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Enable Tax to Calculate on Invoices

Originating in Oracle R12 Projects
By: Jeanne Cooper
Senior Oracle Financials Consultant
AST Corporation
April 8, 2014

Applications Software Technology Corporati on

1755 Park Street, Suite 100 | Naperville, Illinois 60563 | 1.888.278.0002 | www.astcorporation.com

Contents
INTRODUCTION .....................................................................1
PROBLEM DEFINITION ............................................................ 1
E-BUSINESS TAX BUSINESS SCENARIO .................................. 1
HIGH LEVEL SOLUTION ........................................................... 1
SETUP REQUIREMENTS ......................................................... 2
SOLUTION DETAILS ................................................................ 2
FINAL NOTE: ........................................................................ 19
BUSINESS BENEFITS.............................................................. 19
SUMMARY ........................................................................... 20

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Introduction
E-Business Tax is a new mandatory module in Oracles Release 12 EBusiness Suite. Oracles new tax engine, for Order-to-Cash and Procureto-Pay business processes, encapsulates fiscal and tax rules in a single
point solution for tax events. E-Business Tax is called upon whenever
Sales or VAT tax needs to be calculated. Besides the basic E-Business
Tax configuration, tax rules based on party, place, product and
transactions can be used to calculate taxes.
The client can use a minimal configuration of E-Business Tax and use a
3rd party vendor to calculate Sales Tax and Use Tax or the client take
full advantage of its features. Regardless, the E-Business Tax module
cannot be ignored if the client decides to use Oracle R12.

Problem Definition
Project Accounting has not yet been upgraded to Oracles R12
Architecture. Tax does not automatically calculate on Receivables
invoices when they are generated in Project Accounting. Enabling EBusiness Tax will automatically calculate the tax on Receivables
invoices originating in Project Accounting.

E-B USINESS T AX B USINESS S CENAR IO

The client, Company XYZ is located in 65 countries. As a part of the
global Oracle Release 12 Upgrade Project, Company XYZ plans to use
E-Business Tax to calculate taxes within their Oracle Payables,
Receivables and Projects modules. Several custom tax rules in EBusiness Tax need to be built in order to meet specific business
requirements. Tax rules affect all countries. Therefore, the tax rules
must be configured for all 65 countries. Consequently, it was decided
that the Expert (Tax) Rule Entry method was the most logical manner by
which to build the custom tax rules.

High Level Solution

This white paper details how to configure Oracle E-Business Tax so
taxes can be calculated on receivables invoices generated in Project
Accounting before they are interfaced to Oracle Receivables. Custom
tax rule must be created and additional configuration must be performed
in E-Business Tax to allow tax to automatically calculate.

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S ETUP R E QUIREMENTS
Step 1. Configure Configuration Owner Tax Option for Application
Receivables

Event Class:
o

Invoice

Debit Memo

Credit Memo

Step 2. Create Tax Determining Factor Set for use when constructing
the custom tax rule for all 65 countries
Step 3. Create Tax Condition Set for use when constructing the custom
tax rule for all 65 countries
Step 4. Build Custom Tax Rule using Expert Rule Entry

Solution Details
This section details the associated configuration steps required in Oracle
E-Business Tax and how to build the custom tax rule needed to enable
taxes to automatically calculate on invoices generated in Project
Accounting before they are interfaced to Oracle Receivables.
ASSUMPTIONS:
1. Tax Regimes, Taxes, Tax Statuses, Tax Recovery Rates, Tax
Rates and standard Tax Rules have already been successfully
configure.
2. The Tax has been made available for transactions.
Step 1. Configure Configuration Owner Tax Options
Owner Tax Options needs to be configured so taxes will automatically be
calculated on Accounts Receivables invoices, debit memos and credit
memos.
Responsibility: Tax Manager
Navigation: Tax Manager > Defaults and Controls > Configuration
Owner Tax Option

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1. The Configuration Owner Tax Options page is displayed.

2. [Click] the Create button.

