Set up details for the taxes of a tax regime. Each separate tax in a tax regime includes records for the statuses, rates, and rules that are used to calculate and report on the tax. E-Business Tax defaults tax information from the tax regime to each tax that you create under a regime. You can modify this information at the tax level according to your needs, as well as add additional defaults and overrides.
You can create a new tax, or create a tax that is based on an existing tax within the regime. When you create a new tax based on an existing tax, the attributes that remain constant for all taxes derived from the source tax are not available for update.
You can only enable a tax for use on transactions after you have completed all of the related setup required. See: Updating a Tax for more information.
Before you can set up taxes, you may need to complete one or more of these tasks:
Set up tax regimes. (mandatory)
Set up ledgers and accounts. (optional)
Set up tax reporting codes. (optional)
Set up recovery type lookup codes. (optional)
Set up tax types. (optional)
To set up a new tax:
Navigate to the Create Tax page.
Enter the tax regime code. E-Business Tax defaults the tax settings from the tax regime.
Enter the configuration owner for this tax. The configuration owner determines the ownership and use of this tax and its associated setup.
Note: You cannot update the configuration owner setting after you create the tax record. All tax statuses, tax rates, and tax recovery rates defined for this tax inherit the same configuration owner. See: Configuration Options in Oracle E-Business Tax for more information.
Unless this tax belongs to a party-specific configuration, use Global Configuration Owner to share this tax with the other parties in your company.
Select the tax source:
Create a new tax - Use this option: (1) to create a tax that becomes the source for other taxes within this regime to share tax jurisdictions and tax registrations; or (2) to create a tax where the registration and jurisdiction information is independently maintained and not shared.
Create from an existing tax - Use this option to create a tax that shares the registration and jurisdiction information from an existing tax within this regime.
In most cases, you should set up the taxes in a tax regime such that they can share the same jurisdiction and registration information.
Note: You cannot update the tax source setting after you save the tax record.
In the Tax field, enter a code for this tax. Use a coding convention in keeping with the tax regime code.
If the tax source is Create from an existing tax, then select an existing tax from the list of values.
Enter a tax name. You can create a unique tax name or use the code that you entered in the Tax field. For a tax created using tax source, Create from an existing tax, the tax name defaults with attributes from the other tax, which you cannot change.
Enter a tax type to classify this tax for reporting purposes. E-Business Tax provides these tax types:
Sales - Direct taxes that are collected from the consumer by the supplier and paid to the tax authority.
VAT - Value added or cascading taxes.
Excise - Taxes on the production and manufacture of goods.
Customs Duty - Taxes charged on imported and exported products.
Environmental - Taxes charged as a result of environmental regulations.
You can add tax types according to your reporting needs. See: Setting Up Lookup Codes.
Enter an effective date range.
Note: If you enter an Effective To date, you cannot update this date after you save the record.
Enter geographic information for this tax. This includes the geography type for the tax, such as City, County, or State, and the parent geography type and parent geography name of the geography type.
For example, if the tax is US County Tax, then the geography type is County, the parent geography type is Country, and the parent geography name is United States.
Enter the geography type for this tax. You can enter a TCA master reference geography type or a tax zone.
If you use a TCA master reference geography type, enter the parent geography type and parent geography name.
If the geography type is Country, enter Country for parent geography type and the tax regime country name for parent geography name.
Enter an override geography type that belongs to the parent geography type, if you plan to set up different rates for this geography within the same tax jurisdiction. See: Setting Up Tax Jurisdictions for more information.
Enter the currency for this tax, and define the way that tax amounts are displayed on transactions and reported to the tax authorities.
If you set the Allow Tax Rounding Override option at the regime level, you can update the rounding parameters for this tax. If you want to let an individual party update the rounding rule for this tax on its transactions, then set the Allow Tax Rounding Override option at the tax level and update the rounding rule in the applicable party tax profile. See: Party Tax Profiles in Oracle E-Business Tax and Rounding Rule Retrieval Process for more information.
See: Setting Up Tax Regimes for information about entering and updating these fields:
| Fields for Tax Amounts and Related Information |
|---|
| Tax Currency |
| Minimum Accountable Unit |
| Rounding Rule |
| Tax Precision |
| Tax Rounding Override |
| Exchange Rate Type |
| Reporting Tax Authority |
| Collecting Tax Authority |
Enter a single-digit compounding precedence to define the order in which this tax is calculated in the compounding process within this regime. Taxes are calculated in ascending order of compounding precedence.
