Sie sind auf Seite 1von 41

11/27/2017 Document 577996.

Case Study: Setup R12 E-Business Tax (EBTax) for Canada: Includes 2010 HST Changes (Doc ID
577996.1)

In this Document

Purpose
Scope
Details
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
(Back to top)
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
g. Define the Party Tax Profile for Legal Entity & Operating Unit
h. Setup Default Tax Rules
i. Make Tax Available For Transactions

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 1/41
11/27/2017 Document 577996.1

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


Oracle Payables - Version 12.0.0 and later
Oracle E-Business Tax - Version 12.0 and later
Oracle Order Management - Version 12 and later
Oracle Receivables - Version 12.0.0 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 releases were discontinued in favor of this 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 post input, ask questions or share best
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 (added June 21, 2010)

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 Support)

SCOPE

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 for your implementation. The steps
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 the step.
https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 2/41
11/27/2017 Document 577996.1

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 identify the taxes that should be assessed.
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 provide references whenever possible to the
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 documents are not all specific to this 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 setup that may otherwise be dispersed 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 unique to your specific organization. We 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.

DETAILS

Case Study: Setup R12 E-Business Tax (EBTax) for Canada: Includes 2010 HST Changes

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 legal tax requirements and it is often the 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 organization.

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 add a new Canada Legal Entity/Operating 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.

-------------------------------------------------------------------------------------------------

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 Note 1062897.1 titled:
Case Study: 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

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 3/41
11/27/2017 Document 577996.1

-------------------------------------------------------------------------------------------------

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, etc)

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".

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 taxes are based solely
on the 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, Page 11-12 for more
details on the complete implementation of this feature.

Once the Geography Type of "Province" is defined, add each province under the "View Details" link

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 4/41
11/27/2017 Document 577996.1

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 application. TCA product
management is 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.

@Data Fix: to be run after the customer creates all the provinces in TCA and before they create jurisdictions
@update hz_geographies
@set start_date = '&date'
@WHERE GEOGRAPHY_TYPE = 'PROVINCE'
@and country_code = 'CA'

Tax Relevancy:
1) Geographies must be defined in order for a Jurisdiction to be created in E-Business Tax
2) Tax calculation uses the geography structure to identify relevant jurisdictions when calculating taxes and
evaluating tax rules such as place of supply rule.

-------------------------------------------------------------------------------------------------

b. Define Tax & Geography Validation

To see how to setup an a geography validation, refer to Note 554492.1

Responsibility: Trading Community Manager


Navigation: Trading Community > Administration > Geography Hierarchy

For Canada you must enable geography and tax validation at the province level for hz_locations

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 5/41
11/27/2017 Document 577996.1

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 critical that these be consistent.
If 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 intended.

-------------------------------------------------------------------------------------------------

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.
https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 6/41
11/27/2017 Document 577996.1

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 are responsible
to account for themselves to company regulators, taxation authorities, and owners according to rules specified in
the relevant legislation.

In Release 12Legal 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 it is created

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 each office, service
center, 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 additional legal
establishments 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.

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 establishments.

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 main legal establishment feeds the Bill From in AR and the Bill To / Ship to in
AP. This address is then considered if your tax rules use these as the basis for tax calculation.
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 reflect this after it is created

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 least one Operating
Unit must be 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.

------------------------------------------------------------------------------------------------

d. Associate the Operating Unit with the Legal Establishment

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 7/41
11/27/2017 Document 577996.1

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.

-------------------------------------------------------------------------------------------------

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?

-------------------------------------------------------------------------------------------------

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.

