E Tax PDF

OAUG Tax Management SIG presents:
Oracle E-Business Tax

Extreme Hacks
Session 1 - Monday Sept 16, 2013 11 a.m. EDT
Session 2 - Thursday Sept 19, 2013 11 a.m. EDT
2013 Fiteni Enterprises Inc
Introduce the Webinar

Introduce the Presenter(s)
Hack 1 - Gross-up approach to Canada HST RITC reporting via GL
Hack 2 - Automate accrual of taxes on supply when not billed by supplier
AGENDA
In Oracle, we define an Extreme Hack as pushing the

boundaries of the standard functionality by using
the current tech stack for a given release to develop
server side code, report and forms Personalizations,
Descriptive Flexfields, Preferences, Profiles in a
manner that is sustainable over the long term.
WHAT IS AN EXTREME HACK?
Presenters
Extreme Hacks #1 Sept 16 11am EDT
Alex Fiteni Fiteni Enterprises
Tax SIG Chair & Moderator
And later this week .
Extreme Hacks #2 Sept 19 11am EDT
Andrew Bohnet eBiz Answers
eBTax SIG EU Chair
BIO
Alex Fiteni CMA CPA

President, Fiteni Enterprises Inc
OAUG Co-Chair of Oracle Tax Management SIG
Currently assists clients in assessing tax
compliance needs and configuring eBTax to meet
requirements
Prior to building his private practice, Alex was the
Director of Oracle Applications Development for
Oracle E-Business Tax and Globalizations
modules.
Partially Recoverable Tax Scenario

Requirement
The total HST Recoverable must be recorded in a GST/HST as a full ITC
recovery in the Ledger
The PVAT portion must be recorded separately as a deduction on the claim
statement for 8%
The client wants to show this in separate accounts and net them off when
the payment is remitted.
For a 100.00 taxable value the calculation would be as follows:
HST Input Tax Credit by default is 100%
PVAT non-recoverable portion to reduce the HST ITC is
Net recoverable tax portion (GST 5%) is
13.00
-8.00
5.00
Tax Solution Options

Option #1 Reporting the RITC from the Financial Tax Register Report
using Non-recoverable report style
Pros Uses the standard calculation and reporting functionality
Cons Does not reflect the non-recoverable portion passing through
the tax asset & liability accounts for GL only reporting
Option #2 Use Sub-Ledger Accounting to add a gross-up rule (a

demonstration of this method is out of scope)
Pros Accounting will reflect the exact GL Accounts to be used
Cons The additional journal lines will not show in the AP Invoice
Distributions window
Option #3 Gross Up the Tax Rate and recovery and use Offset tax
Pros Standard functionality and reporting in GL supported
Cons Distorts the nominal tax rates used in the calculation
Gross Up Tax Accounting via eBtax

eBtax Configuration Overview
The Ontario RITC is grossed up by the amount to be recovered 13 + 8% = 21%

The Recoverable apportionment (allocation) is then calculated with respect to the
5/21 for the recoverable amount.
Finally, an Offset Tax Code is used to accrue a negative amount for the 8% that will
be charged back to the Item Expense line GL Account.
e.g.
Item expense
100.00 Item Line Acct
Supplier Invoice Amount
-113.00 Trade Payable
HST Input Tax Credit by default is 100%
13.00 Item Line Acct
Offset PVAT calculated on ON HST ITC is
-8.00 Item Line Acct
PVAT Accrued
8.00 GST Accrual Acct
Net recoverable Tax Amount
5.00 GST Recov. Acct
Overview of Tax Set Up

eBTax HIERARCHY
REGIME
STANDARD TAX
OFFSET TAX
CA GST HST RGM
TAX
CA GST HST TAX
GL Account for Ledger & Default Tax
Operating Unit
Recovery/Liability
Accounts
CA GST HST OFST TAX

New account setups for
each
STATUS
CA GST HST STD STT
CA GST HST OFST STT
RATE
%
GL Account
CA ON HST RITC RTE

