Tax Setup Document

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

Responsibility: System Administrator Navigation: Profile > System Profile Options for Responsibilities created in step 3f
Profile Name HR: User Type MO: Operating Unit GL Ledger Name GL AR AP OM EBTax
Yes Yes Yes Yes Yes Yes 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. -------------------------------------------------------------------------------------------------
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 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 eBTax: Allow Override of Tax Recovery Rate eBTax: Inventory Item for Freight (Oracle Order Management only) eBTax: Invoice Freight as Revenue (Oracle Order Management only) eBTax: Read/Write Access to GCO Data Value Error Yes Yes No Yes Yes Available if rules wish to be created based upon tax codes Can lock down at lower levels if needed Available to support data conversion Reason in Case Study Required
Freight Enter the Item created in step 3i In order to assess tax on Freight Charges as per Revenue Canada Yes Yes In order to assess tax on Freight Charges as per Revenue Canada Allows for taxes to be defined at Global Configuration level
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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. -------------------------------------------------------------------------------------------------
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 -------------------------------------------------------------------------------------------------
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 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. -------------------------------------------------------------------------------------------------
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

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

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)
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 -------------------------------------------------------------------------------------------------
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 https://support.oracle.com/CSP/main/article?cmd=show&type=NOT&doctype=BULLETIN&id=577996.1 Page 9 of 26
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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 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 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 Tax Regime Code Name Regime Level Country Name Effective From Used to Group Regimes Allow Tax Recovery
Value CA GST AND HST CA GST AND HST Country Canada 01-Jan-2001 No Yes
Value CA PST CA PST Country Canada 01-Jan-2001 No Yes Yes Yes No CAD 0.01 Nearest 2
Allow Override and Entry of Inclusive Tax Lines Yes Allow Tax Exemptions Allow Tax Exceptions Tax currency Minimum Accountable Unit Rounding Rule Tax Precision Allow tax Inclusion Allow Multiple Jurisdictions Allow tax Rounding Override Exchange Rate Type Reporting Tax Authority Default Recovery Settlement Immediate Yes No CAD 0.01 Nearest 2
Standard Non-Inclusive Handling Standard Non-Inclusive Handling Yes Yes Yes Yes
Immediate
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Tax Accounts Precedent Level Use Legal Registration Number Allow Cross Regime Compounding Compounding Precedence No Yes 1 No Yes 2
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 Tax Regime Code Configuration Owner Tax source Tax Tax Name Tax Type Effective From Enable Tax for Processing Geography Type Parent Geography Type Parent Geography Name Tax Currency Minimum Accountable Unit Rounding Rule Tax Precision Exchange Rate Type Compounding Precedence Reporting Tax Authority Collecting Tax Authority Applied Amount Handling Set as Offset Tax Set Tax for Reporting Purposes Only Allow Tax Inclusion Allow Override and Entry of Inclusive Tax Lines Allow Tax Rounding Override Allow Override for Calculated Tax Lines Allow Entry of Manual tax Lines Use Legal Registration Number Allow Duplicate Tax Registration Numbers Recalculated No No Recalculated No No Recalculated No No 1 2 Value CA GST AND HST Global Configuration Owner Create a new Tax CA GST Value CA GST AND HST Global Configuration Owner Create a new Tax CA HST Value CA PST Global Configuration Owner Create a new Tax CA PST Provincial Sales Tax Sales 01-Jan-2001 Yes PROVINCE COUNTRY Canada CAD 0.01 Nearest 2
