Tax Setup Document PDF

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Case Study: Setup R12 E-Business Tax (EBTax) for Canada: Includes 2010 HST Changes [ID 577996.1]
Modified 21-DEC-2011
Type BULLETIN
Status PUBLISHED
In this Document
Purpose
Scope and Application
Case Study: Setup R12 E-Business Tax (EBTax) for Canada: Includes 2010 HST Changes
1. Introduction
2. If You Are Using an Upgraded Environment....
a. HST Setup:
b Tax Groups:
3. Pre-Requisite Setup
a. Setup Geography Hierarchy Structure & Details
b. Define Tax & Geography Validation
c. Setup a Legal Entity, Establishment, Ledger and Operating Unit
d. Associate the Operating Unit with the Legal Establishment
e. Replicate Seed Data
f. Setup Responsibilities for the New Operating Unit
g. Setup Mandatory Responsibility Level Profile Options
h. Setup Item Validation Organization For The Operating Unit
i. Setup a Freight Inventory Item
j. Setup Tax and TCA Profile Options
k. Setup Receivables System Options
l. Setup Receivables AutoAccounting
m. Setup Receivables Transaction Types
n. Setup Transaction Sources
o. Initialize Operating Unit Party Tax Profile
p. Setup Receivables Activity Types
q. Setup Banks, Branches and Accounts
r. Setup Receivables Receipt Class & Payment Method
s. Setup Approval Limits
t. Run Geography Name Referencing Program
4 Tax Setup
a. Define Regimes
b. Define Taxes
c. Define Tax Statuses
d. Define Tax Jurisdictions
e. Define Tax Recovery Rates
f. Define
Tax Rates
Rate
this document
g. Define the Party Tax Profile for Legal Entity & Operating Unit
h. Setup Default Tax Rules
i. Make Tax Available For Transactions
j. Perform a Baseline Test in AR
k. Perform a Baseline Test in AP
5. Tax Setup: Tax Setup For Common Scenarios
a. Adjusting the Taxable Basis for Quebec and Prince Edward Island
b. Zero Rated Items for Export
c. Applying Tax to Freight
d. Self-Assessed Taxes
e. Reporting By Tax Authority
f. Charging Different Tax Accounts For Each Tax
g. Setting up Tax recovery for ITC and Rebates
6 Testing Your Tax Configuration
a. Receivables
b. Payables
Community Discussion
References
Applies to:
Oracle Purchasing - Version: 12.0 and later [Release: 12 and later ]
Oracle E-Business Tax - Version: 12.0 and later [Release: 12.0 and later]
Oracle Order Management - Version: 12 and later [Release: 11 and later]
Oracle Payables - Version: 12.0.0 and later [Release: 12.0 and later]
Oracle Receivables - Version: 12.0.0 and later [Release: 12.0 and later]
Information in this document applies to any platform.
Purpose
In Release 12, Oracle introduced E-Business Tax as the new tax calculation engine for the Order to Cash and Procure to Pay business flows. Each of these modules proprietary tax engines from earlier
new solution. (Latin Tax Engine, Golden Tax Adaptor and the India Globalization still exist)
This White Paper documents how a simplified implementation might be performed for a customer using E-business Tax for Canada in Release 12. This is a living document and we encourage readers to
practices on our community thread for Canada Tax Setup.
This Note includes changes reflective of HST adoption by British Columbia (BC) and Ontario (ON) scheduled to take effect July 1, 2010. Also added to this note are the Nova Scotia HST rate increases (add
This white paper combines, extends and superseeds the following:

1) Oracle E-Business Tax Configuration Library (CLIC) Note 463001.1
2) Oracle E-Business Tax Implementation Guide Chapter 4: Canadian Sales Tax
3) White Paper titled: Integrating Oracle E-Business Tax With Oracle Receivables and Oracle Payables For Country Canada Release 12 (this document is no longer available for viewing on My Oracle Sup
Scope and Application
https://support.oracle.com/CSP/main/article?cmd=show&type=NOT&doctype=BULLETIN&id=577996.1
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This note was written in a case study format using Canada as the example. It assumes that you have an existing implementation and that you are adding a new country, Canada, to your configuration.
Section 3 begins the case study with some mandatory setup steps. You should refer to the Financials Implementation Guide along with your module specific implementation documentation as appropriate fo
documented in this section do cover mandatory setups for modules impacted by E-Business Tax. Each section also attempts to document the tax implications of options you might select when performing th
Section 4 begins the tax specific setups. In this section we walk you through the basic setup of your tax system. This section focuses on what E-Business tax calls the "Regime to Rate" flow where you ide
Also covered are the default settings used by the rule engine to determine if a tax should be charged and if yes, how to calculate and record the tax.
Section 5 covers some of the more common business requirements applicable to this case study. In this section we explain in non-specific terms the general requirement that needs to be satisfied and prov
origin of the requirement. We then provide a link to a note that provides in-depth examples, screenshots and video of how to configure a system to satisfy the requirement. Please note that these reference
case study but rather are intended to convey examples of how the requirement might be satisfied.
Additional sections and content will be added to focus on Testing the solution and reporting. The intent of this Case Study is to help a new or existing user of E-Business Tax to understand concepts and set
across numerous implementation and user manuals. It also attempts to show how you can comply with some general business requirements, thereby allowing you to focus on the less common requirements
hope that this enables you to streamline your project to reduce the time/cost of the effort and raise the value realized by your business from E-Business Tax.
1. Introduction
For Canada, you can model your tax setups based on these setup examples. These examples are intended to demonstrate recommended setups, settings, and interdependencies for each tax regime.
Disclaimer: This note is not intended to provide examples of all best practices nor cover all cases. The actual details of your own tax configuration setup will depend on your company's specific internal and
case that the same business requirement can be satisfied in many ways. Please consult your tax department or obtain professional tax assistance to determine the specific requirements for your organizatio
Assumptions: This case study will guide you through the creation of basic tax setup for Canada. It assume that you already have completed the setup/installation of the applications and that you wish to ad
Unit under which you will transact and pay/levy/collect taxes.
Note: For this Case Study, we have chosen 1-Jan-2001 as the Effective From date but you may need to choose some other date depending on your requirement.
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2. If You Are Using an Upgraded Environment....

a. HST Setup:
If you are using an 11i upgraded environment and the upgrade was completed BEFORE you setup your system for the BC and Ontario HST adoption, you will need to take additional steps. Refer to
How to Switch from an Upgraded Tax Regime to a New Tax Regime - Canada HST example
b Tax Groups:
Tax Groups are no longer used in Release 12 - See Note 738000.1 Can I Create a Tax Group in R12 E-Business Tax?
For more on the upgrade process refer to Note 810443.1 Troubleshooting and Overview of the E-Business tax R12 upgrade for Order to Cash
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3. Pre-Requisite Setup
Note that some pre-requisites are not required to be performed when using an upgraded instance.
a. Setup Geography Hierarchy Structure & Details
Geography Hierarchy: A hierarchical relationships between a country and the specific geography elements that exist within a country (ex: State, Province, Territory, City, County, Parish, Postal Code
To see how to setup a geography hierarchy, refer to Note 554492.1
Responsibility: Trading Community Manager
Navigation: Trading Community > Administration > Geography Hierarchy
For Canada, you must minimally define a geography type of "Province" under the country "Canada".
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You may additionally wish to define lower levels in your hierarchy to enforce that users select valid city names and postal code combinations however this is not required for Canadian tax calculates as
Country and Province. Some customers do choose to take this additional step to ensure that the mailing addresses are valid. Refer to the Trading Community Architecture Administration Guide
complete implementation of this feature.
Once the Geography Type of "Province" is defined, add each province under the "View Details" link
Important Note: Due to an issue with TCA, when a Geography value is created (Say AB for Alberta) the system will set the default date to the system date. You cannot update this via the applicatio
tracking a fix for this in Bug 7150723 If you have a need to import historical data a data fix will be required until this UI defect is resolved.
Tax calculation uses the geography structure to identify relevant jurisdictions when calculating taxes and evaluating tax rules such as place of supply rule.
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b. Define Tax & Geography Validation