In the Applied Amount Handling field, select the method to use to calculate taxes when a prepayment is applied to an invoice:
Recalculated - E-Business Tax uses the invoice tax rate for both the prepayment and the invoice line amount.
Prorated - E-Business Tax uses the prepayment tax rate for the prepayment amount and the invoice tax rate for the invoice line amount.
See: Prepayment Invoices for more information.
If applicable, set the options for offset taxes:
Check the Set as Offset Tax box if you are creating an offset tax.
Setting this option disables the Controls and Defaults region and clears any values that were entered in this region.
Check the Set for Reporting Purposes Only box if you are not creating an offset tax but you want to calculate reverse charges without creating General Ledger postings. E-Business Tax will save the reverse charge information for reporting to the tax authorities.
If this is an offset tax option, enter a recovery type.
If applicable, set the options for tax inclusive handling:
If you enabled the Allow Override and Entry of Inclusive Tax Lines option at the regime level, then in the Allow Tax Inclusion field define the nature of tax inclusive handling for this tax.
If the tax rates belonging to this tax vary in their treatment of tax inclusive handling, then enable the Allow Override and Entry of Inclusive Tax Lines option for this tax. You can then set tax inclusive handling at the tax rate level.
Note: If you do not set standard inclusive handling for this tax, you can still set this option for individual parties involved in transactions. See: Party Tax Profiles in Oracle E-Business Tax for more information.
Define the manual updates available to users on transaction tax lines. Manual updates do not use tax rules and formulas:
Allow Override for Calculated Tax Lines - Let users override the automatic tax calculation on invoice tax lines.
Allow Entry of Manual Tax Lines - Let users create manual tax lines on invoices.
Check the Allow Duplicate Tax Registration Numbers box to allow multiple parties to use the same tax registration number for this tax.
Leave this box unchecked to enforce unique tax registration numbers across all parties and party sites.
Check the Allow Multiple Jurisdictions box to define tax jurisdictions for this tax in more than one geographic region.
You must set this option in these cases:
different tax rates apply in each region.
different tax authorities administer taxes and require separate tax reporting in each region. See also: Setting Up a Tax Registration.
tax authority requires separate registrations for a party having multiple locations in different regions or multiple registrations for the same location.
Check the Allow Mass Creation of Jurisdictions box to let you mass create tax jurisdictions for this tax.
See: Mass Creating Tax Jurisdictions for more information.
Select the tax accounts creation method.
Select Create Tax Accounts if you intend to create tax accounts for this tax. See: Setting Up Tax Accounts for more information.
If you intend to use the tax accounts of an existing tax at transaction time, enter this tax in the Tax Accounts Source field.
For example, in the United States the county and city taxes may use the same tax accounts as that of the related state tax.
Check the Allow Tax Exceptions box to create special tax rates for specific products for this tax. See: Setting Up Tax Exceptions for more information.
Check the Allow Tax Exemptions box to create tax exemptions for your customers for this tax.
If you enabled tax exemptions for this tax, select the tax exemptions creation method:
Create Tax Exemptions - Create tax exemptions for your customers for this tax. See: Setting Up Tax Exemptions for more information.
Use Tax Exemptions from an existing tax - Use tax exemptions already created for customers for this tax.
If you intend to use the tax exemptions of an existing tax at transaction time, enter this tax in the Tax Exemptions Source field.
For example, county and city taxes may use the tax exemption of the state tax, when the state tax exemption applies to all cities and counties in the state.
If you set the Allow Tax Recovery option for the tax regime associated with this tax, enter tax recovery options:
If applicable, set the option to allow for user override of the calculated tax recovery rate on transaction lines.
If this tax allows for more than one recovery type, use the Primary Recovery and Secondary Recovery fields to enter the corresponding recovery types. The Update Tax page displays the Default Primary Recovery Rate Code and Default Secondary Recovery Rate Code fields, if applicable.
If you plan to use tax rules to determine recovery rates, set the appropriate options. In this case, the recovery rates that you define for each recovery type only apply if the determination rules cannot find a recovery rate. See: Tax Recovery Processing for more information.
