Set up tax regimes for the taxes in each country and geographic region where you do business and where a separate tax applies. A tax regime associates a common set of default information, regulations, fiscal classifications, and registrations to one or more taxes with the same tax requirement.
The tax regime provides these functions:
groups similar taxes together.
designates the geography within which taxes apply.
defaults the settings and values you define to each tax in the regime.
contributes to the definition of configuration options and third party service subscriptions.
optionally provides a single registration for all taxes associated with the regime.
defines the use of fiscal classifications.
The common tax regime setup is one tax regime per country per tax type, with the tax requirements administered by a government tax authority for the entire country. There are also cases where tax regimes are defined for standard geographical types or subdivisions of a country, such as a state, province, county, or city. In these cases, you base the tax regime on the Trading Community Architecture (TCA) standard geography. See: Setting Up TCA Geography Hierarchy for more information.
There are more rare cases where a tax regime is based on disparate parts of a country or more than one country. In these cases, you can create one or more tax zones and set up tax regimes for these tax zones. See: Setting Up Tax Zones for more information.
You can also set up a tax regime as a parent tax regime to group related tax regimes together for reporting purposes.
You must set up a tax regime before you set up the taxes in the tax regime. Some tax regime values default to the taxes that belong to the regime in order to help minimize tax setup. You can update many of these values at the tax level. See: Setting Up Taxes for more information.
Attention: Do not set up tax regimes and taxes for use with the Latin Tax Engine. The Latin Tax Engine still makes use of the Latin tax categories, tax codes, and tax groups for tax calculation.
You must associate a tax regime with all of the first party legal entities and operating units that are subject to the tax regulations of the regime. See: Configuration Options in Oracle E-Business Tax for more information.
Use the Tax Regimes page to search and display your tax regimes and their related setup. The Tax Regimes page makes use of the Page Hierarchy Personalization user interface to display the hierarchy of tax configuration setups.
Use the Regime to Rate flow icon to display a table for the setups of a particular tax regime. The Regime to Rate flow table lets you drill down into the details of a tax regime setup, including all taxes, tax statuses, and tax rates. You can update existing records or create new records at any point in the regime hierarchy.
See: Using the Page Hierarchy Personalization Page for information about using the Page Hierarchy.
Use the geographic settings in E-Business Tax to define the taxes and tax rates at each geographic level in your countries of operation. E-Business Tax uses the TCA master geography hierarchy to determine the relationships between countries and the territories and geographical regions within a country that belong to them.
For example, the structure for the United States is defined in this way: Country is the parent of State, State is the parent of County, County is the parent of City, and City is the parent of Postal Code. E-Business Tax uses this structure to help determine the taxes and tax rates that apply to each geographic entity within the United States. In this way, a sales transaction that takes place in a city may include taxes at the state, county, and city level.
The complexity of the structure that you need depends upon your countries of operation and the requirements of the tax regimes in those countries. For many tax requirements, the country is the only geographic entity that you will use. Tax regimes with more complex requirements will make use of more levels of a geographic hierarchy. If necessary, ensure that the TCA master geography contains the hierarchy structures that you need for each of your countries of operation.
Note: If you plan to administer any of the following setups, then you must set up a structure in the TCA master geography hierarchy for the applicable country:
Tax jurisdictions within a country to apply separate jurisdiction rates;
Taxes for a country that only apply to a part of the country;
Tax zones comprised of elements within a country.
In E-Business Tax you can set up geographic information at three levels: tax regime, tax, and tax jurisdiction. You can use these levels to define different tax requirements within a geographic hierarchy:
Tax regime. Tax regime level defines a tax that applies to a country or tax zone. For example, the tax regime United States Sales and Use Tax refers to the country United States.
Tax. Tax level defines a tax and the geographic level for the tax, such as a City tax or a County tax.
Tax jurisdiction. Tax jurisdiction level defines a geographic entity and the tax and tax jurisdiction rates, if any, that belong to this entity. For example, a US County Sales Tax jurisdiction for San Francisco county refers to the county San Francisco as a child of the state California as a child of the country United States.
Before you can set up tax regimes, you may need to complete one or more of these tasks:
Set up first party legal entities and operating units.
Set up currencies. (mandatory)
Set up TCA geography hierarchy structures. (mandatory, if required by the country)
Set up party tax profiles. (mandatory for configuration options)
Set up tax zones. (optional)
Set up exchange rate types. (optional)
Set up tax authorities. (optional)
The setup of a new tax regime includes:
Header-level information - Entering header-level information about the tax regime.
Tax-level controls - Setting tax-level controls to enable the options that you want to make available to the taxes in this tax regime. If necessary, you can disable the functionality that you enable here for individual taxes within the tax regime.
Default values - Entering default values for the taxes in this tax regime. You can update the default values at the tax level.
To set up a new tax regime:
Navigate to the Create Tax Regime page.
Enter a unique tax regime code and tax regime name. Use a coding convention that indicates both the country and the kinds of taxes that belong to this regime.
Select the regime level to define the geographic area of the tax treatment. You can only use Group of Countries for parent tax regimes.
If the regime level is:
Country, enter the Country Name.
Group of Countries or Tax Zone, enter the tax geography type and tax geography name associated with the group of countries or the tax zone that you want. The tax geography type and tax geography name correspond to the tax zone type and tax zone respectively.
If applicable, enter parent regime information:
If this tax regime is a parent regime, check the Used to Group Regimes box.
If this tax regime belongs to a parent regime, enter a parent regime code.
Enter the effective period for this regime. The dates you enter default to all related tax setup within the regime.
Note: If you enter an Effective To date, you cannot update this date after you save the record.