To see how to setup an a geography validation, refer to Note 554492.1
Navigation: Trading Community > Administration > Geography Hierarchy
For Canada you must enable geography and tax validation at the province level for hz_locations
You must also enabled Tax Validation for Reference1 for the hr_locations_all
Tax Relevancy:
1) Enabling Tax Validation for province ensures that all addresses match the province defined in TCA. Since TCA is the basis for the Jurisdictions and place of supply logic in E-Business Tax, it is
you do not have tax validation enabled, the transactions in AR will not validate the tax location and tax calculation will not occur.
2) Enabling tax validation for HR_Locations ensures that the legal entity and operating unit addresses are valid for taxes and any rules referencing bill_from, ship_from, POO or POA will work as inten
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c. Setup a Legal Entity, Establishment, Ledger and Operating Unit

Refer to Note 1064366.1 to see step-by-step instructions for implementing a Legal Entity, Establishment, Ledger and Operating Unit as required for this case study.
Responsibility: Legal Entity Manager
Navigation: Legal Entities > Create Legal Entity
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. Legal entities
themselves to company regulators, taxation authorities, and owners according to rules specified in the relevant legislation.
In Release 12 Legal Entities "own" one or more Operating Units which in turn "own" transactions.
Patch 8671973 should be applied prior to starting this step or the province will not be displayed in your LOV
Tax Relevancy:
1) For E-Business tax, a tax regime can be associated to a Legal Entity and then optionally one or more Operating units in that Legal Entity can share the tax setup.
2) At least one Legal Entity for Canada must be created. The Legal Entity should include the Tax Registration and represents a level where tax setup can be attached.
3) The Registration defined on the Legal Entity record is the source for the legal establishment defaults. The Establishment tax profile in turn feeds the Bill From in AR and the Bill To / Ship to in AP.
4) The checkbox on the Legal Entity controls self-assessment of taxes. For Canada, GST and HST must be self-assessed for imported goods. Be sure you update the Legal Entity to reflect this after
Legal Establishment: First party legal entities identify your organization to the relevant legal authorities, for example, a national or international headquarters. First party legal establishments identify
warehouse and any other location within the organization that has a tax requirement. When you create a legal entity, the system automatically creates a legal entity establishment. You can create
according to your needs. For each legal establishment there are one or more tax registrations, depending upon the tax requirements of the applicable tax authority.
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If you have multiple legal establishments you should additionally create records as children of the Legal Entity. Be sure to set the "Self Assessment" to the proper value when creating additional legal
Note 604280.1 Explains How To Add New Legal Entity Registration Code for Countries that Are Not Available in the List
Tax Relevancy:
1) The Registration defined on the legal establishment feeds the Bill From in AR and the Bill To / Ship to in AP. These addresses are then considered if your tax rules use these as the basis for tax ca
2) The checkbox on the Legal Establishment controls self-assessment of taxes. For Canada, GST and HST must be self-assessed for imported goods. Be sure you update the Legal Establishment to
Ledger: Also known as set of books in 11i and prior releases this is the object that owns the accounting structure used for transactions.
Operating Unit: Assign operating units to the primary ledger to partition subledger transaction data when multiple operating units perform accounting in the context of one or more legal entities. At lea
defined for each legal entity and set of books. Operating Units are also referred to as "Organizations".
The Operating Unit Location is taken from the Legal Establishment record referenced in section 3 above
Tax Relevancy: Operating Unit along with Legal Entity represent two levels where tax content can be owned and tax setup performed.
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d. Associate the Operating Unit with the Legal Establishment

Responsibility: Legal Entity Manager
Navigation: Home > Search > Legal Entity Name > Go > Click on LE Name > Click on Establishments Tab
Once an operating unit is defined it must be linked back to the parent Legal Establishment record.
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e. Replicate Seed Data

Replicate Seed Data sets defaults in the system for an operating unit after it is created
To see how to run replicate seed data, Refer to Note 134385.1 How to Run the Replicate Seed Data Program
For more details on the purpose of the seed data program refer to Note 274974.1 What Effect Does "Replicate Seed Data" concurrent request have on Appls?
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f. Setup Responsibilities for the New Operating Unit

Responsibility: System Administrator
For this case study, setup Operating Unit specific responsibilities for products including those shown below
1) E-Business Tax
2) Payables
3) Receivables
4) Order Management
5) General Ledger
Add additional responsibilities as needed for your company. Those shown above are minimal required for this case study.
Some Examples:
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g. Setup Mandatory Responsibility Level Profile Options

Navigation: Profile > System
Profile Options for Responsibilities created in step 3f
Profile Name
GL
AR
AP
OM
EBTax
HR: User Type
Yes Yes
MO: Operating Unit
Yes Yes Yes Yes
GL Ledger Name
Yes Yes Yes Yes Yes
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h. Setup Item Validation Organization For The Operating Unit

Item Validation Organization: Used to build the List of Values to a specific organization when selecting inventory items to include on an Order (or Invoice in AR)
To see a simplified step-by-step overview of how to setup an Inventory Organization with screenshots, refer to Note 1063992.1
Responsibility: OM Responsibility from section 3f
Navigation: Setup > System Parameters > Values
Sample Screenshot showing Associated Inventory Org
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i. Setup a Freight Inventory Item

If you charge freight and wish to assess taxes on freight you must create an inventory item for tracking freight.
For more information on how tax on freight is configured, refer to Note 764297.1 - How Tax on Freight Works in R12 Order to Cash
This tax on freight note will again be referenced later in this case study when subsequent setup is performed.
Tax Relevancy: Without this setup the profile options in the next step cannot be set and then freight will be excluded from tax calculations and created as "freight" instead of revenue.
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j. Setup Tax and TCA Profile Options

For more details on the tax profile options and how the influence taxes, refer to Note 466575.1
Navigation: Profile > System
Profile Options required for Tax and TCA
Profile Option Name
Value
Reason in Case Study
HZ: Address Validation Level for Application
Error
Required
eBTax: Allow Ad Hoc Tax Changes
Yes
eBTax: Allow Manual Tax Lines
Yes
eBTax: Allow Override of Customer Exemptions
No
eBTax: Allow Override of Tax Classification Code
Yes
Available if rules wish to be created based upon tax codes
eBTax: Allow Override of Tax Recovery Rate
Yes
Can lock down at lower levels if needed
eBTax: Inventory Item for Freight (Oracle Order Management only)
Freight Enter the Item created in step 3i In order to assess tax on Freight Charges as per Revenue Canada
eBTax: Invoice Freight as Revenue (Oracle Order Management only)
Yes
In order to assess tax on Freight Charges as per Revenue Canada
eBTax: Read/Write Access to GCO Data
Yes
Allows for taxes to be defined at Global Configuration level
Available to support data conversion
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k. Setup Receivables System Options

