R12 - Integrating Oracle E-Business Tax With Oracle Receivables and Oracle Payables for Canada

Kalyankar Tota (AR Support) Page 1 of 45

Integrating

Oracle E-Business Tax

With

Oracle Receivables and Oracle Payables

For

Canada

Release 12

KALYANKAR TOTA

Receivables Support Oracle Support Services


CHAPTER I: LEGAL ENTITY CONFIGURATOR - XLE .................................................4

Legal Entity.................................................................................................................................... 4 Create Legal Entity...................................................................................................................... 4

CHAPTER II: GENERAL LEDGER - GL.........................................................................5

Setup Primary Ledger................................................................................................................... 5

CHAPTER III: RECEIVABLES - AR ...............................................................................6

Setting Up Operating Unit............................................................................................................ 6

CHAPTER IV: SYSTEM ADMINISTRATION ..................................................................7

Setups Required in System Administration ................................................................................ 7

CHAPTER V: ORDER MANAGEMENT - OM................................................................8

Setup Item Validation Organization for the Operating Unit .................................................... 8

CHAPTER VI: TRADING COMMUNITY ARCHITECTURE - HZ.....................................9

CHAPTER VII: SAMPLE TAX REQUIREMENTS FOR CANADA ................................10

CHAPTER VIII: E-BUSINESS TAX - ZX .......................................................................11

Implementation Checklist for Oracle E-Business Tax............................................................. 11 Step 1 – Setting Up Tax Users .................................................................................................. 11 Step 2 – Setting Profile Option Values...................................................................................... 12 Step 3 – Setting Up Lookup Codes ........................................................................................... 12 Step 4 – Setting Up TCA Geography Hierarchy ....................................................................... 12 Step 5 – Setting Up Legal Entity............................................................................................... 12 Step 6 – Setting Up Operating Unit........................................................................................... 13 Step 7 – Setting Up Accounts and Accounting Information ..................................................... 13 Step 8 – Setting Up TCA Classifications .................................................................................. 13 Step 9 – Setting Up Oracle Inventory........................................................................................ 13

Party Tax Profile ......................................................................................................................... 14 Setup Party Tax Profile for Operating Unit............................................................................... 14

Regime To Rate Flow .................................................................................................................. 15 Step 1: Tax Regime ................................................................................................................... 15 Step 2: Taxes ............................................................................................................................. 17 Step 3: Tax Status...................................................................................................................... 21 Step 4: Tax Jurisdictions ........................................................................................................... 22 Step 5: Tax Rates....................................................................................................................... 26 Step 6: Tax Rules ...................................................................................................................... 30 Step 7: Make Tax Available for Transaction............................................................................. 35


Step 8 – Setup Tax Accounting for AR and AP Transactions................................................... 37

CHAPTER VII: RECEIVABLES – AR ...........................................................................39

Setup Receivables for Transactions and Receipts .................................................................... 39

Creating Customers and Transactions in AR........................................................................... 40 Create Customers and Addresses .............................................................................................. 40 Run Geography Name Referencing Program............................................................................ 42 Entering Transactions................................................................................................................ 43


User Guide:

Oracle® Financials

Implementation Guide

Use the Legal Entity Configurator to search for existing legal entities, jurisdictions, and legal

authorities; create and update legal entities, establishments, registrations, legal addresses,

jurisdictions, and legal authorities; and create legal entities from existing organizations.

Important Terms in Legal Entity Configurator:

• Legal Entity

• Establishment

• Registration

• Jurisdiction

• Legal Authority

• Legal Address

• Legal Associations

Legal Entity

A legal entity is a clearly identified entity, which is given rights and responsibilities under

commercial law, through registration with the country's appropriate legal authority. These rights

and responsibilities are enforceable through the judicial system. A legal entity generally has the

right to own property and trade, and the responsibility to repay debt and comply with labor law.

Legal entities are responsible to account for themselves to company regulators, taxation

authorities, and owners according to rules specified in the relevant legislation.

The legal entity belongs to the organization's own corporate legal structure (enterprise).