Federal Goods and Services Tax Harmonized Sales tax VAT 01-Jan-2001 Yes PROVINCE COUNTRY Canada CAD 0.01 Nearest 2 VAT 01-Jan-2001 Yes PROVINCE COUNTRY Canada CAD 0.01 Nearest 2
Standard Non-Inclusive Handling Standard Non-Inclusive Handling Standard Non-Inclusive Handling Yes Yes Yes Yes No No Yes Yes Yes Yes No No Yes Yes Yes Yes No No
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Allow Multiple Jurisdictions Allow Mass Creation of Jurisdictions Tax Accounts Creation Method Allow Tax Exceptions Allow Tax Exemptions Tax Exemption Creation Method Allow Tax Recovery Allow Tax Recovery Rate Override Allow Primary Recovery Rate Determination Rules
Yes Yes Create Tax Accounts No Yes
Yes Yes Yes
Yes Yes Yes Yes STANDARD SREC
Yes Yes Yes No STANDARD
Allow Secondary Recovery Rate Determination Rules No Primary Recovery Type Secondary Recovery Type Allow Tax Rate Rules Default Recovery Settlement Yes Immediate STANDARD
Yes Immediate
Yes 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 Tax Regime Code Configuration Owner Tax Tax Status Code Tax Name Set as Default Tax Status (1) Default Status Effective From Allow tax Exemptions (2) Allow Tax Rate Override Default Recovery
Value CA GST AND HST Global Configuration Owner CA GST CA GST STANDARD CA GST Standard Yes 01-Jan-2001
Value CA GST AND HST Global Configuration Owner CA GST CA GST ZERO CA GST Zero No
Value CA GST AND HST Global Configuration Owner CA GST CA GST EXEMPT CA GST Exempt No
Value CA GST AND HST Global Configuration Owner CA HST CA HST STANDARD CA HST Standard Yes 01-Jan-2001
Value CA GST AND HST Global Configuration Owner CA HST CA HST ZERO CA HST Zero No
Value CA GST AND HST Global Configuration Owner CA HST CA HST EXEMPT CA HST Exempt No
Value CA PST Global Configuration Owner CA PST
Value CA PST Global Configuration Owner CA PST
CA PST STANDARD CA PST SPECIAL RATE CA PST Standard Yes 01-Jan-2001 CA PST Special Rate No
Yes Yes Immediate Yes Immediate Yes Immediate Yes Immediate Yes Immediate
Yes Yes Immediate Yes Immediate Yes 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 Tax Jurisdiction Code Tax Jurisdiction Name Tax Regime Code Tax Geography Type Parent Geography Type Parent Geography Name Geography Name Precedence Level Collecting Tax Authority Value CA AB CA Alberta CA GST AND HST CA GST Province Country Canada AB 1 Value CA BC CA British Columbia CA GST AND HST CA HST Province Country Canada BC 1 Value CA BC CA British Columbia CA GST AND HST CA GST Province Country Canada BC 1 Value CA MB CA Manitoba CA GST AND HST CA GST Province Country Canada MB 1 Value CA NB CA New Brunswick CA GST AND HST CA HST Province Country Canada NB 1 Value CA NL CA Newfoundland and Labrador CA GST AND HST CA HST Province Country Canada NL 1 Value CA NS CA Nova Scotia CA GST AND HST CA HST Province Country Canada NS 1 Value CA NT CA Northwest Territories CA GST AND HST CA GST Province Country Canada NT 1 Value CA NU CA Nunavut CA GST AND HST CA GST Province Country Canada NU 1 Value CA ON CA Ontario CA GST AND HST CA HST Province Country Canada ON 1 Value CA ON CA Ontario CA GST AND HST CA GST Province Country Canada ON 1 Value CA PE CA Prince Edward Island CA GST AND HST CA GST Province Country Canada PE 1
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Reporting Tax Authority Effective From Effective To Set as Default Tax Jurisdiction Default Effective From No No 01-Jan2001 01-Jul-2010 01-Jan-2001 30-Jun-2010 No Yes 01-Jan2001 Yes 01-Jan2001 No No No No No 01-Jan2001 01-Jan2001 01-Jan-2001 01-Jan2001 01-Jan-2001 01-Jan2001 01-Jul-2001 01-Jan2001 30-Jun2010 No No 01-Jan-2001
Setup Jurisdictions for CA PST