Responsibility: Receivables responsibility
Navigation: Setup > System > System Options
To see how to setup AR System Options, refer to the Oracle Receivables Implementation Guide, Page 2-24
Tax Relevancy:
1) "Tax Account" in Accounting System Options can be used in AutoAccounting setup as a source.
2) "Tax Invoice Printing Options" controls how tax is displayed on the default invoice print output (Bill Presentment Architecture can be utilized to create a custom layout and field display)
3) "Application Rule Set" in the Miscellaneous system options determines how Receivables applies partial payments and credit memos to your customer's open debit items, and how discounts affect t
open balance for each type of associated charges. Refer to the Treasury Board of Canada and/or each provincial revenue agency to determine how to evaluate partial payments for your particular bu
additionally control when/if a discount applies to a tax when you setup your receivable activity types.
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l. Setup Receivables AutoAccounting

Responsibility: Receivables responsibility from step 3f
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Navigation: Setup > Transactions > AutoAccounting
To see how to setup an AutoAccounting in Receivables, refer to Note 885225.1 on implementing Tax Accounting for Receivables.
For this Case Study, map the "account" segment for the "Tax" AutoAccounting so that it is derived from the 'Tax' account setup discussed later in this document. Details on how the tax account is deri
later in this document.
Tax Relevancy:
1) The Tax AutoAccounting type is used to build the account combination that in turn is stored on the calculated tax amount on the tax line.
2) AutoAccounting is also called during the tax rule execution with the resulting account derived for your invoice line being available for use in your tax rules.
Note: If you define a tax rule to use the account combination, the account must be derived by AutoAccounting. Manually entered or overriden account combinations will be ignored during rule exec
details on this restriction
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m. Setup Receivables Transaction Types

Navigation: Setup >Transactions > Transaction Types
Transaction Types are seeded automatically when "Replicate Seed Data" is run in step 3f. Transaction types must be added only if you require additional transaction types beyond those seeded value
Tax Relevancy:
1) The "Default Tax Classification" checkbox must be checked on the transaction type if you intend to use the transaction line tax classification codes in your tax rule definitions. (Refer to Note:80153
configured or reference section 5 of this document which discusses an example applicable to Exports).
2) If your AutoAccounting setup references the transaction type as the source for Tax, the Tax Account must then be defined on the transaction type in this step.
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n. Setup Transaction Sources

Navigation: Setup > Transactions > Sources
Transaction sources are seeded by "Replicate Seed Data". This step can be skipped if you have no changes or additions to the seeded values
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o. Initialize Operating Unit Party Tax Profile

Responsibility: Tax Managers responsibility from step 3f
Navigation: Parties > Party Tax Profiles > Operating Unit Owning Tax Content
Enter the Operating Unit then click "Create" to initialize a tax profile. At this point in the Setup nothing further needs to be done except to click "Create Tax Profile" and then apply.
Details will be added in a later step. This Tax Profile must exist before a Receivables Activity Type can be entered.
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p. Setup Receivables Activity Types

Navigation: Setup > Receipts > Receivable Activities
For this Case Study, setup one Receivable Activity Type for Adjustments as shown below. (Additional will be required for most implementations)
Canada does not discount the tax when an early-payment discount is applied. Reference: Revenue Canada: Taxable or Exempt
Tax Relevancy:
1) Tax Rate Code Source: The Tax Rate Code Source you specify determines whether Receivables calculates and accounts for tax on adjustments, discounts, and miscellaneous receipts assigned
Code Source of Invoice, then Receivables uses the tax accounting information defined for the invoice tax rate code(s) to automatically account for the tax. If the Receivables Activity type is Miscellane
Asset or Liability tax accounts that you define for this Receivables Activity. If you set the Tax Rate code Source to "None" then taxes will not be applied on the adjustment. This is relevant for the disco
2) Recoverable / Non-Recoverable: As the name suggests, this radio button determines if the adjustment should be considered when determining recoverable tax amounts.
Note 1: If you wish to calculate tax on a miscellaneous receipt, the receivables activity type may not be linked to a jurisdiction specific tax rate because you cannot enter ship-to information in the Re
mind when planning your implementation.
Note 2: This step may need to be deferred until after the tax setup if you choose to set the tax rate code source to Activity and enter a code on the activity type. This is most frequently done when a
cash receipt
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q. Setup Banks, Branches and Accounts

Follow the steps in Note 415529.1 to add the necessary roles to the Legal Entity you created.
To see how to setup a Bank, Branch and Account, refer to the AR Implementation guide
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r. Setup Receivables Receipt Class & Payment Method

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Navigation: Setup > Receipts
To see how to setup a Receipt Class and Payment Method, refer to the AR Implementation guide
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s. Setup Approval Limits

Navigation: Setup > Transactions > Approval Limits
Approval Limits: Must be set in order for a user to enter and/or approve an invoice adjustment
To see how to setup approval limits, refer to the AR Implementation guide
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t. Run Geography Name Referencing Program

Navigation: Control > Request > Run
This program must be run for both HZ_Locations and HR_LOCATIONS_ALL for the country Canada
To learn about Geography Name Referencing Program and what it does, refer to the TCA Implementation guide
Tax Relevancy:
1) The Geography Name Referencing Program inserts records into a table that is used by E-Business Tax to translate address locations into jurisdictions.
(Back to top)
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4 Tax Setup
Tax Setup is performed under the Tax Managers responsibility added in step 3
a. Define Regimes
Tax regime - A single system of taxation as defined by a set of laws and regulations that determines the treatment of one or more taxes administered by a tax authority. Tax Regimes are typically def
Why Two Regimes?

As a best practice a regime should be created for each tax type. Since PST is a sales tax and GST/HST are VAT type taxes two regimes are defined. While it is possible to combine these into a sin
for Quebec and Prince Edward Island presented later in the case study is based upon a two-regime model. This also has been the basis for the testing of this case study thus if you do elect to comb
need to invest additional time to validate your solution.
Field
Value
Value
Tax Regime Code
CA GST AND HST
CA PST
Name
CA GST AND HST
CA PST
Regime Level
Country
Country
Country Name
Canada
Canada
Effective From
01-Jan-2001
01-Jan-2001
Used to Group Regimes
No
No
Allow Tax Recovery
Yes
Yes
Allow Override and Entry of Inclusive Tax Lines Yes
Yes
Allow Tax Exemptions
Yes
Yes
Allow Tax Exceptions
No
No
Tax currency
CAD
CAD
Minimum Accountable Unit
0.01
0.01
Rounding Rule
Nearest
Nearest
Tax Precision
Allow tax Inclusion
Standard Non-Inclusive Handling Standard Non-Inclusive Handling
Allow Multiple Jurisdictions
Yes
Yes
Allow tax Rounding Override
Yes
Yes
Immediate
Immediate
Exchange Rate Type