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 8/41
11/27/2017 Document 577996.1

Some Examples:

-------------------------------------------------------------------------------------------------

g. Setup Mandatory Responsibility Level Profile Options

Responsibility: System Administrator


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


>-------------------------------------------------------------------------------------------------

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
https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 9/41
11/27/2017 Document 577996.1

1063992.1

Responsibility: OM Responsibility from section 3f


Navigation: Setup > System Parameters > Values
Sample Screenshot showing Associated Inventory Org

-------------------------------------------------------------------------------------------------

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.
-------------------------------------------------------------------------------------------------

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

Responsibility: System Administrator


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

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 10/41
11/27/2017 Document 577996.1

eBTax: Allow Ad Hoc Tax Changes Yes

eBTax: Allow Manual Tax Lines Yes Available to support data conversion

eBTax: Allow Override of Customer No


Exemptions

eBTax: Allow Override of Tax Classification Yes Available if rules wish to be created based upon tax codes
Code

eBTax: Allow Override of Tax Recovery Rate Yes Can lock down at lower levels if needed

eBTax: Inventory Item for Freight (Oracle Freight Enter the Item created in step 3i In order to assess tax on
Order Management only) Freight Charges as per Revenue Canada

eBTax: Invoice Freight as Revenue (Oracle Yes In order to assess tax on Freight Charges as per Revenue
Order Management only) Canada

eBTax: Read/Write Access to GCO Data Yes Allows for taxes to be defined at Global Configuration level

-------------------------------------------------------------------------------------------------

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 the
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 business need. Note that you can
additionally control when/if a discount applies to a tax when you setup your receivable activity types.
-------------------------------------------------------------------------------------------------

l. Setup Receivables AutoAccounting

Responsibility: Receivables responsibility from step 3f


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 derived during invoice entry will be
discussed later in this document.

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 11/41
11/27/2017 Document 577996.1

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 execution. Refer to Note 943657.1
for more details on this restriction

-------------------------------------------------------------------------------------------------

m. Setup Receivables Transaction Types

Responsibility: Receivables responsibility from step 3f


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 values.

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:801535.1 for instructions on how this
might be 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.
-------------------------------------------------------------------------------------------------

n. Setup Transaction Sources

Responsibility: Receivables responsibility from step 3f


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

-------------------------------------------------------------------------------------------------

o. Initialize Operating Unit Party Tax Profile


https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 12/41
11/27/2017 Document 577996.1

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.

-------------------------------------------------------------------------------------------------

p. Setup Receivables Activity Types

Responsibility: Receivables responsibility from step 3f


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)

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 13/41
11/27/2017 Document 577996.1

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 to this activity. If you specify a Tax
Rate 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 Miscellaneous Cash, then you can
allocate tax to the 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 discount example
mentioned above.
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 Receipts window. Please keep this
in 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 an activity type is created for a
misc cash receipt

-------------------------------------------------------------------------------------------------

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

-------------------------------------------------------------------------------------------------

r. Setup Receivables Receipt Class & Payment Method

Responsibility: Receivables responsibility from step 3f


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

-------------------------------------------------------------------------------------------------

s. Setup Approval Limits

Responsibility: Receivables responsibility from step 3f


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

-------------------------------------------------------------------------------------------------

t. Run Geography Name Referencing Program

Responsibility: Trading Community Manager


Navigation: Control > Request > Run

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 14/41
11/27/2017 Document 577996.1

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)

-------------------------------------------------------------------------------------------------

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 defined at the country level.

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 single regime, the compounding
example 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 combine these into one
regime, you may 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 Yes Yes


Lines

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

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 15/41
11/27/2017 Document 577996.1

Tax Precision 2 2

Allow tax Inclusion Standard Non-Inclusive Standard Non-Inclusive


Handling Handling

Allow Multiple Jurisdictions Yes Yes

Allow tax Rounding Override Yes Yes

Exchange Rate Type

Reporting Tax Authority

Default Recovery Settlement Immediate Immediate

Tax Accounts Precedent Level

Use Legal Registration Number No No

Allow Cross Regime Compounding Yes Yes

Compounding Precedence 1 2

Sample Screenshot of how this would be defined:

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 16/41
11/27/2017 Document 577996.1

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.

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 17/41
11/27/2017 Document 577996.1

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 Legal Entity or the tax will not
be 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 subscribe to the Legal Entity
then any tax setup that might exist at the OU level (Taxes, Rates, etc) would be ignored during tax calculation.