The legal entity is referred to as the internal legal entity and is the initiator and owner of a given

transaction.

Create Legal Entity

Please see Chapter I of the following Note for the process of creating Legal Entity:

Note.557139.1 Ext/Pub Release 12 Integrating E-Business Tax With Oracle Receivables

For Location Based Tax

Chapter I: Legal Entity Configurator - XLE


User Guides: Oracle General Ledger User’s Guide

Oracle General Ledger Implementation Guide

Oracle General Ledger Reference Guide

Setup Primary Ledger

Application General Ledger

Responsibility General Ledger Super User

Navigation Setup > Financials > Accounting Setup Manager > Accounting Setups

This is referred to as Set Of Books in Release 11i and prior releases.

Please see Chapter II of the following Note for the process of creating Ledger:



Chapter II: General Ledger - GL


User Guides: Oracle Receivables Implementation Guide

Oracle Receivables Reference Guide

Oracle Receivables User Guide

An organization that uses Oracle Cash Management, Order Management and Shipping Execution,

Oracle Payables, Oracle Purchasing, and Oracle Receivables. It may be a sales office, a division,

or a department. An operating unit is associated with a legal entity. Information is secured by

operating unit for these applications. Each user sees information only for their operating unit. To

run any of these applications, you choose a responsibility associated with an organization

classified as an operating unit.

Setting Up Operating Unit

Please see Chapter III of the following Note for the process of creating Operating Unit:



Chapter III: Receivables - AR


Setups Required in System Administration

Please see Chapter IV of the following Note for the setups required to be performed in

SysAdmin:



Chapter IV: System Administration


Setup Item Validation Organization for the Operating Unit

Please see Chapter I of the following Note for the process of creating Legal Entity:



Chapter V: Order Management - OM


User Guides:

Oracle Trading Community Architecture Administration Guide Oracle Trading Community Architecture Reference Guide Oracle Trading Community Architecture Technical Implementation Guide Oracle Trading Community Architecture User Guide

Please refer to the following White Paper on Metalink to setup Address Validation:

Note.554492.1 Setting Up Geography Hierarchy And Address Validation In Release 12

Chapter VI: Trading Community Architecture - HZ


We will be using the following table as our Tax Requirements for Setting Up E-Business Tax

Application for Canada.

Applicability GST/HST PST PROVINCE PROVINCE

CODE AR/AP Receivables

Tax Rate Code Tax Rate Code

COMBINED TAX

RATES

Alberta AB GST/ABPST GST 5.0% GST 0.0% ABPST 5.0%

British Columbia BC GST/BCPST GST 5.0% GST 7.0% BCPST 12.0%

Saskatchewan SK GST/SKPST GST 5.0% GST 5.0% SKPST 10.0%

Manitoba MB GST/MBPST GST 5.0% GST 7.0% MBPST 12.0%

Ontario ON GST/ONPST GST 5.0% GST 8.0% ONPST 13.0%

Québec QC GST/QCPST GST 5.0% GST 7.5% QCPST 12.5%

New Brunswick NB HST HST 13.0% HST 0.0% NBPST 13.0%

Nova Scotia NS HST HST 13.0% HST 0.0% NSPST 13.0%

Prince Edward Island PEI GST/PEIPST GST 5.0% GST 10.0% PEIPST 15.0%

Newfoundland & Labrador NF HST HST 13.0% HST 0.0% NFPST 13.0%

Northwest Territories NT GST/NTPST GST 5.0% GST 0.0% NTPST 5.0%

Nunavut NU GST/NUPST GST 5.0% GST 0.0% NUPST 5.0%

Yukon YT GST/YTPST GST 5.0% GST 0.0% YTPST 5.0%

Note: This is just a sample Business Case for Canadian Taxes. Please contact your Consultants /

Tax Users before setting up E-Business Tax on your instance.