Reporting Tax Authority
Default Recovery Settlement
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Tax Accounts Precedent Level
Use Legal Registration Number
No
No
Allow Cross Regime Compounding
Yes
Yes
Compounding Precedence
Sample Screenshot of how this would be defined:
After entering the above page, select "Continue" and then add the configuration option settings as shown for your Operating Unit. Repeat this for the PST regime.
You may optionally set the "Configuration for Taxes and Rules" to "Common Configuration" if you do not wish to retain the flexibility for party specific (OU or LE specific) tax setup.
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Note: You can also subscribe at the "Legal Entity" Level. If you only choose the LE option then you must also update your Party Tax Profile for the Operating Unit to use the configuration of the Leg
calculated. Also if you choose "Legal Entity" then it is not required that you subscribe the operating unit as the aforementioned checkbox will cause the OU to defer to the LE setup. Finally, if you su
setup that might exist at the OU level (Taxes, Rates, etc) would be ignored during tax calculation.
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b. Define Taxes
Tax: A tax represents a distinct charge that can be applied to a transaction.
Example: In Canada, depending upon the province, a transaction may have HST, GST and/or PST applied.
Field
Value
Value
Value
Tax Regime Code
CA GST AND HST
CA GST AND HST
CA PST
Configuration Owner
Global Configuration Owner
Tax source
Create a new Tax
Create a new Tax
Create a new Tax
Tax
CA GST
CA HST
CA PST
Tax Name
Federal Goods and Services Tax Harmonized Sales tax
Provincial Sales Tax
Tax Type
VAT
VAT
Sales
Effective From
01-Jan-2001
01-Jan-2001
01-Jan-2001
Enable Tax for Processing
Yes
Yes
Yes
Geography Type
PROVINCE
PROVINCE
PROVINCE
Parent Geography Type
COUNTRY
COUNTRY
COUNTRY
Parent Geography Name
Canada
Canada
Canada
Tax Currency
CAD
CAD
CAD
Minimum Accountable Unit
0.01
0.01
0.01
Rounding Rule
Nearest
Nearest
Nearest
Tax Precision
Exchange Rate Type

Compounding Precedence

Collecting Tax Authority
Applied Amount Handling
Recalculated
Recalculated
Recalculated
Set as Offset Tax
No
No
No
Set Tax for Reporting Purposes Only
No
No
No
Allow Tax Inclusion
Standard Non-Inclusive Handling Standard Non-Inclusive Handling Standard Non-Inclusive Handling
Allow Override and Entry of Inclusive Tax Lines
Yes
Yes
Yes
Allow Tax Rounding Override
Yes
Yes
Yes
Allow Override for Calculated Tax Lines
Yes
Yes
Yes
Allow Entry of Manual tax Lines
Yes
Yes
Yes
Use Legal Registration Number
No
No
No
Allow Duplicate Tax Registration Numbers
No
No
No
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Allow Multiple Jurisdictions
Yes
Yes
Yes
Allow Mass Creation of Jurisdictions
Yes
Yes
Yes
Tax Accounts Creation Method
Create Tax Accounts
Create Tax Accounts
Create Tax Accounts
No
No
No
Yes
Yes
Yes
Allow Tax Recovery
Yes
Yes
Yes
Allow Tax Recovery Rate Override
Yes
Yes
Yes
Allow Primary Recovery Rate Determination Rules
Yes
Yes
Yes
Allow Secondary Recovery Rate Determination Rules No
Yes
No
Primary Recovery Type
STANDARD
STANDARD
Tax Exemption Creation Method
STANDARD
Secondary Recovery Type
SREC
Allow Tax Rate Rules
Yes
Yes
Yes
Immediate
Immediate
Immediate
Sample Setup Screenshots:
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c. Define Tax Statuses
Tax Status: A tax status is the taxable nature of a product in the context of a transaction and a specific tax on the transaction. You define a tax status to group one or more tax rates that are of the sa
Example: One tax can have separate tax statuses for standard, zero, exemption, and reduced rates. A zero rate tax status may have multiple zero rates associated with it in order to handle different
usage, such as Intra EU, zero-rated products, or zero-rated exports. For Canada we have documented the setup to allow for this possibility though no specific example is provided in this limited setup
Field
Value
Value
Value
Value
Value
Value
Value
Value
Tax Regime Code
CA GST AND HST
CA GST AND HST
CA GST AND HST
CA GST AND HST
CA GST AND HST
CA GST AND HST
CA PST
CA PST
Configuration Owner
Global Configuration
Owner
Owner
Owner
Owner
Owner
Owner
Owner
Owner
Tax
CA GST
CA GST
CA GST
CA HST
CA HST
CA HST
CA PST
CA PST
Tax Status Code
CA GST
STANDARD
CA GST ZERO
CA GST EXEMPT
CA HST
STANDARD
CA HST ZERO
CA HST EXEMPT
CA PST STANDARD CA PST SPECIAL

RATE
Tax Name
CA GST Standard
CA GST Zero
CA GST Exempt
CA HST Standard
CA HST Zero
CA HST Exempt
CA PST Standard
CA PST Special
Rate
Set as Default Tax

Status (1)
Yes
No
No
Yes
No
No
Yes
No
Default Status
Effective From
01-Jan-2001
01-Jan-2001
Allow tax Exemptions

(2)
01-Jan-2001
Yes
Yes
Allow Tax Rate

Override
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Default Recovery
Immediate
Immediate
Immediate
Immediate
Immediate
Immediate
Immediate
Immediate
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Settlement
1) Set as default Tax status: Each tax status must have at least one default. Tax Rules must be written to set alternate values as required.
2) Allow Tax Exemptions: With a rule based approach to setting tax exemptions, exempt transactions will be linked to an exempt tax status and rate. Setting the "Yes" value to this configuration op
tax exemption on a transaction or directly in the party tax profile to record the exempt reason code. This is however not required nor enforced. Because the exemptions are primarily tracked by wa
you use Caution when reporting if you intend to use the tax exemption fields on the seeded reports.
Sample Screenshot of Tax Status
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d. Define Tax Jurisdictions
Jurisdiction: The incidence of a tax on a specific geographical area. A tax jurisdiction is limited by a geographical boundary that encloses a contiguous political or administrative area, most commonl
represented by a state, province, city or a county tax jurisdiction. In E-Business Tax, a tax jurisdiction can use the geography setup from your TCA geography hierarchy to identify a tax rate. Taxes su
require rates at the jurisdiction level.
Example: Canadian PST and HST are applicable based upon the jurisdictions.
Important Note Do not begin this step if you plan to import historical transactions and have not applied the data fix referenced in step 3.a You will not be able to back-date the jurisdiction start date
your LOV for the Geography will return no rows.
Setup Jurisdictions for CA GST AND HST
Field
Value
Value
Value
Value
Value
Value
Value
Value
Value
Value
Value
Value
Tax Jurisdiction
Code
CA AB
CA BC
CA BC
CA MB
CA NB
CA NL
CA NS
CA NT
CA NU
CA ON
CA ON
CA PE
Tax Jurisdiction
Name
CA Alberta
CA British
Columbia
CA British
Columbia
CA
Manitoba
CA New
Brunswick
CA Newfoundland
and Labrador
CA Nova
Scotia
CA Northwest
Territories
CA Nunavut
CA Ontario
CA Ontario
CA Prince
Edward Island
Tax Regime Code
CA GST
AND HST
CA GST
AND HST
CA GST
AND HST
CA GST
AND HST
CA GST
AND HST
CA GST AND HST
CA GST
AND HST
CA GST AND
HST
CA GST
AND HST
CA GST
AND HST
CA GST
AND HST
CA GST AND
HST
Tax
CA GST
CA HST
CA GST
CA GST
CA HST
CA HST
CA HST
CA GST
CA GST
CA HST
CA GST
CA GST
Geography Type
Province
Province
Province
Province
Province
Province
Province
Province
Province
Province
Province
Province
Parent Geography
Type
Country
Country
Country
Country
Country
Country
Country
Country
Country
Country
Country
Country
Parent Geography
Name
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Geography Name
AB
BC
BC
MB
NB
NL
NS
NT
NU
ON
ON
PE
Precedence Level
Collecting Tax
Authority
Page 15 of 26
5/21/12 4:31 PM
Reporting Tax
Authority
Effective From
01-Jan2001
01-Jul-2010
Effective To
Set as Default Tax
Jurisdiction
01-Jan-2001
01-Jan2001
01-Jan2001
01-Jan-2001
01-Jan2001
01-Jan-2001
01-Jan2001
01-Jul-2001
30-Jun-2010
No
No
No
Default Effective
From
01-Jan2001
01-Jan-2001
30-Jun2010
Yes
Yes
No
01-Jan2001
01-Jan2001
No
No
No
No
No
No
Setup Jurisdictions for CA PST