Select the default recovery settlement for this tax: 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 this tax to record the tax recoveries or liabilities that accrue prior to payment. See:Setting Up Tax Accounts for more information.
See also: Setting Up Tax Recovery Rates.
Check the Allow Tax Rate Rules box if you plan to use rules to determine the tax rate for this tax at transaction time. See: Determine Tax Rate for more information.
If you set the tax account creation method as Create Tax Accounts, enter tax account information for this tax. See: Setting Up Tax Accounts for more information.
If you defined a tax reporting type for this tax, enter the applicable tax reporting codes. See: Setting Up Tax Reporting Types for more information.
Set up the tax statuses and rates to use with this tax. See: Setting Up Tax Statuses and Setting Up Tax Rates for more information.
After you have completed all the necessary steps in your tax setup, use the Update Tax page to perform these tasks:
For offset taxes, enter a 100% recoverable rate. See: Setting Up Offset Taxes.
For tax recovery, review/update the default primary recovery rate code and default secondary recovery rate code.
Make each tax available on transactions. When you enable the Make Tax Available for Transactions option, E-Business Tax runs a series of checks to ensure that all of the definitions related to the tax have been defined.
To make a tax available on transactions:
Define either a default place of supply or a tax rule for the rule type Determine Place of Supply.
Define either a default tax registration or a tax rule for the rule type Determine Tax Registration.
Define either a default tax status and default tax rate, or tax rules for the rule types Determine Tax Status and Determine Tax Rate.
Define either a default tax formula or a tax rule for the rule type Determine Taxable Basis.
Define either a default tax formula or a tax rule for the rule type Calculate Tax Amounts.
Define a primary tax recovery rate, if you set the allow recovery option for the tax.
Define at least one tax jurisdiction for the tax.
Define an exchange rate type, if the tax is used in cross-border transactions.
An offset tax calculates and records third party Payables tax liabilities for reverse charges, self-assessments, and, in the United States, Consumer's Use tax. An offset tax record is a matching, duplicate record with negative amounts that reduces or completely offsets the tax liability recorded in the tax transaction.
Use offset taxes when the tax requirement includes creating offset general ledger postings.
You cannot update the recovery rate on an offset tax line. The recovery rate is always 100% in order to create credit entries that match the original tax amounts. When you create an offset tax, you enter a primary recovery type with a recoverable rate of 100% and a 100% recovery rate.
To set up for offset taxes, you must perform these tasks:
Enable offset tax calculations for each applicable transaction event and party.
Set up the offset tax, tax status, and tax rate.
Set up the original tax and assign the offset tax rate code to the original tax rate.
Perform these tasks to enable offset tax calculations:
Review the offset tax settings for Payables transaction events:
Allow Offset Tax Calculation option enables the calculation of offset taxes for a transaction event.
Offset Tax Basis indicates the party whose transactions are involved in offset tax creation.
See: Reviewing Event Class Options for more information.
If applicable, update the offset tax basis for the combinations of configuration owners and transaction events that you want. See: Setting Up Configuration Owner Tax Options for more information.
Set the Allow Offset Taxes option for the applicable third parties. You should set this option for each third party involved in offset tax transactions. See: Setting Up a Third Party Tax Profile for more information.
To set up an offset tax, perform these tasks:
Define at least one recovery type lookup to use with offset taxes. See: Setting Up Lookup Codes.
Set up the offset tax and enable these settings:
Select a tax source of Create a new tax.
Use the tax currency of the original tax.
Check the Set as Offset Tax box.
Enter a primary recovery type that you defined for offset taxes.
Set up the tax status for the offset tax. Do not set the Allow Tax Rate Override option.
Set up a 100% tax recovery rate for the offset tax using the recovery type that you defined in step 1.
Set up the tax rate for the offset tax:
Enter a negative rate amount.
Enter the tax recovery rate that you defined in step 4.
Do not set the Allow Ad Hoc Rate option.
Allow tax inclusion to be standard non-inclusive handling, as offset taxes cannot be inclusive.
Recovery settlement should be immediate and not deferred.
Set up the original tax.
Perform the related set up for the original tax: tax jurisdiction, tax status, and tax recovery rate (if the tax is recoverable).