-------------------------------------------------------------------------------------------------

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 Global Configuration Global Configuration


Owner Owner 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 Harmonized Sales tax Provincial Sales Tax
Services 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 2 2 2
https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 18/41
11/27/2017 Document 577996.1

Exchange Rate Type

Compounding Precedence 1 2

Reporting Tax Authority

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- Standard Non- Standard Non-


Inclusive Handling Inclusive Handling Inclusive Handling

Allow Override and Entry of Inclusive Yes Yes Yes


Tax Lines

Allow Tax Rounding Override Yes Yes Yes

Allow Override for Calculated Tax Yes Yes Yes


Lines

Allow Entry of Manual tax Lines Yes Yes Yes

Use Legal Registration Number No No No

Allow Duplicate Tax Registration No No No


Numbers

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

Allow Tax Exceptions No No No

Allow Tax Exemptions Yes Yes Yes

Tax Exemption Creation Method

Allow Tax Recovery Yes Yes Yes

Allow Tax Recovery Rate Override Yes Yes Yes

Allow Primary Recovery Rate Yes Yes Yes


Determination Rules

Allow Secondary Recovery Rate No Yes No


Determination Rules

Primary Recovery Type STANDARD STANDARD STANDARD

Secondary Recovery Type SREC

Allow Tax Rate Rules Yes Yes Yes

Default Recovery Settlement Immediate Immediate Immediate

Sample Setup Screenshots:

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 19/41
11/27/2017 Document 577996.1

-------------------------------------------------------------------------------------------------

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 same or similar nature.

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 20/41
11/27/2017 Document 577996.1

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 reporting requirements for zero rate
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 shown below

Field Value Value Value Value Value Value Value

Tax Regime CA GST AND CA GST AND CA GST AND CA GST AND CA GST AND CA GST AND CA PST
Code HST HST HST HST HST HST

Configuration Global Global Global Global Global Global Global


Owner Configuration Configuration Configuration Configuration Configuration Configuration Configura
Owner Owner Owner Owner Owner Owner Owner

Tax CA GST CA GST CA GST CA HST CA HST CA HST CA PST

Tax Status CA GST CA GST CA GST CA HST CA HST CA HST CA PST


Code STANDARD ZERO EXEMPT STANDARD ZERO EXEMPT STANDAR

Tax Name CA GST CA GST Zero CA GST CA HST CA HST Zero CA HST CA PST
Standard Exempt Standard Exempt Standard

Set as Yes No No Yes No No Yes


Default Tax
Status (1)

Default 01-Jan-2001 01-Jan-2001 01-Jan-20


Status
Effective
From

Allow tax Yes Yes


Exemptions
(2)

Allow Tax Yes Yes Yes Yes Yes Yes Yes


Rate
Override

Default Immediate Immediate Immediate Immediate Immediate Immediate Immediat


Recovery
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 option will also allow a user to
define a 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 way of tax status/rates we
suggest that you use Caution when reporting if you intend to use the tax exemption fields on the seeded reports.

Sample Screenshot of Tax Status

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 21/41
11/27/2017 Document 577996.1

-------------------------------------------------------------------------------------------------

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 commonly the borders of a country. Often
this is 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 such as HST and PST therefore
may 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 dates if this fix has not been
applied and 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

Tax CA AB CA BC CA BC CA MB CA NB CA NL CA NS CA NT CA NU
Jurisdiction
Code

Tax CA CA CA CA CA New CA CA Nova CA CA


Jurisdiction Alberta British British Manitoba Brunswick Newfoundland Scotia Northwest Nunavut
Name Columbia Columbia and Labrador Territories

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 22/41
11/27/2017 Document 577996.1

Tax CA GST CA GST CA GST CA GST CA GST CA GST AND CA GST CA GST CA GST
Regime AND AND HST AND HST AND HST AND HST HST AND AND HST AND
Code HST HST HST

Tax CA GST CA HST CA GST CA GST CA HST CA HST CA HST CA GST CA GST

Geography Province Province Province Province Province Province Province Province Province
Type

Parent Country Country Country Country Country Country Country Country Country
Geography
Type

Parent Canada Canada Canada Canada Canada Canada Canada Canada Canada
Geography
Name

Geography AB BC BC MB NB NL NS NT NU
Name

Precedence 1 1 1 1 1 1 1 1 1
Level

Collecting
Tax
Authority

Reporting
Tax
Authority

Effective 01-Jan- 01-Jul- 01-Jan- 01-Jan- 01-Jan- 01-Jan-2001 01-Jan- 01-Jan- 01-Jan-
From 2001 2010 2001 2001 2001 2001 2001 2001