3. The Create Configuration Owner Tax Options page is

displayed.
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4. The Configuration Owner Tax Options page was configured

three times for each Operating Unit. Three combinations of
Application / Event Class needed to be configured: Receivables /
Invoice, Receivables / Debit Memo, Receivables / Credit Memo.
Field

Description

Description

Description

OU Name

OU Name

OU Name

Receivables

Receivables

Receivables

Event Class

Invoice

Debit Memo

Credit Memo

Entity Name

Transactions

Transactions

Transactions

DD-MMM-YYYY

DD-MMM-YYYY

DD-MMM-YYYY

Header

Header

Header

Yes

Yes

Yes

Configuration Owner
Application Name

Effective From Date

Effective To Date
Rounding Precedence 1
Rounding Precedence 2
Rounding Precedence 3
Rounding Precedence 4
Default Rounding Level
Allow Exemptions
*Regime Determination Set

Determine
Determine
Determine
Applicable Regime Applicable Regime Applicable Regime

Perform Additional
Applicability for Imported
Documents
Enforce Tax from Reference
Document
Enforce Tax From Account

Yes

Yes

Yes

Allow Tax Applicability

Yes

Yes

Yes

Allow Entry of Manual Tax

Lines

Yes

Yes

Yes

Allow Override for

Calculated Tax Lines

Yes

Yes

Yes

Tax Line Override Impacts

Other Tax Lines

Yes

Yes

Yes

Allow Override and Entry of

Inclusive Tax Lines

Yes

Yes

Yes

Allow Offset Tax Calculation

Offset Tax Basis

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5. Make sure to [click] on the Apply button when done to save

the changes.
6. Oracle will display a Confirmation that the Content Owner
Tax Options have been successfully created.

Step 2. Create Tax Determining Factor Set

A tax determining factor is an attribute that may be used by the EBusiness Tax (EBTax) engine to find and calculate taxes for a specific
transaction. The EBTax rule engine allows implementers to create any
number of custom tax rules that reference the tax determining factors:
Party, Product, Place, Process and that satisfy the unique needs of a
specific business operating within a tax jurisdiction.

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Background:

Tax Determining Factor Set needs to be created, so it can

be used when building the custom tax rule, in EBusiness Tax, via the Expert Rule Entry method.

NOTE: The Determining Factor Set only needs to be defined once,

unless it is Tax Regime specific (i.e. for specific country). When
creating the Tax Determining Factor for a rule, which can be
used for many countries, it is good practice to create a generic
name and omit the Ledger or Tax Regime Code. This will save a
lot of configuration time when building the custom tax rule.
Responsibility: Tax Manager
Navigation: Advanced Setup Options > Tax Determining Factor Sets

1. The Tax Determining Factor Sets page will be displayed.

2. [Click] on the Create button.

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3. The Create Tax Determining Factor Set page will be displayed.

4. The Create Tax Determining Factor Set page needs to be
configured with following information:
Field
Tax Determining Factor Set
Tax Determining Factor Set Name
Set Usage

Description
(Create short descriptive meaningful name)
DEFAULT TAX CALC FOR AR
(Create short descriptive meaningful name)
DEFAULT TAX CALC FOR AR
Tax Rules

**Ledger
**Regime Code
Determining Factor Class
Class Qualifier
Determining Factor Name
Required

Registration
Bill To Party
Registration Status
No

WARNING: Never enter the Ledger and/or Regime Code unless you want
the Tax Determining Factor Set to be applicable for only a
specific Ledger and/or Tax Regime Code. If, for example you
are creating this tax rule for multiple countries, a
generically named Tax Determining Factor Set (where
Ledger and/or Regime Code is not specified) will be able to
be used for each country for which the rule needs to be built.

5. When the Tax Determining Factor Class was configured,

Registration was selected.

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What is a Tax Registration Status Determining Factor?

In Release 12, the E-Business Tax module allows you to configure a tax
rule that uses the Tax Registration Status as the determining factor for
deriving the proper tax to apply.
A Tax Registration Status is frequently used for tax reporting as well as
to levy the proper tax in certain countries.
E-Business Tax provides these seeded registration statuses:

Agent The party acts as a withholding agent for the tax

authority for the applicable tax.

Registered The party is registered for the applicable tax.

Not Registered The party is not registered for the applicable

tax.

Creating new Tax Registration Status Determining Factors

Although the Registration Statuses listed above come seeded, new values
can be added using the following responsibility and navigation to the
Application Object Library Lookups window.
Responsibility: Application Developer
Navigation: Application > Lookups > Application Object Library >
Type = ZX_REGISTRATIONS_STATUS

Step 3. Create Tax Condition Set

The tax condition set is the logic of the tax rule. It specifies the factors to
consider, and the resulting value that must exist for each factor, in order
for the result of the tax rule to be true (and therefore the tax to calculate).