21.0
CA ON HST OFST RTE

-8.00
Supplier Trade Payable (for Tax Paid

Invoices)
LE.000.00000.Accrual.000000.00000
RECOVERY
CA GST ON HST RITC

REC
23.81
CA GST HST OFST REC
LE.000.00000.Recovery.000000
Item Charge Account
%
Recovery GL Account
How it works
Tax components and steps to make it work
Pre-Requisites Tax Regime, Tax, Status and Rates for
the Tax Jurisdiction(s)
Additional set Up for the Gross Up
Create a Tax Recovery Rate for the ratio of GST to grossed up
PVAT i.e. 5/21 or 23.81%
Create a Tax Rate Code for the grossed up rate
Assign the Tax Recovery Code to the Tax Rate Code
Create an Offset Tax, Status and Rate for 8%
Create an Offset Tax Recovery Rate for 100%
Create a Tax Rule to invoke the new Tax Rate Code
(e.g. a Determine Tax Rate Rule to test the value for the given Tax
Classification Code)
10
Offset Tax
11
Offset Status
12
Offset Tax Rate Code
13
Offset Tax Rate Details
14
Offset Tax Recovery Rate
15
Update the Standard Rate Code
16
Benefits of Hack
Requirement
The design achieves the expected results and tax
reporting can be performed out of the GL
Configuration
All of the configuration is within eBtax
Maintenance
Updates are required for the Standard, Offset and
Recovery Period Rates
17
Automating Unbilled Tax Accruals

1. Requirement
Some suppliers are not required to bill taxes in Jurisdictions in which they do
not have a permanent establishment, significant presence , a sales threshold
or Nexus (US).
e.g. Supplier is Registered in Jurisdiction 1, but not Jurisdiction 2
Invoice Item amount
100.00
Tax amount
Jurisdiction 1
5%
5.00
Amount billed
105.00
Ship to indicates a second Jurisdiction also has a tax
Jurisdiction 2
7%
7.00
The Legal Entity is Registered in Tax Jurisdiction 2 and must accrue the tax.
2013
OAUG Inc
Multi-National SIG
2013Fiteni
Enterprises
18
Tax Solution Options in R12

In R12 there are two options available
Self-Assessed Tax Allow Self-Assessed Tax flag
Supplier / Site each tax must be set to self-assessed
manually on the Tax Line in Payables Workbench
Legal Entity Establishment all taxes for all suppliers are
self-assessed all the time
Offset Tax Allow Offset Tax flag

Supplier / Site - all taxes are treated with an offset tax
Legal Entity Establishment all taxes are offset
Automated Tax Registration and Offset Tax with Tax

Rules
Supplier / Site Allow Offset Tax & Tax Registrations
Legal entity Establishment Tax Registrations
Tax Rule based on Tax Registration switches in Offset Tax
19
Self-Assessed Tax Option

Self-assessed tax feature creates additional
tax lines based on a choice made to reassign a tax already calculated by eBtax.
The supplier / site must be set to Allow SelfAssessed Tax.
The user must review each tax and choose to
make the specific tax self-assessed by checking
the relevant flag.
20
Offset Tax Method

The supplier tax must allow offset taxes
The supplier is identified with a registration record for each
GST & PST tax and whether they are registered or not.
The AP clerk prepares the invoice for data entry
The end users add the Item line amounts, GL Account,
Purchase Category and Ship To Location.
The invoice is reviewed by the invoice validation process
and tax is calculated.
If the supplier is not registered for the Ship To Location Tax
Jurisdiction, the tax is changed from a default Tax Rate Code to an
Offset Tax rate Code, thus generating the tax accrual needed if the
supplier did not bill the tax.
21
How it works - Registrations

