R12 E-Business Tax - Part 1

Oracle R12 E-Business Tax
Part I
santosh@roverresources.com
Agenda
Analyzing Tax Requirements
Issues in 11i
Key Features of EBTax
Value Proposition
Key Concepts with a Business Scenario
Tax Determination Steps
Demonstration
Upcoming sessions
Analyzing your Tax

Requirements
ANALYZING YOUR TAX

REQUIREMENTS
To ascertain which taxes are applicable to a
business, we need to address the following
questions :
Who am I ?
Corporation, Government Organization, NGO etc
Where do I operate ? (Places)
Countries / States in which Company, Branches &
Subsidiaries conduct business.
What is the type of business I conduct ? (Transactions)
Business of Manufacturing, Reselling, Export etc.
What products do I buy or sell ? (Products)
Steel, Plastic, Services etc.
Who are my customers and suppliers ? (Parties)
Large / Small scale , Exporter, Importer etc.
Issues in 11i
Issues in 11i
Excessive Dependency on Accounting Clerk
Accounting clerk was entrusted with the responsibility of

identifying the applicable tax rate(s) for a transaction.
He could not be expected to have relevant expertise to

determine tax rate which were sometimes based on
complex rules and could possibly lead to wrong tax
calculations.
Isolated Tax Solution
Oracle had Module / Country specific solutions for diverse

tax related requirements. This was not scalable in long run.
Tax codes created for one module could not be reused by

other modules.
Duplication of work and redundancy.
Issues in 11i
Lack of Automation
Reduction in operational efficiency during invoice

processing
Limited Rules
Complex rules could not be configured in the tax engine
Key Features
Oracle E-Business Tax

Key Features
Complete Global Tax Solution for E-Business

Suite
Country specific and product specific requirements around tax were

gathered and a central solution was designed that caters to all(or most)
of those requirements.
Tax Rules
Enables users to create and maintain a variety of tax rules, which can
handle very simple to very complex tax requirements.
In an environment where tax laws and rule changes often, it enables
the user to update tax set up easily and effectively.
Can configure rules based on Product, Party & Transaction
Classifications.
ORACLE E-BUSINESS TAX

KEY FEATURES
Tax Repository
Captures all relevant tax and transaction information in a centralized Tax

Repository.
Provides a single source of truth for Tax information.
Tax Simulator
Provides infrastructure to simulate tax setup, transactions lines and

respective tax calculation results.
Tax Simulator is useful for testing your complex tax setup before going
to production with new setup.
Tax Reporting
Offers powerful and flexible tax reporting solution.

Users can use and/or modify the pre-defined tax reporting templates.
Generates XML based reports.
ORACLE E-BUSINESS TAX

KEY FEATURES
Common Configuration
Enables sharing of Tax Setup across Operating Units.
Upgrade Process
A fully automated upgrade that ensures

Customers current investment in tax setup is not lost.
Uptake of new features can be made in a way/pace that is
suitable for implementing customer.
E-Business Tax Value Proposition

How will my business get benefited?
Benefits
Manage Tax Changes
Automation
Less or No Manual Intervention
Improve Operational Efficiency
Avoid Error due to Human Decisions
React Quickly to Tax Law Changes

Avoid Manual Intensive Regular Software
Updates
Reduce Cost of Ongoing Maintenance
E- Business Tax
Local Compliance
Support Strict Reporting
Requirements
Mitigate Audit Risks
Integration
Visibility Across E-Business
Suite
Reduce Cost of Integration
Key Set up Concepts
BUSINESS SCENARIO
ABC Inc. is in the business of buying and selling
Computers in the states of California and Texas . The
applicable Sales Tax is at a standard rate is10 % and
12% respectively.
Legal Entity
Parties
Place
Product
Tax
KEY CONCEPTS
TAX REGIME
Tax Regime is the level at which similar taxes
governed by common tax rules or laws are grouped
together.
In our Business Scenario, Regime will be United

States Taxation Regime.
Other Examples for different Regimes can be :Excise Tax Regime in India.
VAT Regime in UK.
KEY CONCEPTS
TAXES
A classification of a charge imposed by a
government through a fiscal or tax authority.
EBTax supports only Indirect (Transaction) taxes.
There can be multiple taxes under one regime.
In our Business Scenario, applicable Tax will be US

Sales & Use Tax.
Other Examples for different Taxes can be :Excise Tax in India.
Value Added Tax (VAT) in UK.
KEY CONCEPTS
TAX STATUS
Tax Status is the taxable nature of a product or
service. It is a way of grouping different tax rates
under one single tax.
Provide additional granularity for reporting.
There can be multiple tax status under a tax but at
least one has to be specified as a default status.
In our Business Scenario, applicable Status will be

Standard Status
Other Examples for different Status can be :-
Reduced Rated
Zero Rated
KEY CONCEPTS
TAX JURISDICTION
A geographic area for which tax is levied by a specific tax
authority.
There can be multiple jurisdictions for a tax but at least one has to
be specified as a default jurisdiction.
In our Business Scenario, applicable Tax Jurisdiction will be :State of California,