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Tax condition sets group together the tax conditions that constitute a tax
rule. You can set up tax condition set in advance and apply them to a tax
rule (using Expert Rule Entry), or you can set up a tax condition set
during tax rule creation (using Guided Rule Entry).
Each tax condition in a tax condition set consists of a tax determining
factor (determining factor class/class qualifier/determining factor name),
an operator, and a value.
Background:

Tax Condition Set needs to be configured so it can be

used when building the custom tax rule, in EBusiness
Tax, using the Expert Rule Entry method.

NOTE: The Tax Condition Set, for this tax rule will be built without
the country name. Omitting the country name will enable the
same Tax Condition Set to be used for each tax rule for every
tax.
Responsibility: Tax Manager
Navigation: Advanced Setup Options > Tax Condition Sets

1. The Tax Condition Sets page will be displayed.

2. [Click] on the Create button.

3. The Create Tax Condition Set page will be displayed.

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4. Enter the following information on the Create Tax Condition Set

page:
Field

Description

Tax Condition Set

(Create short descriptive meaningful name)

DEFAULT TAX CALC FOR AR

Tax Condition Set Name

(Create short descriptive meaningful name)

DEFAULT TAX CALC FOR AR

Determining Factor Set

(Name created in previous step)

DEFAULT TAX CALC FOR AR

**Country Name
Determining Factor Set Name

(Name created in previous step)

DEFAULT TAX CALC FOR AR

WARNING: Never enter the Country Name unless you want the Tax
Condition Set to be applicable for only the Country
specified.

5. After the information has been entered on the Create Tax

Condition Set page, [click] on the Continue button.

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6. The Create Tax Conditions page will be displayed and contain

pre-populated values.
7. Enter / verify the following information on the Create Tax
Conditions page
Field
Determining Factor Class
Class Qualifier
Determining Factor Name
Operator

Description
Registration
Bill To Party
Registration Status
Not Equal To

Value / From Range

Agent

To Range
Ignore Condition

No (leave check box unchecked)

8. [Click] on the Finish button when done to save the changes.

NOTE: Once you use a tax condition set to create a tax rule, you can no
longer update the condition set.

Step 4. Create tax Rule

Tax rules are created for each combination of configuration owner, tax
regime, and tax.
Background:

When a tax rule needs to be configured for multiple Tax

Regimes, it is suggested to use the Expert Rule Entry
approach. It will save a significant amount of time;
especially since Data Loader cannot be used to upload
information into HTML pages for Oracle Rel 12.

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Responsibility: Tax Manager

Navigation: Tax Configuration > Tax Rules

1. The Tax Rules search page will be displayed.

2. Enter the Configuration Owner, Tax Regime Code and Tax for
which the tax rule needs to be created. To serve as an example,
the following information and subsequent tax rule was entered
for Austria (ISO code AU).

3.

[Click] on the Go button.

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4. Oracle will re-display the Tax Rules page, based on the search
criteria entered, and list the Determination Tax Rule Types. The
tax line determination process uses the information of the
transaction header and transaction line to determine the tax lines.
The rule types and related processes used for tax line determination and
tax calculation are:
Rule Type
Determine Place of Supply
Determine Tax Applicability
Determine Tax Registration
Determine Tax Status
Determine Tax Rate
Determine Taxable Basis
Calculate Tax Amounts
Determine Recovery Rate

Direct Tax Rate

Determination

Description
Determines the location where a transaction
is considered to have taken place for a
specific tax.
Determines the taxes that apply to a given
transaction.
Determines the party whose tax registration
status is considered for an applicable tax on
the transaction.
Determines the tax status of each applicable
tax on the transaction.
Determines the tax rate for each applicable
tax on the transaction.
Determines the amount upon which to apply
the tax rate.
Calculates the tax amount for each
applicable tax on the transaction.
Determines the recovery rate to apply to
each recovery type for each applicable tax
on the transaction.
This is a special tax rule type that lets you
specify the results of tax applicability, tax
status, and tax rate for a given tax. You use
this rule type for specific tax determination
requirements.

