AP Self Assessed Tax Configuration

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How to Configure a Tax to Self-Assess in R12 E-Business Tax (EBTax) Payables (Doc ID 948414.1) In this Document

Goal Solution 1. What is Self-Assessed Tax? 2. How Do I Determine if I Should Self-Assess? 3. 11i vs R12 solution Comparison 4. Assumptions for this Example 5. Setup Steps to Self Self -Assess -Assess For Non-Registered Suppliers a. Step 1 - Update the Tax Profile for the Legal Establishment b. Step 2 - Update Supplier Party Tax Profile c. Step 3 - Update Supplier Party Site Tax Profile d. Create a Determining Factor Set g. Test h. How the Logic Works to Self-Assess a Supplier site that is NOT REGISTERED in This Example 7. Critical Patches for Self-Assessment 8. A lternate lternate Scenario: Self-Assess on the majority of your Invoices Invoices 9. A lternate lternate Scenario: You Self-Assess on A llll Imports 10. Alternate Scenario: You Elect To Self Assess Manually for Each Invoice 11. Comparison: Differences between Purchase Orders and AP Invoices 11. References Refere nces

APPLIES APPL IES TO: Oracle E-Business E-Business Tax - Version 12.0 to 12.2.5 [Release [Rele ase 12.0 to 12.2] Oracle Payables Payables - Version 12.0.0 to 12.0.0 to 12.2.5 [Release 12.0 to 12.2] Information Information in this document applies applies to any platform.

GOAL EBTax Information Center > EBTax Features (Setup & Troubleshooting) > Self Assessing (Use) Tax Tax > Note 948414.1.1 his Note was authored to guide guide a user through the self-assessment self-assessme nt of taxes. taxes. The screenshots scree nshots and examples examples used in this note note are related to the Case Study Note 577996.1 on 577996.1 on Canada but applicable to any self-assessment configuration you may wish to undertake. Content was included in this Note from the following: Oracle Payable Implementation Guide Oracle E-Business Tax User Guide

SOLUTION 1. What is Self-Assessed Tax? A self-assessed self-ass essed tax is a tax calculated and remitted for a transaction, w here tax was wa s 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

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responsible for calculating and remitting the tax. Self-assessment is also known as reverse charge or use tax in certain tax regimes. Self-assessment is also known as reverse charge or use tax in certain tax regimes. 2. How Do I Determine if I Should Self-Assess? Each taxing jurisdiction and authority defines their own criteria for self-assessment. If the regulations governing your business dictate that you self-assess then E-Business Tax establishes the need to self-assess a tax based upon the registration status of the Legal Establishment purchasing the goods or services and the Registration Status of the Supplier. Conceptually the following is normally true: If goods purchased from a unregistered seller, to ensure that tax is not evaded on that transactions, it is buyers responsibility to calculate and remit the tax to relevant authority. For Example : ABC procures goods from XYZ ( Unregistered Seller) worth $1,000 Normal tax rate :- 15% Since XYZ is a unregistered seller , It is ABC's ( Buyers) responsibility to calculate tax ABC will pay X YZ :- $1,000 (Invoice Amount) ABC will pay calculate and pay to Tax Authority :- $150 (Tax Amount) 3. 11i vs R12 solution Comparison Release 12 replaces the concept of a Use tax with self-assessed taxes for fresh regimes. If you are using an upgraded regime you can retain the old use tax solution until you desire to replace the old regime. Note that The Use Tax Liability Report is for upgraded transactions only and is a carryover from 11i. The 11i way: 1) When a tax code with tax type as use was associated in AP invoice workbench , then the details of that tax would get displayed in the USE TAX LIABILITY REPORT. Tax distribution would not get created for this tax rate. 2) The total of that report would determine the tax liability and user would create 2 accounting entries- One for accruing tax liability and other for settlement.

The R12 way :1) Users configure SELF ASSESSED TAX which is the R12 equivalent of USE TAX. 2) The self assessed tax information can be viewed on the AP invoice workbench if user navigates to Tax Details 3) The accounting of self assessed tax will automatically happen in the TAX LIABILITY account defined at the TAX RATE level. User will still have to create accounting for settlement. 4) If a user wants to ascertain the use / self assessed tax liability then he just has to take the total of liability side of the above mentioned account. Debit side will have details of tax recoverable ( If any). Details can be obtained if the user extracts the SLA account analysis report. In case of Upgrade: Even after upgrade if the user associates the upgraded tax code with tax type as use then the details of that tax https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=149gm8zgo5_224&id=948414.1

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will still appear in the use tax liability report. There is no change of functionality nor any additional set up required here.