Each supplier billing for goods and services to a
Canadian Legal Entity must be registered with a
Tax Registration Status for each tax in Canada
The Tax Registration Status determines if the
supplier will bill the tax or not.
REGISTERED the tax is expected to be billed by and
included on the invoice by the supplier
NOT REGISTERED the specified tax is not expected to
be billed by the supplier and will have to be accrued for
later payment too the relevant tax authority.
22
How it Works Configuration

Each Tax in the Canadian Tax Regime will require a new Tax
Rate Code with an Offset tax Code that mirrors the rate
assigned.
PP Standard Tax Rate Code +7%
PP Offset Tax Rate Code 7%
Tax Accounts are assigned at the Ledger/Operating Unit

level to accrue the tax to the relevant GL accrual account
A Tax Rule is required to examine the Registration Status of
the supplier and LE and switch the tax rate code from the
default billed tax to the offset tax rate code method
during the tax calculation process.
23
Tax Conditions and results

Ship to is SK,
CA GST HST RGM, Tax is CA GST HST, If LE is REGISTERED
& Supplier is REGISTERED, continue with default CA GST
STD RTE Tax Rate Code
CA ST RGM, Tax is CA SK TAX, If LE is REGISTERED &
Supplier is NOT REGISTERED, switch to Offset Tax Rate
Code CA SK OFST STD RTE
24
Implementation considerations
Initial load
Loading supplier tax registrations can be automated
Loading tax rates and rules add to existing scripts
Maintenance
Supplier tax registration status may change from time to time and
will need to be updated or manual intervention in invoices will be
required
Changes in tax rates will need to also be made to the Offset Tax
Rate codes as well.
Reporting
All taxes, including offsets will be reported with tax account details.
25
Pros and Cons

Offsets
Eliminates manual intervention at tax line level
Shows up in GL Distributions
Supplier must be configured
Self-Assessed
Requires a decision on each tax line
Not shown in Invoice Distributions window
26
How it Works
27
Key Design Components include:

Supplier Configuration
Tax Configuration
Invoice Processing
Tax Reporting
Supplier Tax Registrations

Create a Registration for each Tax with a Registration
Status of REGISTERED if supplier will bill or NOT
REGISTERED if supplier will NOT bill tax
28
Supplier Tax Registration

Each Tax Registration must identify the Supplier tax Registration Status as
REGISTERED or NOT REGISTERED.
29
Allow Offset Tax at Supplier/Site Level

Do not set any flags at the Site Level, only the
Supplier level, same as the Tax Registrations
30
Create Offset Tax, Status & Rates
Add Offset Tax

Add Offset Status
Add Offset Tax Rate Code
31
One offset (negative) rate per tax

rate is required per core tax rate
code.
Create additional Tax Rates for Offset

One additional Standard Tax Rate Code matched with one
> Offset Tax Rate to which is assigned one > Offset recovery rate code per
Province
32
Offset Tax Rate assignment
A new Tax Rate Code must be

different from the default
standard rate code to allow a
Tax Rate Rule based on Tax
Registration Status to switch
Tax Rate Codes
33
Tax Rule Components

DFS must include at minimum
Registration Status
Ship To/Bill To Province
TCS must define Offset conditions only
Bill To Party = REGISTERED

Bill From Party = NOT REGISTERED
Ship To SK or MB or BC (one TCS per province)
Ship to is NULL and Bill To is SK or MB or BC (one
TCS per province)
Determine Tax Rate Rule (one per PST Tax)

If Condition is TRUE, then switch to CA pp OFST
STD RTE
34
Determining Factor Set

Create Tax Determining Factor Set
Ensure minimum conditions are included
35
Tax Condition Sets

Create Condition Sets for each combination of Buyer,
Seller, Registration Status and Province that requires
an Offset Tax Rate to be selected if all such
conditions exist.
36
Tax Rules
Add Rate Rule
to each Tax
Add
conditions and
result for
condition if
TRUE
37
Auto-Offset Taxes in Workbench