Effective 30-Jun-
To 2010

Set as No No No Yes Yes No No No No


Default Tax
Jurisdiction

Default 01-Jan- 01-Jan-


Effective 2001 2001
From

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 CA CA CA Prince Edward CA CA


Columbia Manitoba Ontario Island Quebec 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 Canada Canada Canada Canada Canada Canada


Name

Geography Name BC MB ON PE QC SK
https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 23/41
11/27/2017 Document 577996.1

Precedence Level 1 1 1 1 1 1

Collecting Tax
Authority

Reporting Tax
Authority

Effective From 01-Jan-2001 01-Jan- 01-Jan- 01-Jan-2001 01-Jan- 01-Jan-2001


2001 2001 2001

Effective To 30-Jun-2010 30-Jun-


2010

Set as Default Tax No Yes No No No No


Jurisdiction

Default Effective From 01-Jan-


2001

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 Credits. Rebates may also occur in other
countries using a similar methodology. For more on this refer to the Canada Revenue Agency.

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 24/41
11/27/2017 Document 577996.1

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

Tax Regime CA GST AND CA GST AND CA GST AND CA GST AND CA GST AND CA GST AND CA GST A
Code HST HST HST HST HST HST HST

Configuration Global Global Global Global Global Global Global


Owner Configuration Configuration Configuration Configuration Configuration Configuration Configura
Owner Owner Owner Owner Owner Owner Owner

Tax CA GST CA GST CA HST CA HST CA HST CA HST CA HST

Tax Recovery CA GST STD CA GST CA HST STD CA HST BC CA HST CA HST STD CA HST N
Rate Code REC RATE ZERO REC PROV REC PROV REC ZERO PROV FED REC FED REC
RATE RATE RATE REC RATE RATE RATE

Recovery Standard Standard Sec Rec Sec Rec Sec Rec Standard Standard
Type Type1 Type1 Type1

Percentage 100 0 61.54 58.33 0 38.46 33.33


Recovery
Rate

Effective 01-Jan-2001 01-Jan-2001 01-Jan-2008 01-Jul-2010 01-Jan-2008 01-Jul-2010 01-Jul-20


From

Effective To

Set as Yes
Default

Effective 01-Jan-2001
From

Allow Ad Hoc Yes Yes Yes Yes Yes Yes Yes


Rate

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 entered rate period; or clear the
default 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 requirement a single rate of 13% can be
defined with no jurisdiction and then a 12% rate can be defined and associated with the BC jurisdiction (15% rate

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 25/41
11/27/2017 Document 577996.1

assigned to Nova Scotia). This minimizes the setup required by creating an exception based setup.

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 tax. This is not reflected in
the examples below
Setup Rates for GST AND HST

Field Value Value Value Value Value Value Value

Tax Regime Code CA GST AND CA GST AND CA GST AND CA GST AND
HST HST HST HST

Configuration Global Global Global Global


Owner Configuration Configuration Configuration Configuration
Owner Owner Owner Owner

Tax CA GST CA GST CA GST CA HST

Tax Status Code CA GST CA GST CA GST CA HST


STANDARD ZERO EXEMPT STANDARD

Tax Jurisdiction
Code

Tax Rate Code CA GST CA GST CA GST CA HST


STANDARD ZERO RATE EXEMPT STANDARD
RATE RATE RATE

Rate Type Percentage Percentage Percentage Percentage

Percentage Rate 5 6 7 0 0 13 14

Effective From 01-JAN-2008 01-JUL- 01-JAN- 01-JAN-2008 01-JUL-


2006 2001 2006

Effective To 31-DEC- 30-JUN- 31-DEC-


2007 2006 2007

Tax Rate Name CA GST CA GST Zero CA GST CA HST


Standard Rate Exempt Rate Standard
Rate Rate

Default Recovery CA GST CA GST CA GST CA GST CA GST CA HST STD CA HST
Rate Code STANDARD STANDARD STANDARD ZERO REC ZERO REC FED REC STD FED
REC RATE REC RATE REC RATE RATE RATE RATE REC RATE