4. Assumptions for this Example 1) The steps documented below for configuring a system to self-assess assume that the taxes and rules are already configured and work correctly in AP for non self assessed scenarios. 2) Self-Assessment is an Exception - This assumes that most of your suppliers will assess taxes and that the exception will be situations where you must self-assess. For this reason, the default for "Determine tax registration" Rule Process Type for the Tax would be "Ship From" and there is not need for explicit registration status for the Suppliers, Sites who may need a particular tax to be levied; though some may define a explicit registration status as REGISTERED to indicate that taxes are relevant. If your situation is such that you selfassess on the majority of invoices then you may wish to reverse the logic in the solution below. See the alternatives section at the end of this note for details. 5. Setup Steps to Self-Assess For Non-Registered Suppliers a. Step 1 - Update the Tax Profile for the Legal Establishment Responsibility: Tax Managers Navigation: Parties > Party Tax Profile > First Party Legal Establishment Party name: Click GO Click on update and go to "Tax Registrations tab" Assign the following i) Tax regime: ii) You may leave Tax and Tax jurisdiction as null, if you want all the tax,jurisdictions under this regime to be self assessed. On the other hand if you want self assessment only for a particular tax, jurisdiction, registration records have to be created mentioning the jurisdiction and tax details. iii)Tax Registration Status: REGISTERED

iv) Set for Self Assessment / Reverse Charge: checked in the "Registration tab"

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Note:Self assessment checbox should be checked in "Tax Registrations tab" by following the steps listed above. The Self assessment checkbox option in "Main" section/tab is not considered during tax calculation.

Depending on the level at which this first party establishment tax registration is created, the self-assessment will apply to: 1) All taxes of the tax regime, if the tax registration is defined for the tax regime only. 2) All tax jurisdictions of the tax, if the tax registration is defined for the tax regime and tax. 3) A specific tax jurisdiction of the tax, if the tax registration is defined for the tax regime, tax, and tax jurisdiction.

b. Step 2 - Update Supplier Party Tax Profile Navigate to Third party and check if a registration record is available with status : NOT REGISTERED. If not, create a registration record with this status as shown below.


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This step is necessary assuming you expect to create multiple supplier sites and that all of the customers sties would be non-registered sites.

c. Step 3 - Update Supplier Party Site Tax Profile

Navigate to Third party and check if a registration record is available with status : NOT REGISTERED. If not, create a registration record with this status as shown below.

d. Create a Determining Factor Set

Note: Tax registration rule to be created in step 5f Create a determining factor set using the example shown below:


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e. Create a Condition Set (for a tax registration rule to be created in step 6)

Create a condition set using the example shown below

f. Create a Tax Registration Rule

Query the Tax Regime and Tax against which you wish to self-assess Click on "Expert Rule Entry" and create the first page as shown below. Note that in this example we limited the event class to "Purchase Transactions" as this rule does not need to be executed for Sales Transactions such as AR invoices.


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Using the condition set from step 5, set the results to Bill To Party (Legal establishment)

Make sure you enable the rule PS Note: The default for Determine tax registration Rule Process Type will be Ship From/Bill From (Supplier site/Supplier)


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g. Test With the above setup in place, test your rule by entering an invoice using the supplier from the example Note that you will need to duplicate the tax rule for any other tax where this is relevant. For example in Canada we would create a duplicate of this rule under the HST tax.

h. How the Logic Works to Self-Assess a Supplier site that is NOT REGISTERED in This Example 1) Invoice is entered with a Supplier and Calculate Tax is selected 2) Standard Tax logic is executed to determine which taxes should be charged for the invoice 3) Supplier & Supplier Site address are evaluated to see if they are Registered or Not Registered. 4) Since the supplier site is not registered, the rule will get satisfied and the registration status of the Bill To (Legal establishment) would be used . 5) Since the First party Legal establishment (Bill To) is setup with self assessment checked, the taxes would be marked self assessed. 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 selfassessment.

Note: The Effective date range for the registration created for the First party Legal establishment, Supplier should be within the transaction (invoice date).

6. How the Logic Works to create regular tax for a Supplier/ Supplier site that is REGISTERED / no explicit registration created at all If a regular tax applied for a particular Supplier/Site, the example and setup below shows how to achieve t

Users may create explicit registration by navigating to Third party/ Party Site and check if a registration record is available with status : REGISTERED, for which normal tax applies. If not, create a registration record with this status. This step is not mandatory because not creating explicit registration is treated as Supplier is registered to collect tax. So they can also ignore this step and not define any explicit registration, if a tax is required. Tax Rules/Default for Determine Tax Registration Process Type: Default for this process Type in Tax Rules screen will be Ship From/Bill From (Supplier site/Supplier) https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=149gm8zgo5_224&id=948414.1