Field Tax Jurisdiction Code Tax Jurisdiction Name Tax Regime Code Tax Geography Type Parent Geography Type Parent Geography Name Geography Name Precedence Level Collecting Tax Authority Reporting Tax Authority Effective From Effective To 01-Jan-2001 30-Jun-2010 Yes 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 30-Jun-2010 No No No No 01-Jan-2001 01-Jan-2001 Value CA BC Value CA MB Value CA ON Value CA PE Value CA QC Value CA SK CA Saskatchewan CA PST CA PST Province Country Canada SK 1
CA British Columbia CA Manitoba CA Ontario CA PST CA PST Province Country Canada BC 1 CA PST CA PST Province Country Canada MB 1 CA PST CA PST Province Country Canada ON 1
CA Prince Edward Island CA Quebec CA PST CA PST Province Country Canada PE 1 CA PST CA PST Province Country Canada QC 1
Set as Default Tax Jurisdiction No Default Effective From
Sample Screenshot of a Jurisdiction Setup
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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
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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 Tax Regime Code Configuration Owner Tax Tax Recovery Rate Code Recovery Type Percentage Recovery Rate Effective From Effective To Set as Default Effective From Allow Ad Hoc Rate Yes 01-Jan-2001 Yes Yes Yes Yes Yes Yes Yes Yes Value CA GST AND HST Global Configuration Owner CA GST CA GST STD REC RATE Standard 100 01-Jan-2001 Value CA GST AND HST Global Configuration Owner CA GST CA GST ZERO REC RATE Standard 0 01-Jan-2001 Value CA GST AND HST Global Configuration Owner CA HST CA HST STD PROV REC RATE Sec Rec Type1 61.54 01-Jan-2008 Value CA GST AND HST Global Configuration Owner CA HST CA HST BC PROV REC RATE Sec Rec Type1 58.33 01-Jul-2010 Value CA GST AND HST Global Configuration Owner CA HST CA HST ZERO PROV REC RATE Sec Rec Type1 0 01-Jan-2008 Value CA GST AND HST Global Configuration Owner CA HST CA HST STD FED REC RATE Standard 38.46 01-Jul-2010 Value CA GST AND HST Global Configuration Owner CA HST CA HST NS FED REC RATE Standard 33.33 01-Jul-2010 Value CA GST AND HST Global Configuration Owner CA HST CA HST BC FED REC RATE Standard 41.67 01-Jul-2010
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 Tax Regime Code Configuration Owner Value CA GST AND HST Global Configuration Owner CA GST CA GST STANDARD Value Value Value CA GST AND HST Global Configuration Owner CA GST CA GST ZERO Value CA GST AND HST Global Configuration Owner CA GST CA GST EXEMPT Value CA GST AND HST Global Configuration Owner CA HST CA HST STANDARD Value Value Value CA GST AND HST Global Configuration Owner CA HST CA HST STANDARD CA BC CA GST STANDARD RATE Percentage 5 01-JAN-2008 6 01-JUL-2006 31-DEC-2007 CA GST Standard Rate CA GST STANDARD REC RATE STANDARD Immediate Yes CA GST STANDARD REC RATE STANDARD Immediate Yes CA GST STANDARD REC RATE STANDARD Immediate Yes 7 01-JAN-2001 30-JUN-2006 CA GST Zero Rate CA GST ZERO REC RATE STANDARD Immediate Yes CA GST Exempt Rate CA GST ZERO REC RATE STANDARD Immediate Yes CA HST Standard Rate CA HST STD FED REC RATE STANDARD Immediate Yes CA HST STD FED REC RATE STANDARD Immediate Yes CA HST STD FED REC RATE STANDARD Immediate Yes CA GST ZERO RATE Percentage 0 CA GST EXEMPT RATE Percentage 0 CA HST STANDARD RATE Percentage 13 01-JAN-2008 14 01-JUL-2006 31-DEC-2007 15 01-JAN-2001 30-JUN-2006 CA HST Standard Rate CA HST STANDARD RATE Percentage 12 01-Jan-2001 Value
CA GST AN HST
Global Configuratio Owner CA HST
Tax Tax Status Code Tax Jurisdiction Code Tax Rate Code
CA HST STANDARD CA NS
CA HST STANDARD RATE
Rate Type Percentage Rate Effective From Effective To Tax Rate Name Default Recovery Rate Code Recovery Type Default Recovery Settlement Set as Default Rate
Percentage 15
01-Jan-2001
CA HST Standard Ra
CA HST BC FED CA HST NS REC RATE REC RATE STANDARD Immediate Yes
STANDARD Immediate Yes
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Default Effective From Default Effective To Allow Tax Inclusion
01-Jan-2008
01-Jul-2006 31-Dec-2007
01-Jan-2001 30-Jun-2006 Standard NonInclusive Handling Yes
01-Jan-2001
01-Jan-2001