State of Texas.
Other Examples for Tax Jurisdictions can be :-
Tax applicable uniformly in UK, will have a Tax Jurisdiction

directly at Country level.
Tax Jurisdiction for Goods and Services Tax in Singapore will be
the Country of Singapore.
KEY CONCEPTS
TAX RATE
The rate specified for a tax status for a period of time.
Tax rate is generally expressed in terms of percentage. In
EBTax we can also express in terms of quantity.
There can be multiple tax rates under a tax status but at least
one has to be specified as a default rate.
In our Business Scenario, applicable Tax Rate will be :-
California 10%
Texas
12%
Other Examples for different Tax Rates can be :UK Standard VAT Rate 17.5%.
Sweden Standard Rate VAT is 25%.
Regime to Rates flow

Tax Regime
Tax
United States Tax Regime
Sales & Use Tax
Tax Status
Standard
Tax
Jurisdiction
California
Tax Rate
10 %
Texas
12 %
KEY CONCEPTS
PLACE OF SUPPLY
Decides which location to be considered for tax calculation.
The different options available are :Ship To

Bill To
Ship From
Bill From
Ship To, Use Bill To if Ship To not found
For Example :Goods Sold from California to Texas then

- If we want California Tax to be applicable then we will
define Bill / Ship From as the place of supply,
- If we want Texas Tax to be applicable then we will define
Bill / Ship To as the place of supply.
KEY CONCEPTS
TAXABLE BASIS & TAX AMOUNTS
Taxable Basis
Determines the amount on which the tax rate

should be applied.
The options are
Line Amount
Tax Formula (Prior Tax, Compounding,
Assessable Value)
Tax Amounts Calculation
Determines how tax will be calculated for each

applicable tax on the transaction.
The options are
Standard_TC :- Line Amount (x) Tax Rate
Compounding of tax Rate
Tax Determination Steps

Regime Applicability
Tax
Applicability
Tax
Status
Determine Candidate Taxes

Determine Place of Supply And Tax Registration
Determine Applicable Taxes & Jurisdictions
Determine Tax Status for each applicable Tax
Determine Tax Rate

Evaluate Exemptions and Exceptions
Determine Taxable Basis (normally line amount)
Calculate Tax (normally = line amount x rate)
Tax Rate
Determine where the transaction is deemed to take place

Determine Applicable Tax Regimes
Taxable Basis
Tax
Calculation
EXTERNAL DEPENDENCIES
FOR TAX SET UP
Pre Requisite Mandatory Set Ups

User with Tax Manager responsibility
Geography structure defined in TCA
Locations in HRMS
Legal Entity
Operating Unit
Ledger
Customers & Suppliers
Optional Set Ups

Tax Reporting and collecting Authority
Inventory Org, Items, Items categories and Category Codes
etc
Party Classification defined in TCA
INFORMATION SOURCE
EBTax User Guide
EBTax Implementation Guide

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Oracle R12 E-Business Tax

Analyzing your Tax

ANALYZING YOUR TAX

Excessive Dependency on Accounting Clerk

Accounting clerk was entrusted with the responsibility of

He could not be expected to have relevant expertise to

Isolated Tax Solution

Oracle had Module / Country specific solutions for diverse

Tax codes created for one module could not be reused by

Duplication of work and redundancy.

Reduction in operational efficiency during invoice

Complex rules could not be configured in the tax engine

Oracle E-Business Tax

Complete Global Tax Solution for E-Business

Country specific and product specific requirements around tax were

ORACLE E-BUSINESS TAX

Captures all relevant tax and transaction information in a centralized Tax

Provides infrastructure to simulate tax setup, transactions lines and

Offers powerful and flexible tax reporting solution.

ORACLE E-BUSINESS TAX

Enables sharing of Tax Setup across Operating Units.

A fully automated upgrade that ensures

E-Business Tax Value Proposition

Manage Tax Changes

React Quickly to Tax Law Changes

Key Set up Concepts

In our Business Scenario, Regime will be United

VAT Regime in UK.

In our Business Scenario, applicable Tax will be US

Other Examples for different Taxes can be :Excise Tax in India.

Value Added Tax (VAT) in UK.

In our Business Scenario, applicable Status will be

Other Examples for different Status can be :-

In our Business Scenario, applicable Tax Jurisdiction will be :State of California,

Other Examples for Tax Jurisdictions can be :-

Tax applicable uniformly in UK, will have a Tax Jurisdiction

In our Business Scenario, applicable Tax Rate will be :-

Regime to Rates flow

United States Tax Regime

Sales & Use Tax

Decides which location to be considered for tax calculation.

The different options available are :Ship To

For Example :Goods Sold from California to Texas then

Determines the amount on which the tax rate

Tax Amounts Calculation

Determines how tax will be calculated for each

Tax Determination Steps

Determine Candidate Taxes

Determine Tax Status for each applicable Tax

Determine Tax Rate

Determine Taxable Basis (normally line amount)

Calculate Tax (normally = line amount x rate)

Determine where the transaction is deemed to take place

Pre Requisite Mandatory Set Ups

Optional Set Ups

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