Field
Value
Value
Value
Value
Value
Value
Tax Jurisdiction Code
CA BC
CA MB
CA ON
CA PE
CA QC
CA SK
Tax Jurisdiction Name
CA British Columbia CA Manitoba CA Ontario
CA Prince Edward Island CA Quebec
CA Saskatchewan
Tax Regime Code
CA PST
CA PST
CA PST
CA PST
CA PST
CA PST
Tax
CA PST
CA PST
CA PST
CA PST
CA PST
CA PST
Geography Type
Province
Province
Province
Province
Province
Province
Parent Geography Type
Country
Country
Country
Country
Country
Country
Parent Geography Name
Canada
Canada
Canada
Canada
Canada
Canada
Geography Name
BC
MB
ON
PE
QC
SK
Precedence Level
Effective From
01-Jan-2001
01-Jan-2001
01-Jan-2001 01-Jan-2001
Effective To
30-Jun-2010
Collecting Tax Authority

01-Jan-2001 01-Jan-2001
30-Jun-2010
Set as Default Tax Jurisdiction No
Yes
Default Effective From
01-Jan-2001
No
No
No
No
Sample Screenshot of a Jurisdiction Setup
-------------------------------------------------------------------------------------------------
e. Define Tax Recovery Rates

For Canada GST is normally fully recoverable when paid as an input to creating another item. (Input Tax Credit or ITC)
PST is recoverable under criteria established by each province
HST is recoverable as primary (Federal Recovery of the 5% portion) and secondary (Provincial recovery of the 7% or 8% provincial component of HST)
Rebates: In Canada, some entities such as Municipalities and Hospitals are able to claim a Full or Partial Rebates for GST or HST taxes paid in cases where the taxes are not subject to Input Tax Cre
Page 16 of 26
5/21/12 4:31 PM
countries using a similar methodology. For more on this refer to the Canada Revenue Agency.
Tax Recovery Rates
The rates below reflect only a subset of those you will likely require. Expand this as needed for your unique industry and business.
IMPORTANT: Review Note 735991.1 on setting up Tax recovery before you enable your tax for transaction processing.
Field
Value
Value
Value
Value
Value
Value
Value
Value
Tax Regime Code
CA GST AND HST
CA GST AND HST
CA GST AND HST
CA GST AND HST
CA GST AND HST
CA GST AND HST
CA GST AND HST
CA GST AND HST
Configuration
Owner
Global
Configuration
Owner
Global
Configuration
Owner
Owner
Owner
Owner
Owner
Owner
Owner
Tax
CA GST
CA GST
CA HST
CA HST
CA HST
CA HST
CA HST
CA HST
Tax Recovery Rate

Code
CA GST STD REC

RATE
CA GST ZERO
REC RATE
CA HST STD PROV

REC RATE
CA HST BC PROV
REC RATE
CA HST ZERO PROV

REC RATE
CA HST STD FED

REC RATE
CA HST NS FED
REC RATE
CA HST BC FED
REC RATE
Recovery Type
Standard
Standard
Sec Rec Type1
Sec Rec Type1
Sec Rec Type1
Standard
Standard
Standard
Percentage
Recovery Rate
100
61.54
58.33
38.46
33.33
41.67
Effective From
01-Jan-2001
01-Jan-2001
01-Jan-2008
01-Jul-2010
01-Jan-2008
01-Jul-2010
01-Jul-2010
01-Jul-2010
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Effective To
Set as Default
Yes
Effective From
01-Jan-2001
Allow Ad Hoc Rate
Yes
Note: Do not use a '%' sign in the tax recovery rate code as this will return errors when attempting to set the recovery rate on a tax rate. Internal bug 9343870 was logged.
Error that will occur if this is done is: "The rate period and the associated default recovery rate must overlap. You can: adjust the rate period; enter another default recovery rate that is valid for the en
recovery rate."
-------------------------------------------------------------------------------------------------
f. Define Tax Rates
Tax Rates - At least one tax rate is required for each tax status. Additional Tax Rates may be needed at the Jurisdiction Level if the tax rate applicable for the tax is unique for a particular jurisdiction.
Example: - In Canada, HST is applied at a 13% rate in Most provinces that have adopted HST except for BC where the Rate is 12% and Nova Scotia where the rate is 15%. To satisfy this requireme
with no jurisdiction and then a 12% rate can be defined and associated with the BC jurisdiction (15% rate assigned to Nova Scotia). This minimizes the setup required by creating an exception based
Note: In some cases such as Alcohol sales, taxes are applied at the quantity level. If therefore a $0.05 tax is applicable for each bottle a secondary tax, status and rate can be created to apply this
examples below
Setup Rates for GST AND HST
Field
Value
Value
Value
Value
Value
Value
Tax Regime Code
CA GST AND
HST
Value
Value
CA GST AND
HST
CA GST AND
HST
CA GST AND
HST
Value
Value
CA GST AND
HST
CA GST AN
HST
Configuration Owner
Global
Configuration
Owner
Global
Configuration
Owner
Global
Configuration
Owner
Global
Configuration
Owner
Global
Configuration
Owner
Global
Configuratio
Owner
Tax
CA GST
CA GST
CA GST
CA HST
CA HST
CA HST
Tax Status Code
CA GST
STANDARD
CA GST ZERO
CA GST
EXEMPT
CA HST
STANDARD
CA HST
STANDARD
CA HST
STANDARD
CA BC
CA NS
Tax Rate Code
CA GST
STANDARD
RATE
CA GST ZERO
RATE
CA GST
EXEMPT RATE
CA HST
STANDARD
RATE
CA HST
STANDARD
RATE
CA HST
STANDARD
RATE
Rate Type
Percentage
Percentage
Percentage
Percentage
Percentage
Percentage
Percentage Rate
13
14
15
12
15
Effective From
01-JAN-2008
01-JUL-2006
01-JAN-2001
01-JAN-2008
01-JUL-2006
01-JAN-2001
01-Jan-2001
01-Jan-2001
31-DEC-2007
30-JUN-2006
31-DEC-2007
30-JUN-2006
CA HST
Standard Rate
CA HST
Standard Ra
Effective To
Tax Rate Name
CA GST
Standard Rate
CA GST Zero
Rate
CA GST Exempt
Rate
CA HST
Standard Rate
Default Recovery Rate