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The tax calculation is based on the place of supply. Therefore; the

custom tax rule will be built based on the Determine Place of Supply.
The tax rule will be created for the Default Tax Rate for each Tax
Rule.

5. On the Determine Place of Supply tax rule type row, [click] on

the new custom tax rule icon

beneath Expert Rule Entry.

6. The first of three configuration tax rule pages will be displayed:

A. Step 1 of 3 General Information
B. Step 2 of 3 Rule Conditions
C. Step 3 of 3 Rule Order
Each is discussed in the following.

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A. Step 1 of 3 General Information

7. The Create Tax Rule: General Information page will be

displayed.
8. [Enter] the following information:
Field
Tax Law Reference
Description
Use the Tax Law Reference
and Description as Tax Rule
Code and Rule Name
Event Class Category
Application
Event Class
Set as Geography Specific
Rule
Rule Code
Value / From Range

Description

Event Class
Receivables
Invoice

(Create short descriptive meaningful name)

DEFAULT TAX CALC FOR AR
(Create short descriptive meaningful name)
DEFAULT TAX CALC FOR AR

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Field

Description

Effective From (Date)

DD-MMM-YYYY

Effective To (Date)
Determining Factor Set Code

(Select from the LOV, the Determining Factor

Set Code specifically created for this tax rule)
DEFAULT TAX CALC FOR AR

9. After the information has been entered, [click] on the Next

button.

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B. Step 2 of 3 Rule Conditions

10. The Create Tax Rule: Rule Conditions page will be displayed.
11. [Enter] the following information:
Field
Condition Set Code
Name
Order
Result
Application

Description
(Condition Set Code created for this tax rule)
DEFAULT TAX CALC FOR AR
(Condition Set Name created for this tax rule)
DEFAULT TAX CALC FOR AR
(If multiple conditions exist for a tax rule, enter
the order of each condition in which EBTax
should follow to calculate the tax rule)
1
Bill To

NOTE: Verify the correct Determining Factor Class is displayed on the

bottom of the page. The Determining Factor Class will be
displayed after the Condition Set Code is selected.

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12. After the information has been entered, [click] on the Next
button.
C. Step 3 of 3 Rule Order

13. The Create Tax Rule: Rule Order page will be displayed.
14. [Enter] the following information:
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Field

Description

Select Rule Code

Rule Order

DEFAULT TAX CALC FOR AR

60

NOTE: Rule Order was numbered 60 so to not interfere with any

other existing rules.

15. After the information has been entered, [click] on the Finish button.
16. Oracle will display a Confirmation that the tax rule was successfully
created.

F INAL N OTE :
In addition to configuring the above, Default Tax Rate Names for each of
the 64 countries were provided to the Technical Team. The Technical
Team included the Default Tax Rate Names in their custom program for
the Project Accounting module.

Business Benefits
This associated configuration and custom tax rule will enable tax to
automatically calculate on Receivables invoices when they originate in
Project Accounting.

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Using the Expert Entry Method to build custom tax rules, expedites the
configuration process when there are a multitude of Tax Regimes for
which tax rules need to be created.

Summary
This document provided an overview of Oracle Release 12 E-Business
Tax (EBTax). It highlighted the configuration required before
constructing custom tax rules in EBTax using the Expert Rule Entry.
Additionally, this paper detailed how the Expert Rule Entry can be
utilized to configure custom tax rules for multiple Tax Regimes.

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Enable Tax to Calculate on Invoices Originating in Oracle R12 Projects

April 8, 2014r
AST Corporation
1755 Park Street, Suite 100
Naperville, Illinois 60563
Phone: 888-278-0002
Fax:
630-778-1179
www.astcorporation.com
Copyright 2014 AST Corporation
AST Corporation is a privately held company founded in
1995 to serve commercial and public sector organizations
in utilizing the full potential of their investment in Oracle
Applications and Technologies. We have built our
practice by providing top quality full life cycle and turnkey consulting services for Oracle Applications
implementation and upgrade projects, among other
specific services.
Our mission is to insure that you, as a valued client,
receive the highest level of expertise and personalized
service for your Enterprise Applications. We endeavor to
help you realize the full benefit from your investment in
software applications and integrate them seamlessly to
your business processes.