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How to Configure a Tax to Self-Assess in R12 E-Business Tax (EBTax) Payables (Doc ID 948414.1) To Bottom

In this Document Was this document helpful?

Goal Yes
No
Solution
1. What is Self-Assessed Tax?
Document Details
2. How Do I Determine if I Should Self-Assess?
3. 11i vs R12 solution Comparison
Type:
HOWTO
4. Assumptions for this Example Status:
PUBLISHED
5. Setup Steps to Self-Assess For Non-Registered Suppliers Last Major
01-Feb-2017
Update:
a. Step 1 - Update the Tax Profile for the Legal Establishment 01-Feb-2017
Last Update:
b. Step 2 - Update Supplier Party Tax Profile
c. Step 3 - Update Supplier Party Site Tax Profile Related Products
d. Create a Determining Factor Set Oracle E-Business Tax
g. Test Oracle Payables

h. How the Logic Works to Self-Assess a Supplier site that is NOT REGISTERED in This Example
Information Centers
7. Critical Patches for Self-Assessment
Information Center: Oracle E-
8. Alternate Scenario: Self-Assess on the majority of your Invoices Business Tax - Payables
9. Alternate Scenario: You Self-Assess on All Imports Release 12 and Later
[1383309.2]
10. Alternate Scenario: You Elect To Self Assess Manually for Each Invoice
Information Center: Oracle
11. Comparison: Differences between Purchase Orders and AP Invoices Payables 1099 Tax Reporting
[1381863.2]
References
Information Center: Oracle
iSupplier Portal [1363052.2]
APPLIES TO: Information Center: Oracle
Payables for Suppliers
[1363041.2]
Oracle E-Business Tax - Version 12.0 to 12.2.5 [Release 12.0 to 12.2]
Oracle Payables - Version 12.0.0 to 12.2.5 [Release 12.0 to 12.2] Information Center: Oracle
Information in this document applies to any platform. Payables Accounting R12
[1476284.2]

Show More
GOAL
Document References
EBTax Information Center > EBTax Features (Setup & Troubleshooting) > Self Assessing (Use) Tax > Note 948414.1.1
What is the Latest E-Business
This Note was authored to guide a user through the self-assessment of taxes. The screenshots and examples used in this note Tax (eBTax) Rule Engine
are related to the Case Study Note 577996.1 on Canada but applicable to any self-assessment configuration you may wish to Patch? [1301356.1]
undertake. E-Business Tax (EBTax)
Information Center
Content was included in this Note from the following: [1117544.1]
Oracle Payable Implementation Guide
Case Study: Setup R12 E-
Oracle E-Business Tax User Guide Business Tax (EBTax) for
Canada: Includes 2010 HST
Changes [577996.1]
SOLUTION

1. What is Self-Assessed Tax? Recently Viewed

A self-assessed tax is a tax calculated and remitted for a transaction, where tax was not levied by the supplier but Frequently Asked Questions
- Oracle Payables and EBTax
is deemed as due (and therefore needs to be paid by the purchaser). In such cases the purchaser is responsible Setup [735970.1]
for calculating and remitting the tax. Self-assessment is also known as reverse charge or use tax in certain tax
After Changing The Default
regimes. Tax Rate System Is Not
Calculating The Tax, Get
Self-assessment is also known as reverse charge or use tax in certain tax regimes. Error: The system cannot
determine the default tax
rate for tax &tax and
2. How Do I Determine if I Should Self-Assess? tax status &tax_status
[1301343.1]
Each taxing jurisdiction and authority defines their own criteria for self-assessment. If the regulations governing R12: Ebtax Unable To
your business dictate that you self-assess then E-Business Tax establishes the need to self-assess a tax based Manually Add A Self-assess
upon the registration status of the Legal Establishment purchasing the goods or services and the Registration Tax In AP Invoice
Status of the Supplier. [1912099.1]
Tax User Defined Fiscal

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Conceptually the following is normally true: Classification Rules Defined
If goods purchased from a unregistered seller, to ensure that tax is not evaded on that transactions, it is buyers in OLFM not Working for
Payable Invoices or
responsibility to calculate and remit the tax to relevant authority. Disbursements [2336040.1]
Determine Tax Applicability
For Example :
Rules Doesn''t Update Tax
ABC procures goods from XYZ ( Unregistered Seller) worth $1,000 Correctly On AP Invoice
Normal tax rate :- 15% when PO is Matched
Since XYZ is a unregistered seller , It is ABC's ( Buyers) responsibility to calculate tax [1451662.1]
ABC will pay XYZ :- $1,000 (Invoice Amount) Show More
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
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 self-assess
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: <Name of the first party legal establishment>

Click GO

Click on update and go to "Tax Registrations tab"

Assign the following

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i) Tax regime: <name of the 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"

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)

g. Test

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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 self-
assessment.

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 the

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)

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

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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)
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 assessed 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

There was 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) and eventually the fix is implemented via
Bug 20189122

Fix is implemented via bug 20189122.

Following issues have been taken care of
.
1. Self Assessed Tax should not be computed on PREPAYMENT Type of invoice
.
Self Assessed tax will not get computed on prepayment invoice
even if set for self assessment is enabled at Legal Establishment level
.
2. Self Assessed Tax should not be allowed to enter from Tax Details window
(Both Detail and Summary context) for a PREPAYMENT Type of invoice

Tax forms UI no longer allows user to enable self assessed tax

check box for tax lines created on prepayment invoice.
.
3. Self Assessed Tax should not be computed upon prepayment application on
an invoice.

Similar to Point 1 during application also, self assessed tax

calculation is prevented. Also there is a forms fix in place which no longer
allows the user to modify the tax line created from prepayment application.
.

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Customer should be advised to uptake latest patch for ZXTRLLINEDISTUI.fmb and
this patch 20189122 ZX.A/B/C to get the functionality.

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

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

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Related
Products
Oracle E-Business Suite > Financial Management > Financials Common Modules > Oracle E-Business Tax
Oracle E-Business Suite > Financial Management > Procure to Pay > Oracle Payables > EB Tax > EB Tax

Keywords
DYNAMIC ADV FEATURES; DYNAMIC TAX ADVANCED; E-BUSINESS TAX; EBTAX; FEATURES; LIABILITY; SELF-ASSESS; SETUP; TAX CALCULATION; USE TAX

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