Note: Consider your tax planning carefully before entering the tax regime Effective From date. This date must accommodate the oldest transaction that you want to process within this tax regime. After you create the tax regime, you can only update this date with an earlier date.
Set tax-level controls for this tax regime:
Allow Tax Recovery - Lets you set up tax recovery for the taxes in this tax regime.
You must set this option to set up tax recovery definitions at the tax level and to set up tax recovery rates for taxes in this tax regime. See: Setting Up Taxes and Setting Up Tax Recovery Rates for more information.
Allow Override and Entry of Inclusive Tax Lines - Lets you change the setting for tax inclusive handling at the tax level.
You should only set this option if the taxes in this tax regime vary in their treatment of tax inclusive handling. For example, if all taxes in this tax regime are inclusive of tax for all transactions, then do not set this option.
Allow Tax Exemptions - Lets you set up customer tax exemptions for this tax. A tax exemption is a full or partial exclusion from taxes within a given time period.
You must set this option to set up tax exemptions for this tax regime and for taxes in this tax regime. See: Setting Up Tax Exemptions for more information.
Allow Tax Exceptions - Lets you designate special tax rates for specific products as determined by the tax authorities. A tax exception is a condition or combination of conditions that result in a change from the standard values for a particular product.
You must set this option to set up product tax exceptions for taxes in this tax regime. See: Setting Up Tax Exceptions for more information.
Enter a tax currency. The tax currency is the currency required by the tax authority. You use the tax currency to pay the tax authority and to report on all tax transactions.
The tax currency may differ from the ledger currency and transaction currency. The ledger currency is the accounting currency of your ledger. The transaction currency is the currency or currencies used on your transactions.
If necessary, enter the exchange rate type to use to convert the transaction currency to the tax currency.
Enter the tax rounding parameters to use for all taxes in this regime:
Minimum accountable unit is the smallest unit a tax amount can have.
Rounding rule is the method to use to round off taxes to the minimum accountable unit.
Tax precision is a one-digit number that indicates the number of decimal places to which to calculate tax. Enter a precision of 0 to round to a whole currency unit.
For example, to round off a calculated tax amount of 1.466 to 1.47, define a tax precision of 2, a rounding rule of Up or Nearest, and a minimum accountable unit of .01.
If you want to apply different tax rounding parameters to an individual tax, then set the Allow Tax Rounding Override option.
Note: If you plan to use a third party service provider, then you must define tax rounding information that is at least as detailed as the rounding information of the service provider. See:Setting Up Service Subscriptions for more information.
Enter the default tax authority to use on your tax reports, for the submission of tax reports (Reporting) and the submission of tax remittances (Collecting).
Use the Allow Tax Inclusion field to define the nature of tax inclusive handling. Tax inclusive handling defines the relationship, as designated by the tax authority, between the line amount and the tax amount:
Standard Inclusive Handling - The price on the transaction line is inclusive of tax.
Standard Non-Inclusive Handling - The price on the transaction line is exclusive of tax. The tax amount is added to the price.
Special Inclusive Handling - Use this option for special tax handling, such as a taxable base amount based upon the line amount rather than the adjusted line amount, or based on the line amount plus another tax amount. See: Setting Up Tax Formulas for more information.
Note: If you do not set standard inclusive handling for the taxes in this tax regime, you can still set this option for individual parties involved in transactions. See: Party Tax Profiles in Oracle E-Business Tax for more information.
If you set the Allow Tax Recovery option, select the default recovery settlement:
Immediate - Tax recovery is available at invoicing.
Deferred - Tax recovery is available only after the invoice is paid.
Note: If the default recovery settlement is Deferred, then you must set up an interim tax account for the applicable taxes and tax rates to record the tax recoveries or liabilities that accrue prior to payment. See: Setting Up Tax Accounts for more information.
Check the Allow Multiple Jurisdictions box if one or more of the taxes in this tax regime apply to multiple tax jurisdictions. See: Setting Up Tax Jurisdictions for more information.
Check the Allow Tax Rounding Override box to let you update the rounding parameters for individual taxes in this regime.
Check the Use Legal Registration Number box if the tax authority requires that you use the same registration number for this tax for both legal and transaction tax purposes.
When you set up tax registrations, choose one of the available legal entity registration numbers as the transaction tax registration number for taxes in this tax regime. See: Setting Up a Tax Registration for more information.
Check the Allow Cross Regime Compounding box and enter the compounding precedence, if taxes in this regime are involved in any compounding operation with taxes in another regime of the same configuration owner. The compounding precedence indicates the order in which to consider the taxes in each regime.
You must set this option in each of the participating tax regimes if any of these cases apply:
a tax in this regime impacts the taxable base of a tax in another regime.
a tax in another regime impacts the taxable base of a tax in this regime.
a tax in this regime impacts the taxable base of a tax in another regime on the same transaction line.
Note: You must ensure that you set this option correctly for each tax regime. You cannot update this setting after you save the tax regime record.
You must also complete these setup steps for cross-regime compounding:
Define the compounding precedence for the taxes in this regime according to the cross-regime compounding requirements. See: Setting Up Taxes.
Set up a taxable basis tax formula or tax calculation tax formula for each tax involved in the compounding. See: Setting Up Tax Formulas.
Set up a Taxable Basis tax rule or Calculate Tax tax rule for each tax regime and tax, and assign the tax formulas to these rules. See: Tax Determination Processing.
Click Continue to enter configuration options. See: Setting Up Configuration Options for more information.
Note: You must set up the applicable first party legal entities before you can enter configuration options for a tax regime. See: Configuration Options in Oracle E-Business Tax for more information.