Recovery Type STANDARD STANDARD STANDARD STANDARD STANDARD STANDARD STANDARD

Default Recovery Immediate Immediate Immediate Immediate Immediate Immediate Immediate


Settlement

Set as Default Yes Yes Yes Yes Yes Yes Yes


Rate

Default Effective 01-Jan-2008 01-Jul- 01-Jan- 01-Jan-2001 01-Jan-2001 01-Jan-2008 01-Jul-


From 2006 2001 2006

Default Effective 31-Dec- 30-Jun- 31-Dec-


To 2007 2006 2007

Allow Tax Standard Standard Standard Standard Standard Standard Standard


Inclusion Non- Non- Non- Non- Non- Non- Non-
Inclusive Inclusive Inclusive Inclusive Inclusive Inclusive Inclusive
Handling Handling Handling Handling Handling Handling Handling
https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 26/41
11/27/2017 Document 577996.1

Allow Override Yes Yes Yes Yes Yes Yes Yes


and Entry of
Inclusive Tax
Lines

Allow Tax No No No No Yes No No


Exemptions

Allow Tax No No No No No No No
Exceptions

Allow Ad Hoc No No No No No No No
Rate

Adjustment for Taxable Taxable Taxable Taxable Taxable Taxable Taxable


Ad Hoc Amounts Basis Basis Basis Basis Basis Basis Basis

Tax Accounts: Optional Optional Optional Optional Optional Optional Optional


Tax
Recovery/Liability

Setup Rates for PST

Field Value Value Value Value Value Value Value

Tax Regime Code CA PST CA PST CA PST CA PST CA PST CA PST CA PST

Configuration Global Global Global Global Global Global Global


Owner Configuration Configuration Configuration Configuration Configuration Configuration Configu
Owner Owner Owner Owner Owner Owner Owner

Tax CA PST CA PST CA PST CA PST CA PST CA PST CA PST

Tax Status Code CA PST CA PST CA PST CA PST CA PST CA PST CA PST
STANDARD STANDARD STANDARD STANDARD STANDARD STANDARD STANDA

Tax Jurisdiction CA QC CA ON CA PE CA SK CA BC CA SK
Code

Tax Rate Code CA PST CA PST CA PST CA PST CA PST CA PST BC CA PST
STANDARD STANDARD STANDARD STANDARD STANDARD SPECIAL SPECIA
RATE RATE RATE RATE RATE RATE RATE

Rate Type Percentage Percentage Percentage Percentage Percentage Percentage Percent

Percentage Rate 7 7.5 8 10 5 9 3.5

Effective From 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-

Effective To 30-Jun-2010 30-Jun-2010

Tax Rate Name CA PST


Standard
Rate

Default Recovery CA PST CA PST CA PST CA PST CA PST


Rate Code ZERO REC ZERO REC ZERO REC ZERO REC ZERO REC
RATE RATE RATE RATE RATE

Recovery Type STANDARD STANDARD STANDARD STANDARD STANDARD

Default Recovery Immediate Immediate Immediate Immediate Immediate


Settlement

Set as Default Yes Yes Yes Yes Yes Yes Yes


https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 27/41
11/27/2017 Document 577996.1

Rate

Default Effective 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-


From

Default Effective 30-Jun-2010 30-Jun-2010


To

Allow Tax Standard Standard Standard Standard Standard Standard Standar


Inclusion Non- Non- Non- Non- Non- Non- Non-
Inclusive Inclusive Inclusive Inclusive Inclusive Inclusive Inclusiv
Handling Handling Handling Handling Handling Handling Handlin

Allow Override Yes Yes Yes Yes Yes Yes Yes


and Entry of
Inclusive Tax
Lines

Allow Tax No No No No No No No
Exemptions

Allow Tax No No No No No No No
Exceptions

Allow Ad Hoc No No No No No No No
Rate

Adjustment for Taxable Taxable Taxable Taxable Taxable Taxable Taxable


Ad Hoc Amounts Basis Basis Basis Basis Basis Basis Basis

Tax Accounts: Optional Optional Optional Optional Optional Optional Optiona


Tax
Recovery/Liability

Sample Screenshots: Tax Rate

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 28/41
11/27/2017 Document 577996.1

Tax Rate Details

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 29/41
11/27/2017 Document 577996.1

Tax Accounts

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 30/41
11/27/2017 Document 577996.1

-------------------------------------------------------------------------------------------------

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, party fiscal classifications, tax
reporting 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 that you set both tax regimes as
associated 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 regimes that will be invoke when a
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 also eliminates some
features in E-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 selection.