Chapter VII: Sample Tax Requirements For CANADA


User Guides: Oracle E-Business Tax Implementation User Guide

Oracle E-Business Tax User Guide

Oracle E-Business Tax Reference Guide

Oracle E-Business Tax: Vertex Q-Series and Taxware Sales/Use Tax System Implementation

Guide

Implementation Checklist for Oracle E-Business Tax

Step # Description Mandatory / Optional

1 Setting Up Tax Users Optional

2 Setting Up E-Business Tax Profiles Optional

3 Setting Up E-Business Lookup Codes Optional

4 Setting Up TCA Geography Hierarchy Optional

5 Setting Up Legal Entity Mandatory

6 Setting Up Operating Unit Mandatory

7 Setting UP Accounts and Accounting Information Mandatory

8 Setting Up TCA Classifications Optional

9 Setting Up Oracle Inventory Optional

Step 1 – Setting Up Tax Users Set up your tax users and assign each user a tax-related responsibility. Oracle E-Business Tax

provides these seeded responsibilities:

Tax Manager: Assign this responsibility to users who will set up and maintain tax configuration

data. The tax manager responsibility is the responsibility with the highest level of access to E-

Business Tax functionality.

If you want to include the GL Tax Options window, you must assign a data access set to the GL:

Data Access Set profile option under the Tax Manager responsibility.

Tax Administrator: Update and assign this responsibility to users who will provide E-Business Tax technical setup and support services. You can update this responsibility according to the

duties of each tax administrator user.

Oracle Tax Simulator: Assign this responsibility to users who test tax setups with the Oracle Tax Simulator.

You can also set up new E-Business Tax menus and responsibilities according to your

requirements.

Chapter VIII: E-Business Tax - ZX


Step 2 – Setting Profile Option Values

Set values for E-Business Tax profile options to control the availability of certain tax options and

to maintain your Vertex or Taxware installation.

Note 466575.1 - What is the usage of E-Business Tax Profile Options

Step 3 – Setting Up Lookup Codes

Use the Application Object Library Lookups window to maintain existing lookup codes and

define additional lookup codes for E-Business Tax lookup types.

Note: E-Business Tax does not perform validation on updated or disabled lookups. If you want to

disable, update, or apply an end date to an E-Business Tax lookup type, please ensure that the

applicable values are not in use in the E-Business Tax setup.

Note 466578.1 - How To Update E-Business Tax Lookup Codes?

Step 4 – Setting Up TCA Geography Hierarchy

Set up and maintain the TCA geography hierarchy for each country where you have a tax

requirement. The TCA geography hierarchy provides a single reference source for all

geographical and location-based information for all E-Business Suite applications.

You use the TCA geography hierarchy in these cases:

• Taxes that are levied at a level lower than the country level, for example, state or provincial

taxes.

• Tax characteristics, such as the tax rate, vary at a lower level than the country level. You

must set up and maintain the TCA geography hierarchy before you can perform these tax-

related setups:

• Legal entities and establishments - Enter and maintain location information for first party

legal entities and the first party legal establishments.

Refer to Chapter VI of this document on more information about TCA Geography Hierarchy.

Step 5 – Setting Up Legal Entity Use the Legal Entity Configurator to set up these parties:

First party legal entity - The legal entities that represent your company.

First party legal establishments - The legal establishments that have or require tax registrations,

either implied or explicit, from one or more tax authorities.

Legal authorities - The legal authorities that represent the tax authorities in the tax regimes

where you do business.


Refer to Chapter I of this document on more information about Legal Entity.

Step 6 – Setting Up Operating Unit

An organization that uses Oracle Cash Management, Order Management and Shipping Execution,

Oracle Payables, Oracle Purchasing, and Oracle Receivables. It may be a sales office, a division,

or a department. An operating unit is associated with a legal entity. Information is secured by

operating unit for these applications.

Refer to Chapter III of this document on more information about Operating Unit.

Step 7 – Setting Up Accounts and Accounting Information

Set up accounts and accounting information for your tax transactions. You must set up and

maintain accounting information before you can set up tax accounts for the applicable operating

units. You set up tax accounts by operating unit for taxes, tax rates, tax jurisdictions, tax recovery

rates, and tax registrations of first party legal establishments

Review and complete these accounting setup tasks according to your requirements:

• Ledgers - Set up the chart of accounts, accounting calendar and currency for the primary

ledger of your legal entities and, if applicable, any secondary ledgers.

