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Tax Authority
A government entity that regulates tax law, and administers and/or audits one or more
taxes.
Some examples of tax authorities are:
• Brazil - Secretaria da Fazenda Estadual (State Revenue Office)
• Brazil - Secretaria da Receita Federal (Federal Revenue Office)
• California, USA - California State Board of Equalization
• Canada - Canadian Customs and Revenue Agency
• France - Ministry of Economy, Finance and Industry
• Germany - Federal Ministry of Finance
• India - Central Board of Customs and Excise
• Singapore - Inland Revenue Authority of Singapore
• United Kingdom - HM Customs and Excise
Tax Regime
A tax regime is the set of tax regulations that determine the treatment of one or more taxes
administered by a tax authority.
Some examples of tax regimes are:
• Brazil - RICMS - ICMS Regulation
• Brazil - RIPI - IPI Regulation
• California, USA - California Sales Tax
• Canada - Canadian Goods and Services Tax
• India - Excise Tax
• Singapore - Singapore Goods and Services Tax
• United Kingdom - UK VAT
Tax
In Oracle E-Business Tax, a tax is a specific charge within a tax regime imposed by a
government through a fiscal or tax authority.
Some examples of taxes are:
Tax Regime Taxes
------------------------------------------------ ---------------------------------------
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RICMS - Regulamento do ICMS ICMS, ICMS-ST (Tributary Substitution)
RIPI - Regulamento do IPI IPI
California Sales Tax State Sales Tax
California Sales Tax County Sales tax
Canadian Goods and Services Tax GST
Canadian Provincial Sales Tax PST
India Excise and Customs Excise Tax
Singapore Goods and Services Tax GST
UK VAT UK VAT
Tax Jurisdiction
A tax jurisdiction is a geographic area where a tax is levied by a specific tax authority.
Some examples of tax jurisdictions are:
Tax Overview
E-Business Tax processes Oracle Order Management and Oracle Receivables Output Tax,
which is charged on the supply of taxable goods and services on customer invoices or
revenue items. You should report Output Tax whenever you account for sales.
E-Business Tax processes Oracle Payables and Oracle Purchasing Input Tax, which is paid
on supplier invoices.
• Input tax: What you pay your tax authority via supplier invoices.
• Output tax: What you receive from customers and then pay to your tax authority.
• Amount Due to the Tax Authority consists of Output Tax on customer invoices minus
any Recoverable Input Tax on supplier invoices.
Value Added Tax Overview
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Determining Factors
Determining factors are the key building blocks of your tax rules. They are the variables
that are passed at transaction time or derived from information on the transaction.
Determining factors fall into four groups, namely:
• Party
• Product
• Place
• Process
A determining factor is an attribute that contributes to the outcome of a tax determination
process, such as a geographical location (place) or tax registration status (party).
Determining factors can be used in tax rules, taxable basis formula, and tax regime
determination.
Determining Factor Classes
Tax determining factors are categorized into logical groupings called determining factor
classes, such as Accounting or Geography. The grouping of determining factors into
determining factor classes is done to simplify searches, by grouping similar determining
factors together. A determining factor is automatically created under the appropriate
determining factor class whenever you create a new element, such as a new fiscal product
classification code.
Class Qualifiers
You use a class qualifier with a determining factor class when it is possible to associate a
determining factor class with more than one value on the transaction. For example, for the
determining factor class Geography and the determining factor Country, you need to specify
which party location to use by means of a class qualifier such as ship from party or ship to
party location.
Determining Factor - Party
The Party determining factor includes the following determining factor classes and their
class qualifiers:
• Legal party fiscal classification
- First party
• Registration
- Bill From Party
- Bill To Party
- Ship From Party
- Ship To Party
• Party fiscal classification
- Bill From Party
- Bill To Party
- Point of Acceptance Party (AR transactions)
- Point of Origin Party (AR transactions)
- Ship From Party
- Ship To Party
• Transaction input factor
- Not applicable
The transaction input factor determining factor class groups together additional factors
entered on the transaction line that can influence tax determination. Transaction input
factors can apply to the parties, products, or processes involved in a transaction.
See: Oracle E-Business Tax: Fiscal Classifications for a discussion of legal party and party
fiscal classifications.
Determining Factor – Product
The Product determining factor includes the following determining factor classes and their
class qualifiers:
• Product – Inventory linked
- Not applicable
• Product – Non-Inventory linked
- Product fiscal classification level (Levels 1-5)
• Transaction input factor (intended use, product override)
- Not applicable
Determining Factor - Place
The Place determining factor includes the following determining factor classes and their
class qualifiers:
• Geography
- Bill From
- Bill To
- Point of Acceptance (AR transactions)
- Point of Origin (AR transactions)
- Ship From
- Ship To
• Tax Zones
- Bill From
- Bill To
- Point of Acceptance
- Point of Origin
- Ship From
Ship To
Tax Formulas
Responsibility: E-Business Tax Manager
(N) Tax Managers > Advanced Setup Options > Tax Formulas > (B) Create
Use the Create Tax Formula page to set up tax formulas for use in the tax rules Determine
Taxable Basis and Calculate Tax Amounts.