Code
CA GST
STANDARD
REC RATE
CA GST
STANDARD
REC RATE
CA GST
STANDARD
REC RATE
CA GST ZERO
REC RATE
CA GST ZERO
REC RATE
CA HST STD
FED REC RATE
CA HST STD
FED REC RATE
CA HST STD
FED REC RATE
CA HST BC FED CA HST NS

REC RATE
REC RATE
Recovery Type
STANDARD
Default Recovery
Settlement
Immediate
STANDARD
STANDARD
STANDARD
STANDARD
STANDARD
STANDARD
STANDARD
STANDARD
STANDARD
Immediate
Immediate
Immediate
Immediate
Immediate
Immediate
Immediate
Immediate
Immediate
Set as Default Rate
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Page 17 of 26
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01-Jan-2008
Default Effective To
01-Jul-2006
01-Jan-2001
31-Dec-2007
30-Jun-2006
01-Jan-2001
01-Jan-2001
01-Jan-2008
01-Jul-2006
01-Jan-2001
31-Dec-2007
30-Jun-2006
01-Jul-2010
01-Jul-2010
Allow Tax Inclusion
Standard NonInclusive
Handling
Handling
Handling
Handling
Handling
Handling
Handling
Handling
Handling
Standard No
Inclusive
Handling
Allow Override and

Entry of Inclusive Tax
Lines
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
No
Yes
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
Allow Ad Hoc Rate
No
No
No
No
No
No
No
No
No
No
Adjustment for Ad Hoc

Amounts
Taxable Basis
Taxable Basis
Taxable Basis
Taxable Basis
Taxable Basis
Taxable Basis
Taxable Basis
Taxable Basis
Taxable Basis
Taxable Bas
Tax Accounts: Tax

Recovery/Liability
Optional
Optional
Optional
Optional
Optional
Optional
Optional
Optional
Optional
Optional
Setup Rates for PST

Field
Value
Value
Value
Value
Value
Value
Value
Value
Tax Regime Code
CA PST
CA PST
CA PST
CA PST
CA PST
CA PST
CA PST
CA PST
Configuration Owner
Global Configuration Global Configuration Global Configuration Global Configuration Global Configuration Global Configuration Global Configuration
Owner
Owner
Owner
Owner
Owner
Owner
Owner
Owner
Tax
CA PST
CA PST
CA PST
CA PST
CA PST
CA PST
CA PST
CA PST
Tax Status Code
CA PST
STANDARD
CA PST
STANDARD
CA PST
STANDARD
CA PST
STANDARD
CA PST
STANDARD
CA PST
STANDARD
CA PST
STANDARD
CA PST SPECIAL
RATE
CA QC
CA ON
CA PE
CA SK
CA BC
CA SK
CA ON
Tax Rate Code
CA PST
STANDARD RATE
CA PST
STANDARD RATE
CA PST
STANDARD RATE
CA PST
STANDARD RATE
CA PST
STANDARD RATE
CA PST BC
SPECIAL RATE
CA PST SK
SPECIAL RATE
CA PST ON
SPECIAL RATE
Rate Type
Percentage
Percentage
Percentage
Percentage
Percentage
Percentage
Percentage
Percentage
Percentage Rate
7.5
10
3.5
Effective From
01-Jan-2001
01-Jan-2001
01-Jan-2001
01-Jan-2001
01-Jan-2001
01-Jan-2001
01-Jan-2001
01-Jan-2001
Effective To
30-Jun-2010
30-Jun-2010
30-Jun-2010
Tax Rate Name
CA PST Standard
Rate
Default Recovery Rate Code
CA PST ZERO REC

RATE
CA PST ZERO REC

RATE
CA PST ZERO REC

RATE
CA PST ZERO REC

RATE
CA PST ZERO REC

RATE
Recovery Type
STANDARD
STANDARD
STANDARD
STANDARD
STANDARD
Immediate
Immediate
Immediate
Immediate
Immediate
Set as Default Rate
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
01-Jan-2001
01-Jan-2001
01-Jan-2001
01-Jan-2001
01-Jan-2001
01-Jan-2001
01-Jan-2001
01-Jan-2001
Allow Tax Inclusion
Standard NonInclusive Handling
Allow Override and Entry of

Inclusive Tax Lines
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
Allow Ad Hoc Rate
No
No
No
No
No
No
No
No
Adjustment for Ad Hoc

Amounts
Taxable Basis
Taxable Basis
Taxable Basis
Taxable Basis
Taxable Basis
Taxable Basis
Taxable Basis
Taxable Basis
Tax Accounts: Tax

Recovery/Liability
Optional
Optional
Optional
Optional
Optional
Optional
Optional
Optional
Default Effective To
30-Jun-2010
30-Jun-2010
30-Jun-2010
Sample Screenshots: Tax Rate
Page 18 of 26
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Tax Rate Details
Page 19 of 26
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Tax Accounts
Page 20 of 26
5/21/12 4:31 PM
-------------------------------------------------------------------------------------------------
g. Define the Party Tax Profile for Legal Entity & Operating Unit
A tax 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, main and default information,
codes, and account tax details.
Steps Required:
1) Setup a tax profile for the Operating Unit and Legal Entity. Make sure that you have selected both tax regimes as associated to the Operating Unit (will automatically copy to the Legal Entity) or tha
to the legal entity and you check the "Use Subscription of the Legal Entity" checkbox on the Operating Unit tax profile. For this case study we are subscribing at the operating unit.
2) Make sure the "Set for Self Assessment / Reverse Charge checkbox is checked if you wish to self-assess in AP (required for imports)
Sample Screenshot of OU Tax Profile
Tax Relevance:
1) Tax Profiles contain vast amounts of data that can influence tax calculations and reporting. Most significantly, the configuration options tab on the Legal Entity and Operating Unit identify the tax
transaction is created.
Note: If you select the "Use Subscription of the Legal Entity" on the Operating unit tax profile, the configuration options will be ignored and instead the application will reference the legal entity. This
Business Tax such as the ability to define tax rules that reference operating unit "owned" components such as transaction type. Use caution when selecting this value as you can not reverse this se
2) Self-Assessment is critical for AP if you import materials.
-------------------------------------------------------------------------------------------------
h. Setup Default Tax Rules
Tax Rules are evaluated by the rule engine for each enabled tax within a tax regime. Rules use a combination of defaults plus 1..N number of additional user defined rules to determine if a tax should
be for the tax application, what rate to use, what jurisdiction is relevant (Place of supply), what source to use for a tax registration, what tax status to apply, what calculation method to execute and fina
applicable).
Setup defaults for each of the taxes defined in step 4b as shown below
Rule
CA GST
Direct Tax Rate Determination Blank
CA HST
CA PST
Blank
Blank
Determine Place of Supply
Ship to, use bill to if ship to is not found Ship to, use bill to if ship to is not found Ship to, use bill to if ship to is not found
Determine Tax Applicability
Applicable
Applicable
Applicable
Determine Tax Registration
Ship From Party
Ship From Party
Ship From Party
Determine Tax Status
CA GST STANDARD
CA HST STANDARD
CA PST
Determine Tax Rate
CA GST STANDARD RATE
CA HST STANDARD RATE
CA PST STANDARD RATE
Determine Taxable Basis
STANDARD_TB
STANDARD_TB
STANDARD_TB
Calculate Tax Amounts
STANDARD_TC
STANDARD_TC
STANDARD_TC
Note: Not all tax rules defaults are set in the "tax rules" window
1) Direct Tax Rate Determination is normally only used for upgraded regimes. This rule is also ignored if any other rules are enabled
2) Determine Tax Status is set on the tax status setup form
Page 21 of 26
5/21/12 4:31 PM
3) Determine Tax Rate is set on the Tax Rate setup form
4) Taxable basis is set to exclude early payment discounts as Canada does not discount the tax when an early-payment discount is applied. Reference: Revenue Canada: Taxable or Exempt
Sample Screenshot of the GST Tax Defaults is Shown Below
-------------------------------------------------------------------------------------------------
i. Make Tax Available For Transactions