• Legal entity balancing segments - Define balancing segment values for the legal entities

involved in tax transactions.

• Accounting setup - Create an accounting setup for each legal entity with the ledger or ledgers that you created, and assign the applicable operating units to the primary ledger.

• Complete the accounting setup - Complete the details of the accounting setups.

Refer to Chapter II of this document on more information about Setting Up Ledger and related

setups.

Step 8 – Setting Up TCA Classifications

Set up TCA classifications to classify third parties for tax purposes. You can define a TCA class

category and class codes specifically for use in tax determination. You can also use standard

classifications, such as the US Standard Industrial Classification (SIC) codes, and assign these

codes a party fiscal classification.

You must set up and maintain TCA classifications before you can perform these tax-related

setups:

• Party fiscal classifications

• Party tax profiles

• Tax rules

Step 9 – Setting Up Oracle Inventory


Use the Inventory Item Category functionality in Oracle Inventory to model product fiscal

classifications. You can create either a single product fiscal classification type or a hierarchy of

product fiscal classification types that matches the segments of the Inventory category.

Party Tax Profile

A tax profiletax profiletax profiletax profile is the body of information that relates to a party's transaction tax activities. A tax

profile can include tax registration, tax exemptions, configuration options, default information,

party fiscal classifications, tax reporting codes, and account tax details.

The tax registrationtax registrationtax registrationtax registration contains information related to a party's transaction tax obligation with a tax

authority for a tax jurisdiction where it conducts business. The tax registration is part of the tax

profile of a first party legal establishment and a third party and third party site.

Set up tax profiles for the parties involved in your transactions. Parties include:

1. All legal entities, legal establishments, and operating units in your organization that have a

transaction tax requirement.

2. Your customers and suppliers and their locations.

3. Tax authorities that administer tax rules and regulations.

Setup Party Tax Profile for Operating Unit

Application E-Business Tax

Responsibility Tax Manager

Navigation Parties > Party Tax Profiles


Regime To Rate Flow

Step 1: Tax Regime

Tax Regime is the level at which similar taxes governed by common tax rules or laws are

grouped together.

In our exercise, we will setup a Tax Regime for Canada (CA), which consists of three Taxes

GST, HST and PST.

Other Examples for different Tax Regimes can be….

1) Excise Tax Regime in India

2) VAT Regime in UK

3) Locations Based Tax for US (STATE.COUNTY.CITY)

Define Tax Regime



Navigation Tax Configuration > Tax Regimes


Assign Operating Unit To Tax Regime referred to as Regime Subscriptions

Note: Depending on your requirement, you can either subscribe your Operating Unit or Legal

Entity to the regime. If you have more than one Operating Unit under a Legal Entity, then you

might want to assign Legal Entity to the Regime.


Step 2: Taxes

A classification of a charge imposed by a government through a fiscal or tax authority.

In our exercise, we will setup Taxes for Canada. (GST, HST and PST).

Other Examples for different Taxes can be Excise Tax Regime in India or VAT Regime in UK.

Define Taxes



Navigation Tax Configuration > Taxes


Setup similar Taxes for HST and PST.




Step 3: 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. This provides 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 exercise, we will setup Tax Statuses GST, HST and PST Taxes as STANDARD.

Other Examples for different Status can be Reduced Rated and Zero Rated

Define Tax Status



Navigation Tax Configuration > Tax Statuses


Note: Make sure to check the option ‘Set as Default Tax Status’ for all the statuses you define

(One for each Tax).

Step 4: Tax Jurisdictions

Tax Jurisdiction is 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 exercise, we will setup Jurisdictions for all the Provinces defined in Geography Hierarchy.

Example: Ontario, British Columbia, etc. There should be at least one Jurisdiction for each Tax.

So we will setup one Jurisdiction for country Canada for both Taxes GST and HST.