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Invoice is entered with a Supplier and Calculate Tax is selected 1) Standard Tax logic is executed to determine which taxes should be charged for the invoice 2) Supplier, Supplier Site address are evaluated to see if they are Registered or Not Registered. 3) Since the supplier site is registered, the rule will not get satisfied and the default registration Ship From/Bill From (Supplier site/ Supplier) would be used . 4) Here, even if the First party Legal establishment (Bill To) setup with self assessment checked may exist, the rule for Tax registration will not evaluate to true, as the Supplier/site is Registered to collect tax/implicity registered (if no registration exists)

Note: Section 5. and Section 6 are listed to clarify how the change in Supplier/Site level setup in Step 2, Step 3 will affect the self assessment. So if a particular Supplier XYZ is NOT REGISTERED, tax is self assessed based on the details listed in Section 5 and another Supplier ABC who is REGISTERED/no explicit registration defined (which also means registered) will have the tax on the invoice based on details listed in Section 6.

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. 7. Critical Patches for Self-Assessment Users are strongly encouraged to apply the latest rule engine patch to avoid known issues with tax rules used to establish registration. As of the last update date for this note, the following were the latest available rule engine patches: File Name: zxdirulenginpvtb.pls Refer to Note 1301356.1 for the latest patch with this file.

8. Alternate Scenario: Self-Assess on the majority of your Invoices Modify the example above as follows: 1) Set the default tax registration rule to "Bill To" 2) Update your Legal Establishment Tax Profile as shown in the example above 3) Update your registered suppliers site tax profiles to show as Registered 4) Create a tax rule that evaluates the Suppliers and switches the registration source to "Ship From" whenever a registered supplier invoice is entered

9. Alternate Scenario: You Self-Assess on All Imports Modify the example above as follows: 1) Update your Legal Establishment Tax Profile as shown in the example above 2) Create a tax rule based upon Geography. If the Ship From Country is not Canada then use the Bill To tax registration. Note that you may also wish to use a combination of these rules as appropriate. If you have additional scenarios that you would like to see reflected in this note, please use the feedback option to add your comments to the document.

10. Alternate Scenario: You Elect To Self Assess Manually for Each Invoice 1. Allow Override of Calculated Tax lines must be checked on the tax 2. Configuration Owner Tax Options must be set to Allow Override of Calculated Tax Lines for Payables (Event Class Standard Invoices) https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=149gm8zgo5_224&id=948414.1

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3. Enter an invoice 4. Press "Calculate Tax" and note that taxes calculate 5. View tax details and manually check the "Self Assessed" checkbox as shown below

11. Comparison: Differences between Purchase Orders and AP Invoices Purchase Orders will always show the tax, when it is applicable and it is not self assessed: 1. In AP the self asses sed tax is not visible on the summary lines level. In Purchasing the tax is displayed at the header level. 2. In AP users can view tax only by selecting tax details for the line. 3. In AP self assessed tax totals are not included in the invoice total. In Purchasing the tax is included in the Order total. 12. Prepayment Invoices, Prepayment Applications and self assessed taxes

Currently there is a limitation in R12 that the accounting code does not have any means to account for the Self assessed tax distributions which are prorated against the prepayment application distributions.Hence SELF ASSESSED Tax Computed on PREPAYMENT APPLICATION cannot be accounted. There is a Enhancement request to handle this (ER:16912408) but as a workaround, there can be rules defined to ensure that Self Assessed tax is not computed on the prepayment invoices. The setup is: (1) Navigate to Tax Configuration>Tax Rules. (2) Search for the relevant Tax Regime and Tax. (3) Check the existing set up for Determine Tax Registration Rule Type (4) Ensure that ¿Bill From/Ship From Party¿, is processed for the Prepayment event class.

13. Tax Reporting

Use tax liability report will not extract the invoices with self assessed taxes that are setup in R12. Use tax liability report will only report migrated invoices with Use taxes that got migrated from 11i to R12 and newly created invoices in R12 that uses a migrated Use tax rate code on Item lines and Use tax liability report is only for backward compatibility support. There is no specific report in R12 that is designed to extract only invoices with Self assessed taxes. You can use Financial tax register report but that will report invoices with self assessed tax as well as regular tax. There is an Enhancement request: 16734930 for reporting only self assessed taxes in r12.

REFERENCES


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NOTE:1301356.1 - What is the Latest E-Business Tax (eBTax) Rule Engine Patch? NOTE:1117544.1 - E-Business Tax (EBTax) Information Center NOTE:577996.1 - Case Study: Setup R12 E-Business Tax (EBTax) for Canada: Includes 2010 HST Changes Didn't find what you are looking for?


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