Enable each tax for transaction processing.
To see how to enable a tax and learn more about the settings and validation required to enable a tax, refer to note the E-Business Tax User Guide
Note: Not shown are several steps required to define a tax recovery rule. If you have selected to allow primary tax recovery rate determination rules then at least one such rule must exist for each t
inventory and thus are not currently shown in this case study. They will be added as supporting content is created.
To enable a tax for this case study take the following actions:
1)
2)
3)
4)
5)
Query the tax

Select "Update"
Expand Tax to view "Defaults and Controls
Select a "Default Primary Recovery Rate Code" and "Default Secondary Recovery Rate Code" as shown in the table below
Apply
Field
Value
Value
Value
Tax
CA GST
CA HST
CA PST
Default Primary Recovery Rate Code
CA GST STANDARD REC RATE CA HST 100 PCT FED REC RATE
Default Secondary Recovery Rate Code
CA PST STANDARD REC RATE
CA HST 61.54 PCT PROV REC RATE
61.54 PCT rate is based upon current primary HST recovery rate for all provinces except for BC. In BC the recovery rate is 7/12th or 58.33%. A separate rate and rule must be defined to apply
Note: Bug 9762787 has reported a problem where the message below is displayed even when a tax rate has been defined:
Row 1 Error - You must first define a tax rate for this tax.
Page 22 of 26
5/21/12 4:31 PM
This is solved after applying patch 9762787:R12.ZX.B
Or as a workaround you can uncheck the checkbox next to "Allow tax rate rules" and enable the tax. This can be changed at a later date when/if you define a tax rate rule.
-------------------------------------------------------------------------------------------------
j. Perform a Baseline Test in AR

At this point in the Case Study you should be able to test and see taxes calculating. Perform the simple test below to validate your setup:
1) Create a customer
Name: Canada Test Corporation
Address: 123 Main Street, Toronto, ON L5R 3P4, Canada
Set as Primary Bill To address and save
2) Open the GL period(s)
3) Enter an invoice for this customer. Save. Taxes should calculate
So how did the prior steps cause this to calculate?

1)
2)
3)
4)
5)
6)
7)
An Invoice was entered against a specific Operating Unit which is part of a Legal Entity
The OU or LE are linked to the "Tax Regime" by way of the tax profile. This triggered E-Business tax to consider the regime.
The tax place of supply rule validated that the bill-to address should be considered
The bill-to address on the invoice had a province and country that could be tied to a taxing jurisdiction within the regime
The taxing jurisdiction was found to be associated with a valid tax rate
The tax was applicable
Standard tax calculation was used (rule defaults said to use line amount * Tax rate)
-------------------------------------------------------------------------------------------------
Page 23 of 26
5/21/12 4:31 PM
k. Perform a Baseline Test in AP

Perform AP Setup as required for your site. See the AP Implementation Manual for required steps.
For this case study a simplified set of steps were performed that included:
1) Setup Payment Terms
2) Setup bank, branch and account (used same setup as from AR in section 3)
3) Setup Financial Options (required to setup inventory org first - see section 3)
4) Setup Supplier:
Name: Canada Supplier
Address: 123 Oracle Way Toronto, ON ABC123
Invoice was entered with minimum data
Control amount for tax was entered as $13 and Invoice amount of $100
Calculate Tax returns the amounts shown below for GST and PST
-------------------------------------------------------------------------------------------------
5. Tax Setup: Tax Setup For Common Scenarios
This section discusses tax setup necessary to address some common scenarios encountered in Canada. For more on how to setup tax rules and use determining factors please review Note 1108463
and provide sample tax rule setup built upon this case study.
a. Adjusting the Taxable Basis for Quebec and Prince Edward Island
The taxable basis formula for most transactions is (line amount) *(tax rate). Since the PST in Quebec and on Prince Edward Island is calculated on the selling price plus GST, you will need to define a
identify when a different taxable basis is needed and which taxable basis tax formula to use.
Note 1063491.1 documents the step-by-step setup required to comply with this requirement.
Tax Setup Impact of Note on Case Study:
1) Tax Regime compounding must be enabled and precedence set (Already shown in step 4a on Tax Regime setup)
2) Tax Zone setup required (New step - no impact on prior setup)
3) Tax Formula setup required (New step - no impact on prior setup)
4) Taxable Basis Rule setup required (New step - no impact on prior setup)
-------------------------------------------------------------------------------------------------
b. Zero Rated Items for Export
The Canada Revenue Agency has stated that good exported out of Canada are zero rated for GST if they take delivery outside of Canada. Goods delivered inside Canada may also be zero rated as e
when the purchase is not a consumer and the purchaser exports the goods as soon as is reasonable in the circumstance after you deliver them.
Page 24 of 26
5/21/12 4:31 PM
The default logic will automatically exclude items with a ship-to address outside of Canada from having GST applied. This example assumes that all exports should in fact have a tax line with a zero r
addresses two scenarios:
Scenario 1: Goods are sold with a ship-to address outside of Canada
Scenario 2: Goods are delivered in Canada for immediate export
Again in both of these cases the tax should apply with a Zero Rate.
Note 1063534.1 'How To Apply A Zero Rate Tax To Exports' has been created to provide step-by-step instructions for setting up rules to comply with this requirement.
A similar approach can be taken when creating tax rules for other Exempt or Zero Rated goods as defined by Canada Revenue
1) 2 Tax place of supply rules required
2) Tax rate must be added to regime to allow for LOV selection
-------------------------------------------------------------------------------------------------
c. Applying Tax to Freight
In Canada, GST and HST are normally assessed on the transportation expenses. Refer to the GST/HST Info Sheet published by Canada Revenue for more details. The requirement is therefore to ta
cost. This is done by following the instructions referenced in the note below.
Note 764297.1 - How Tax on Freight Works in R12 Order to Cash
Note: The example in the note is not specific to this case study but the same flow/approach can be used for Canada.
1) Tax Profile Option Settings required
2) Freight must be defined as inventory item
3) Product Fiscal Classification setup may be required
4) Tax applicability rule may be required
5) Tax exception may need to be created
-------------------------------------------------------------------------------------------------
d. Self-Assessed Taxes
In Canada, taxes must be self-assessed for a number of scenarios including against purchases where the supplier is outside of Canada and not registered to assess taxes.
To see how to configure your system to comply with this sample scenario, refer to Note 948414.1 How to Configure a Tax for Automatic Self-Assessment in R12 E-Business Tax and Payables
1) Tax profile for LE may need to be updated
2) Vendor tax profiles may need to be created
3) Tax Registration Rule may be required
-------------------------------------------------------------------------------------------------
e. Reporting By Tax Authority

