or tax jurisdiction that applies to transactions for this operating unit and supplier site takes precedence over this setting.
Set Invoice Values as Tax Inclusive (Yes/No) - If you set this option to Yes, the same option setting at the tax registration level for a tax or tax jurisdiction that applies to transactions for this operating unit and supplier site takes precedence over this setting.
Tax Classification - The tax classification code to use in tax determination for this operating unit and supplier site. This tax classification code takes precedence over the Main party tax profile setting for invoices that apply to this operating unit and supplier site account.
If applicable, update third party customer account site business purpose tax details:
Operating Unit - The operating unit for this customer site account.
Account Number - The customer site account number.
Tax Registration Number - The customer site tax registration number.
Rounding Level (Header/Line) - This setting takes precedence over the Main party tax profile setting for invoices that apply to this operating unit and customer account site.
Rounding Rule (Up/Down/Nearest) - The rounding rule defined at the tax registration level for a tax or tax jurisdiction that applies to transactions for this operating unit and customer site account takes precedence over this setting.
Tax Classification - The tax classification code to use in tax determination for this operating unit and customer site account. This tax classification code takes precedence over the Main party tax profile setting for invoices that apply to this operating unit and customer site account.
Geography Type Classification - If previously defined, this field displays the migrated geography type of the Receivables condition sets or group constraint for this operating unit and customer site account.