2) Self-Assessment is critical for AP if you import materials.

-------------------------------------------------------------------------------------------------

h. Setup Default Tax Rules

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 31/41
11/27/2017 Document 577996.1

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 applied, what the taxable
basis 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 finally what recovery rate
to apply (if applicable).

Setup defaults for each of the taxes defined in step 4b as shown below

Rule CA GST CA HST CA PST

Direct Tax Rate Blank Blank Blank


Determination

Determine Place of Ship to, use bill to if ship to Ship to, use bill to if ship to Ship to, use bill to if ship to
Supply is not found is not found is not found

Determine Tax Applicable Applicable Applicable


Applicability

Determine Tax Ship From Party Ship From Party Ship From Party
Registration

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 STANDARD_TB STANDARD_TB STANDARD_TB


Basis

Calculate Tax STANDARD_TC STANDARD_TC STANDARD_TC


Amounts

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
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

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 32/41
11/27/2017 Document 577996.1

-------------------------------------------------------------------------------------------------

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 tax. These steps involve setting
up 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) Query the tax


https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 33/41
11/27/2017 Document 577996.1

2) Select "Update"
3) Expand Tax to view "Defaults and Controls
4) Select a "Default Primary Recovery Rate Code" and "Default Secondary Recovery Rate Code" as shown in the table
below
5) Apply

Field Value Value Value

Tax CA GST CA HST CA PST

Default Primary Recovery Rate CA GST STANDARD REC CA HST 100 PCT FED REC CA PST STANDARD REC
Code RATE RATE RATE

Default Secondary Recovery CA HST 61.54 PCT PROV


Rate Code 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 this recover rate.

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.

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

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 34/41
11/27/2017 Document 577996.1

So how did the prior steps cause this to calculate?

1) An Invoice was entered against a specific Operating Unit which is part of a Legal Entity
2) 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.
3) The tax place of supply rule validated that the bill-to address should be considered
4) The bill-to address on the invoice had a province and country that could be tied to a taxing jurisdiction within the
regime
5) The taxing jurisdiction was found to be associated with a valid tax rate
6) The tax was applicable
7) Standard tax calculation was used (rule defaults said to use line amount * Tax rate)

-------------------------------------------------------------------------------------------------

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

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 35/41
11/27/2017 Document 577996.1

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 1108463.1 where we list each determining
factor 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 Determine Taxable Basis tax rule to
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)

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 36/41
11/27/2017 Document 577996.1

-------------------------------------------------------------------------------------------------

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 exports in certain circumstances such as
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.

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 rate tax instead of no tax line at all. It
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

Tax Setup Impact of Note on Case Study:


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 tax freight charges along with the item
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.

Tax Setup Impact of Note on Case Study:


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

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 37/41
11/27/2017 Document 577996.1

Tax Setup Impact of Note on Case Study:


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.

Tax Setup Impact of Note on Case Study:


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 both PST and GST. To report on the
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 R12 E-Business Tax and Oracle
Receivables.

Payables:
To see more information about how tax accounting is configured for Payables, refer to the accounting section in
<Note735991.1>

Tax Setup Impact of Note on Case Study:


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 need to configure recoverable taxes.

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 the provincial recovery.

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 preparations.