In order to run reports by Tax Authority you must create a taxing authority and associate at the proper level in your regime to rate setup.
To see how to configure a Tax Authorities (aka Legal Authority), follow the steps outlined in
Note 817698.1.
For PST you should associate the Tax Authority at the Jurisdiction level.
Be sure to create a Tax Authority for Canada Revenue Agency as well as one for each PST taxing authority. A tax authority can be defined as a collecting or reporting tax authority.
1) Legal Authority must be created
2) Legal Authority must be linked to existing tax objects (jurisdiction, rates, etc) as needed for business requirements
-------------------------------------------------------------------------------------------------
f. Charging Different Tax Accounts For Each Tax
Receivables:
In many cases, companies desire to track their tax liabilities using unique tax account combinations for each Tax that is assessed on an invoice. For example, in Canada an invoice may be charged b
liability out of GL these would need to hit separate account combinations.
This is accomplished by setting up Receivables AutoAccounting and mapping E-Business Tax accounts at the proper level.
To see a detailed example of how this setup is performed and how E-Business Tax and Receivables work together to derive interim tax accounts, refer to Note 885225.1 Setting up Tax Account for R1
Receivables.
Payables:
To see more information about how tax accounting is configured for Payables, refer to the accounting section in <Note735991.1>
1) Tax setup may require changes (NOTE: Changes must be made prior to performing section 4!)
2) Jurisdiction setup may require changes (NOTE: Changes must be made prior to performing section 4!)
3) Tax Accounts must be set at appropriate levels
-------------------------------------------------------------------------------------------------
g. Setting up Tax recovery for ITC and Rebates
As discussed earlier in section 4e of this note, Canada allows for recovery on HST and GST and some provinces allow recovery of all or some PST payments. To satisfy this requirement you will nee
For HST recovery both a primary recovery rate and secondary recovery rate are typically required. Configure primary recovery for the federal portion of your tax recovery and secondary recovery for t
Page 25 of 26
5/21/12 4:31 PM
If you can recover both through Input Tax Credits and Rebates, consider setting up unique recovery rates for each. You can then set accounts for each scenario to simplify your reporting and tax form
To see a detailed example of how recoverable taxes are implemented, refer to Note 735991.1
-------------------------------------------------------------------------------------------------
6 Testing Your Tax Configuration
This section will be expanded greatly in the coming months with detailed test cases and more comprehensive scenarios. The intent of this section is to provide a listing of topics that should be considered wh
a. Receivables
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
Invoice Entry with automatic calculation

Invoice Entry with Manual Entry of Tax Line
AutoInvoice Integration with other modules
AutoInvoice Integration with Legacy systems
AutoInvoice Data Migration
Credit Memo - Applied
Credit Memo - On Account
Adjustments (Tax)
Adjustments (Non-Tax)
Tax Accounting
Tax Compounding
Tax Exemptions
Exports
Exception Rates
Miscellaneous Receipts
Receipt Applications
Tax Reporting
b. Payables
1.
2.
3.
4.
5.
6.
7.
Standard Invoice Entry with tax control amount

Self-Assessment
Credit Memo's
Tax Recovery
Tax Reporting
Tax Exception Rates
Tax Exemptions
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January 19, 2010 7:29 AM

Dedicated Thread: Case Study on Canada Tax setup - Including HST uptake by BC and Ontario
Pro
564 points
Patrick McBride
Starting in July 2010, BC and Ontario will join 4 other provinces in using HST instead of GST/PST. We are working on some documentation that will help
all of you with this migration. Let us know if you have started this setup. What issues have you encountered? What questions have arisen? Also let us
know if you have any requirements that you need to satisfy so we can fold them into the documents that are created.
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Note 577996.1 has been created as a case study on how one might go about setting up tax for Canada. Please provide your input, ideas, gaps and
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1. January 28, 2010 12:18 PM

in response to: Patrick McBride
Re: Send us your Requirements for HST migration for BC and Ontario
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Patrick McBride
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I am looking for details and documentation for the City of Waterloo (ON), as we are at the initial stage of configuring and testing for HST.
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Community thread for Canada Tax Setup.
References
NOTE:1062897.1 - Case Study: How to Switch From an Upgraded Tax Regime to a New Tax Regime - Canada HST example
Page 26 of 26

Tax Setup Document PDF

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Tax Setup Document PDF

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5/21/12 4:31 PM

This white paper combines, extends and superseeds the following:

Scope and Application

2. If You Are Using an Upgraded Environment....

a. Setup Geography Hierarchy Structure & Details

b. Define Tax & Geography Validation

c. Setup a Legal Entity, Establishment, Ledger and Operating Unit

d. Associate the Operating Unit with the Legal Establishment

e. Replicate Seed Data

f. Setup Responsibilities for the New Operating Unit

g. Setup Mandatory Responsibility Level Profile Options

HR: User Type

MO: Operating Unit

Yes Yes Yes Yes

Yes Yes Yes Yes Yes

h. Setup Item Validation Organization For The Operating Unit

i. Setup a Freight Inventory Item

j. Setup Tax and TCA Profile Options

Reason in Case Study

HZ: Address Validation Level for Application

eBTax: Allow Ad Hoc Tax Changes

eBTax: Allow Manual Tax Lines

eBTax: Allow Override of Customer Exemptions

eBTax: Allow Override of Tax Classification Code

Available if rules wish to be created based upon tax codes

eBTax: Allow Override of Tax Recovery Rate

Can lock down at lower levels if needed

eBTax: Inventory Item for Freight (Oracle Order Management only)

eBTax: Invoice Freight as Revenue (Oracle Order Management only)

In order to assess tax on Freight Charges as per Revenue Canada

eBTax: Read/Write Access to GCO Data

Allows for taxes to be defined at Global Configuration level

Available to support data conversion

k. Setup Receivables System Options

l. Setup Receivables AutoAccounting

m. Setup Receivables Transaction Types

n. Setup Transaction Sources

o. Initialize Operating Unit Party Tax Profile

p. Setup Receivables Activity Types

q. Setup Banks, Branches and Accounts

r. Setup Receivables Receipt Class & Payment Method

s. Setup Approval Limits

t. Run Geography Name Referencing Program

Why Two Regimes?

Tax Regime Code

CA GST AND HST

CA GST AND HST

Used to Group Regimes

Allow Tax Recovery

Allow Override and Entry of Inclusive Tax Lines Yes

Allow Tax Exemptions

Allow Tax Exceptions

Minimum Accountable Unit

Allow tax Inclusion

Standard Non-Inclusive Handling Standard Non-Inclusive Handling

Allow Multiple Jurisdictions

Allow tax Rounding Override

Exchange Rate Type

Allow Cross Regime Compounding

Sample Screenshot of how this would be defined:

Tax Regime Code

CA GST AND HST