Define Tax Jurisdictions



Navigation Tax Configuration > Tax Jurisdictions

Choose Mass Create



Chose one Jurisdiction as Default Jurisdiction per Tax.



Step 5: Tax Rates

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

GST – 5 %

HST – 13 %

BCPST – 7 %

Other Examples for different Tax Rates can be -

• UK Standard VAT Rate 17.5%.

• Sweden Standard Rate VAT is 25%.

Define Tax Rates



Navigation Tax Configuration > Tax Rates




Note: You should setup a Default Tax Rate for every Tax Jurisdiction when using Location

Based Tax.

Regime to Rate Flow Setups Screen shot:


Step 6: Tax Rules

These are the defaults Rules for Tax Calculation

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Tax Calculation

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Regime Applicability

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•• DDeetteerrmmiinnee AApppplliiccaabbllee TTaaxx RReeggiimmeess

Tax Applicability

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Define Tax Rules



Navigation Tax Configuration > Tax Rules

Rules for Tax GST:

Create a ‘Not Applicable’ Rule for GST Tax for the following Provinces:

1. New Brunswick

2. Nova Scotia

3. Newfoundland & Labrador



Define similar rules for provinces NS and NF to make GST ‘Not Applicable’.

Rules for Tax HST:

Define similar rules for provinces NS and NF to make GST ‘Applicable’.


Rules for Tax HST:

Define similar rules for provinces NS and NF to make GST ‘Not Applicable’.


Step 7: Make Tax Available for Transaction

Final step before using the Tax is to check the option ‘Make Tax Available for Transactions’ on

the Tax Setup. You will not be able to check this option until you complete all the setups in

Regime to Rate Flow. If setup is not complete this is where the errors will appear to address

missed or incorrect setup.

Define Taxes



Navigation Tax Configuration > Taxes



Step 8 – Setup Tax Accounting for AR and AP Transactions

Set up default tax accounts for the taxes in a tax regime to post the tax amounts derived from your

transactions. The tax accounts you define serve as default accounting information for taxes, tax

rates, tax jurisdictions, and tax recovery rates.

You set up tax accounts under a primary ledger and operating unit. The calculated tax amounts

post to the specified operating unit accounts at transaction time. The actual account information

that the system uses depends upon subledger accounting rules. You can also define tax accounts

for tax rates, tax recovery rates, and tax jurisdictions. If you define tax accounts at the tax level,

these accounts default to the tax rate level for the same tax and operating unit. You can update

these default tax accounts in the tax rate setup.

Tax Accounts at TAX Level


Tax Accounts at Tax Jurisdiction Level

Tax Accounts at Tax Rate Level


User Guides: Oracle Receivables Implementation Guide

Oracle Receivables Reference Guide

Oracle Receivables User Guide

Setup Receivables for Transactions and Receipts

Please see Chapter VII of the following Note for the Setups required in AR:



Chapter IX: Receivables – AR


Creating Customers and Transactions in AR

Create Customers and Addresses

After these basic transactions, we are ready to create Customers for this Operating Unit.

Application Receivables

Responsibility Receivables Manager

Navigation Customers > Customers

Creating Customer CANADA TRANSPORTAION for Ontario Province


Creating Customer ‘Canada New Brunswick’ for New Brunswick Province


Run Geography Name Referencing Program

One last step before entering transactions is to validate or Locations created in

HZ_LOCATIONS. This program should only be run one time if your Address Validation is setup

to Error as explained in Chapter VI. Otherwise you may need to run this program on a periodic

basis to fix the bad locations that you may have.

Application Trading Community Architecture

Responsibility Trading Community Manager

Navigation Control > Request > Run


Entering Transactions

After these basic transactions, we are ready to test our setups by entering a Transaction in AR.

Application Receivables

Responsibility Receivables Manager

Navigation Transactions > Transactions

Entering Transactions for Ontario Province


Entering Transactions for New Brunswick Province


R12 - Integrating Oracle E-Business Tax With Oracle Receivables and Oracle Payables for Canada

Documents

tax regime

tax available

tax users

tax status

tax jurisdictions

tax rates

tax rules

setup tax accounting