To see a detailed example of how recoverable taxes are implemented, refer to Note 735991.1

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 38/41
11/27/2017 Document 577996.1

-------------------------------------------------------------------------------------------------

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 when testing your setup.

a. Receivables

1. Invoice Entry with automatic calculation


2. Invoice Entry with Manual Entry of Tax Line
3. AutoInvoice Integration with other modules
4. AutoInvoice Integration with Legacy systems
5. AutoInvoice Data Migration
6. Credit Memo - Applied
7. Credit Memo - On Account
8. Adjustments (Tax)
9. Adjustments (Non-Tax)
10. Tax Accounting
11. Tax Compounding
12. Tax Exemptions
13. Exports
14. Exception Rates
15. Miscellaneous Receipts
16. Receipt Applications
17. Tax Reporting

b. Payables

1. Standard Invoice Entry with tax control amount


2. Self-Assessment
3. Credit Memo's
4. Tax Recovery
5. Tax Reporting
6. Tax Exception Rates
7. Tax Exemptions

Community Discussion

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 39/41
11/27/2017 Document 577996.1

52 Replies Latest reply on Oct 3, 2016 3:54 PM by Patrick McBride-Oracle

Patrick McBride-Oracle Oct 16, 2013 4:35 AM

Dedicated Thread: Case Study on Canad


uptake by BC and Ontario

Starting in July 2010, BC and Ontario will join 4 other provinces in using HS
documentation that will help all of you with this migration. Let us know if you h
encountered? What questions have arisen? Also let us know if you have any
them into the documents that are created.

Note 577996.1 has been created as a case study on how one might go about s
ideas, gaps and suggestions so we can enhance this note further.

If we get a good response we will explore creating similar notes for EMEA and

Community thread for Canada Tax Setup.

REFERENCES

NOTE:738000.1 - Can I Create a Tax Group in R12 E-Business Tax?


NOTE:764297.1 - How to Setup Tax on Freight in R12 E-Business Tax (EBTax) Order to Cash
NOTE:274974.1 - What Effects Does Replicate Seed Data Concurrent Request Have On Oracle Applications?
NOTE:415529.1 - R12: CE: Unable to See the Legal Entity List of Values in the Bank Account Owner Field
NOTE:943657.1 - Tax Rules Do Not Consider Manually Entered Revenue Account
NOTE:948414.1 - How to Configure a Tax to Self-Assess in R12 E-Business Tax (EBTax), Payables and Purchasing (Offset, Use
Tax)
NOTE:801535.1 - How to Setup and Troubleshoot Tax Classification Codes and Use in Tax Rule in R12 E-Business Tax (EBtax)
NOTE:810443.1 - Overview of the R12 E-Business Tax (EBTax) Upgrade for Order to Cash
NOTE:885225.1 - Setting Up and Troubleshooting Tax Accounting for R12 E-Business Tax (EBTax) and Oracle Receivables
NOTE:1063491.1 - How to Setup a Taxable Basis Rule for Tax Compounding in R12 E-Business Tax (EBTax)
BUG:9762787 - CANNOT MAKE THE CA PST TAX LIVE WHEN ALLOW TAX RATE RULE IS CHECKED
NOTE:604280.1 - How To Add New Legal Entity Registration Code For Countries That Are Not Available In The List?
NOTE:735991.1 - Implementing and Using Tax Recovery in R12 E-Business Tax (EBTax)
NOTE:554492.1 - Setting Up Geography Hierarchy And Address Validation In Release 12
BUG:7150723 - UNABLE TO SET START DATE FOR HZ_GEOGRAPHIES

NOTE:1062897.1 - Case Study: How to Switch From an Upgraded Tax Regime to a New Tax Regime - Canada HST example

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 40/41
11/27/2017 Document 577996.1

NOTE:1063534.1 - How To Apply A Tax To Exports in R12 E-Business Tax (EBTax)


NOTE:1063992.1 - How Do I Set Up a Inventory Organization
NOTE:1064366.1 - How to Add a New Legal Entity, Ledger and Operating Unit for a New Country
NOTE:1108463.1 - How Tax Determining Factors Work with Tax Rules in R12 E-Business Tax
NOTE:134385.1 - How to Run the Replicate Seed Data Program
NOTE:463001.1 - EBusiness Tax Seed Data
NOTE:466575.1 - What Is The Usage Of E-Business Tax Profile Options?

Didn't find what you are looking for?

https://support.oracle.com/epmos/faces/DocumentDisplay?_adf.ctrl-state=m52aae9r0_768&id=577996.1 41/41