Set up the tax rate for the original tax, and enter the offset rate code that you created in step 5.
Make the tax available on transactions.
You can manage the use and availability of the taxes in your tax regimes by applying an end date to the appropriate record or records. Before you apply end dates to records, first evaluate both your business requirements and the requirements of the tax authority. You need to consider the tax regime and tax records, the legal entity and operating unit configuration owners, and in some cases the transaction events. There are these points to consider:
Does the tax regime itself no longer exist.
Do one or more taxes within a tax regime no longer exist, while other taxes within the regime remain.
Does the tax still exist, but it no longer applies to certain legal entities or operating units.
Does the tax still exist, but it no longer applies to a specific transaction event for a specific operating unit.
After you complete this evaluation, apply end dates to all of the appropriate records, according to the guidelines given in the appropriate sections below. These conditions apply to end-dated tax records:
Once you enter an Effective To date, you cannot update this date after you save the record.
The tax or taxes remain available for transactions whenever the transaction date is within the date range of the applicable tax regime, tax, and configuration owner.
You can still search, view, and update end-dated tax records using the Taxes pages.
End-dated taxes no longer appear in the Regime-to-Rate Flow hierarchy grid of tax regimes, taxes, and tax statuses. The Regime to Rate Flow icon for these taxes is disabled.
You can manage tax availability in these ways:
Update availability of all taxes in a tax regime for all configuration owners.
Update availability of a specific tax in a tax regime for all configuration owners.
Update availability of all taxes for a specific legal entity or operating unit.
Update availability of a specific tax in a tax regime for a specific legal entity or operating unit.
Update availability of all taxes for a specific transaction event of a specific legal entity or operating unit.
You can update the availability of all taxes in a tax regime by applying an end date to the tax regime. You should only do this when the tax regime itself no longer exists and there is no requirement for any tax in the tax regime after the tax regime end date.
Applying an end date to the tax regime also renders all taxes in the tax regime unavailable to all legal entities and operating units with a configuration option setting for this regime.
If a specific tax within a tax regime no longer exists, but other taxes in the regime remain active:
If the configuration owner for the tax is the Global Configuration Owner only, you can apply an end date to the tax. This renders the tax unavailable to all legal entities and operating units with a common configuration setting.
If the configuration owner for the tax is a legal entity or operating unit with a party-specific configuration or common configuration with party overrides setting, then you must:
Apply an end date to the tax.
In the party tax profile of the applicable party, apply an end date to the party-specific configuration or common configuration with party overrides configuration option.
You must apply a tax end date that is before the tax regime end date, if there is one.
You can also use this approach for entities associated with the tax, including tax status, tax rate, tax jurisdiction, and tax formula.
If taxes remain active but no longer apply to a specific legal entity or operating unit owning tax content, you can render the taxes unavailable by applying an end date to all of the configuration options of this legal entity or operating unit. During tax calculation, E-Business Tax will not find an applicable tax regime for the legal entity or operating unit.
If one of the taxes in a tax regime that has multiple taxes no longer applies to a specific legal entity or operating unit owning tax content:
If the legal entity or operating unit is the configuration owner of the tax and has a party-specific configuration setting, then apply an end date to the tax.
If the legal entity or operating unit has a common configuration setting, then applying an end date to the tax would render this tax unavailable to all other legal entities or operating units with a common configuration setting. Instead, you must complete these steps:
Apply an end date to the configuration option for the applicable tax regime.
Create a new configuration option for the legal entity or operating unit with a setting of common configuration with party overrides for the same tax regime.
Create a tax record for the tax that you want to update with the legal entity or operating unit as configuration owner, and make the tax available on transactions.
Apply an end date to the tax that you created in step 3.
If a tax remains active but no longer applies to a specific transaction event of a legal entity or operating unit owning tax content, then you can control tax applicability using configuration owner tax options.
If the legal entity or operating unit does not have a configuration owner tax option record for the transaction event, then create a record and do not enable the Allow Tax Applicability option.
If the legal entity or operating unit has a configuration owner tax option record for the transaction event, and tax applicability is enabled, then apply an end date to this record and create a new record with Allow Tax Applicability disabled.
See: Setting Up Configuration Owner Tax Options for more information.