Determine Taxable Basis
The Determine Taxable Basis tax rule derives 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.
• Taxable Basis = Quantity.
If the tax requires the calculation of a taxable basis other than the line amount or line
quantity (for example, assessable value or prior tax), 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.
Services
E-Business Tax calculates tax on Order to Cash transactions from Receivables, and on
Project invoices created in Receivables.
For intercompany transactions, E-Business Tax accounts for tax on both the Receivables
(sale) side and Payables (purchase) side.
For General Ledger, you can use E-Business Tax to set up automatic tax calculation on
taxable journal entry lines. You can define a tax rate code at the ledger level to default to all
taxable journal lines entered in the ledger, or you can define a tax rate code for a natural
account segment to default to related taxable journal entry lines.
E-Business Tax also calculates tax on transactions from applications that feed data into
Payables or Receivables. These applications are called source applications. The tax
determination process only takes place after these applications interface data into Payables
or Receivables.
• Example 1: A source application can feed a Receivables invoice into Payables to use
as the source document for an intercompany Payables transaction.
• Example 2: A source application can feed Trade Management transaction information
into Receivables to ensure consistency in the tax calculation between the Trade
Management source and Receivables and Payables transactions.
Payables Transactions
E-Business Tax provides tax services for the following Payables event classes:
• Standard invoices.
• Prepayment invoices.
• Expense reports.
With the invoice line introduction by Payables in Release 12, tax calculation is now also
supported at both invoice lines and distribution level.
Additional attributes are captured by Payables for tax purposes as displayed on the Payables
Invoice Workbench. Additional attributes include:
• Taxation country.
• Document subtype.
• Transaction business category.
• Product fiscal classification.
• Product category.
• Product type.
• Line intended use.
• User defined fiscal classification.
• Assessable value.
You can enter and update detail and summary tax lines according to the requirements of
your transactions. You can perform these operations on tax lines:
• Enter a manual tax line.
• Change existing tax line information.
• Cancel a tax line.
Self-assessed taxes are also handled in Payables transactions.
Examples of tax handling on Payables transactions are discussed in the following slides:
• Invoices matched to purchase orders.
• Prepayment invoices.
• Payables price corrections.
Receivables Transactions
E-Business Tax provides tax services for the following Receivables event classes:
• Invoices
• Debit memos
• Credit memos
Receivables has integrated with Oracle E-Business Tax windows to capture additional
attributes and also to enter, view, or modify tax lines.
You can set up Receivables tax accounts to record tax amounts that you can and cannot
claim as deductions against overall tax liability.
Credit memo processing no longer allows different percentage of line amount and tax
amount crediting.
Examples of tax handling on Receivables debit and credit memo transactions are discussed
in the following slide.
Intercompany Transactions
Intercompany transactions must account for tax on both the Receivables (sale) side and
Payables (purchase) side. If the transaction is between legal entities in different tax
regimes, then you may need to account for the tax charged on the sale in a different
manner from the purchase.
E-Business Tax accounts for intercompany transactions in this way:
• If a tax is charged on the Receivables sale with a tax amount greater than zero, then
E-Business Tax charges the same amount of tax on the Payables purchase side. E-Business
Tax looks for and applies a Payables tax rate code to match the Receivables tax rate code in
order to reconcile the transaction tax.
If you are using migrated tax data, then E-Business Tax uses the matching Receivables and
Payables tax rate codes. If you are using an E-Business Tax configuration with the legal
entities sharing the tax configuration of the Global Configuration Owner, then E-Business
Tax applies the same tax rate to the Receivables and Payables transactions.
• If a zero tax amount is charged on the Receivables sale, then E-Business Tax
reconciles the Payables purchase in one of two ways:
- If the Payables side also uses a zero-rated tax rate for goods and services, then E-
Business Tax applies the zero-rated tax rate code.
- If there is no zero-rated tax rate, then E-Business Tax self-assesses the tax using
the applicable self-assessment setup: offset taxes; self-assessment/reverse charge; or
reporting purposes only tax. This applies, for example, to intercompany Intra-EU sales,
where the sale is to another legal entity of the same company in a different EU country.
If any special implications apply to intercompany transactions, you can use the transaction
business category Intercompany Transaction to identify these transactions.