What tax drivers does the tax scenario have
to include?
Buyer is Bill To Party (Legal Entity) is
REGISTERED for PST in SK
Seller is Bill From Party (Supplier) is NOT
REGISTERED for PST in SK
Ship To Location is SK
Tax Rule will trigger Offset Tax Rate switch for
PST in SK only
38
Tax Simulator Rule Result

Create tax scenario in Oracle Tax Simulator
Review the Tax Rate Rule that obtained the result to ensure
all criteria are satisfied
39
Summary Tax Lines

GST is not affected by PST tax rule
PST based on default Ship/Bill To till rate level
40
Tax Accounting and Automated Offsets

Tax Accounting for the negative accrual is
identified as a Recovery, so the tax accrual
GL account is derived from the Recovery
Account of the Recovery rate assigned to
the Offset Rate Code.
Item Expense Acct Dr
Tax GST Rec Acct Dr
Tax SK PST Expensed Dr
Tax SK PST Accrual Cr
Trade Payables Cr
41
100.00
5.00
5.00
5.00
105.00
Benefits of Hack
Configuration
Uses Standard Tax Functionality
Development
No custom development required
Maintenance
Tax Registration for each affected Supplier
Tax Registration for Legal Entity Establishment(s)
Maintain tax rates for Offset Tax Rate Codes
42
Q&A
Contact Information
Extreme Hacks #1
Alex Fiteni CMA CPA
alex@fiteni.com
+1-604-902-2782
Extreme Hacks #2
Andrew Bohnet
andrew@ebizanswers.net
LinkedIn Group: Oracle Tax Management SIG

43

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OAUG Tax Management SIG presents:

Oracle E-Business Tax

Introduce the Webinar

2013 Fiteni Enterprises Inc

In Oracle, we define an Extreme Hack as pushing the

WHAT IS AN EXTREME HACK?

2013 Fiteni Enterprises Inc

2013 Fiteni Enterprises Inc

Alex Fiteni CMA CPA

Partially Recoverable Tax Scenario

2013 Fiteni Enterprises Inc

Tax Solution Options

Option #2 Use Sub-Ledger Accounting to add a gross-up rule (a

2013 Fiteni Enterprises Inc

Gross Up Tax Accounting via eBtax

The Ontario RITC is grossed up by the amount to be recovered 13 + 8% = 21%

2013 Fiteni Enterprises Inc

Overview of Tax Set Up

CA GST HST OFST TAX

CA GST HST STD STT

CA GST HST OFST STT

CA ON HST RITC RTE

CA ON HST OFST RTE

Supplier Trade Payable (for Tax Paid

CA GST ON HST RITC

CA GST HST OFST REC

Item Charge Account

2013 Fiteni Enterprises Inc

2013 Fiteni Enterprises Inc

2013 Fiteni Enterprises Inc

Offset Tax Rate Code

2013 Fiteni Enterprises Inc

Offset Tax Rate Details

2013 Fiteni Enterprises Inc

Offset Tax Recovery Rate

2013 Fiteni Enterprises Inc

Update the Standard Rate Code

2013 Fiteni Enterprises Inc

Automating Unbilled Tax Accruals

Tax Solution Options in R12

Offset Tax Allow Offset Tax flag

Automated Tax Registration and Offset Tax with Tax

2013 Fiteni Enterprises Inc

Self-Assessed Tax Option

2013 Fiteni Enterprises Inc

Offset Tax Method

2013 Fiteni Enterprises Inc

How it works - Registrations

2013 Fiteni Enterprises Inc

How it Works Configuration

Tax Accounts are assigned at the Ledger/Operating Unit

2013 Fiteni Enterprises Inc

Tax Conditions and results

2013 Fiteni Enterprises Inc

2013 Fiteni Enterprises Inc

Pros and Cons

2013 Fiteni Enterprises Inc

Key Design Components include:

2013 Fiteni Enterprises Inc

Supplier Tax Registrations

2013 Fiteni Enterprises Inc

Supplier Tax Registration