01-Jan-2008
01-Jul-2006 31-Dec-2007
01-Jan-2001 30-Jun-2006 Standard NonInclusive Handling Yes
01-Jul-2010
01-Jul-2010
Standard NonInclusive Handling Yes
Standard No Inclusive Handling Yes
Allow Override and Entry of Inclusive Tax Lines Allow Tax Exemptions Allow Tax Exceptions Allow Ad Hoc Rate Adjustment for Ad Hoc Amounts Tax Accounts: Tax Recovery/Liability
No No No Taxable Basis Optional
Yes No No Taxable Basis Optional
No No No
Taxable Bas Optional
Setup Rates for PST

Field Tax Regime Code Configuration Owner Tax Tax Status Code Tax Jurisdiction Code Tax Rate Code Rate Type Percentage Rate Effective From Effective To Tax Rate Name Default Recovery Rate Code Recovery Type Default Recovery Settlement Set as Default Rate Default Effective From Default Effective To Allow Tax Inclusion Allow Override and Entry of Inclusive Tax Lines Allow Tax Exemptions Allow Tax Exceptions Allow Ad Hoc Rate Adjustment for Ad Hoc Amounts Tax Accounts: Tax Recovery/Liability Standard NonInclusive Handling Yes No No No Taxable Basis Optional Standard NonInclusive Handling Yes No No No Taxable Basis Optional CA PST Standard Rate CA PST ZERO REC RATE STANDARD Immediate Yes 01-Jan-2001 CA PST ZERO REC RATE STANDARD Immediate Yes 01-Jan-2001 CA PST ZERO REC RATE STANDARD Immediate Yes 01-Jan-2001 30-Jun-2010 Standard NonInclusive Handling Yes No No No Taxable Basis Optional Standard NonInclusive Handling Yes No No No Taxable Basis Optional Standard NonInclusive Handling Yes No No No Taxable Basis Optional CA PST ZERO REC RATE STANDARD Immediate Yes 01-Jan-2001 CA PST ZERO REC RATE STANDARD Immediate Yes 01-Jan-2001 Yes 01-Jan-2001 30-Jun-2010 Standard NonInclusive Handling Yes No No No Taxable Basis Optional Standard NonInclusive Handling Yes No No No Taxable Basis Optional Yes 01-Jan-2001 Yes 01-Jan-2001 30-Jun-2010 Standard NonInclusive Handling Yes No No No Taxable Basis Optional CA PST STANDARD RATE Percentage 7 01-Jan-2001 Value CA PST Value CA PST Value CA PST Value CA PST Value CA PST Value CA PST Value CA PST Value CA PST Global Configuration Owner CA PST CA PST SPECIAL RATE CA ON CA PST ON SPECIAL RATE Percentage 1 01-Jan-2001 30-Jun-2010
Global Configuration Global Configuration Global Configuration Global Configuration Global Configuration Global Configuration Global Configuration Owner Owner Owner Owner Owner Owner Owner CA PST CA PST STANDARD CA PST CA PST STANDARD CA QC CA PST STANDARD RATE Percentage 7.5 01-Jan-2001 CA PST CA PST STANDARD CA ON CA PST STANDARD RATE Percentage 8 01-Jan-2001 30-Jun-2010 CA PST CA PST STANDARD CA PE CA PST STANDARD RATE Percentage 10 01-Jan-2001 CA PST CA PST STANDARD CA SK CA PST STANDARD RATE Percentage 5 01-Jan-2001 CA PST CA PST STANDARD CA BC CA PST BC SPECIAL RATE Percentage 9 01-Jan-2001 30-Jun-2010 CA PST CA PST STANDARD CA SK CA PST SK SPECIAL RATE Percentage 3.5 01-Jan-2001
Sample Screenshots: Tax Rate
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Tax Rate Details
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Tax Accounts
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-------------------------------------------------------------------------------------------------
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 CA HST Blank CA PST Blank
Direct Tax Rate Determination Blank Determine Place of Supply Determine Tax Applicability Determine Tax Registration Determine Tax Status Determine Tax Rate Determine Taxable Basis Calculate Tax Amounts
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 Applicable Ship From Party CA GST STANDARD CA GST STANDARD RATE STANDARD_TB STANDARD_TC Applicable Ship From Party CA HST STANDARD CA HST STANDARD RATE STANDARD_TB STANDARD_TC Applicable Ship From Party CA PST CA PST STANDARD RATE STANDARD_TB 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
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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
Value CA GST Value CA HST Value CA PST CA PST STANDARD REC RATE
Field Tax Default Primary Recovery Rate Code Default Secondary Recovery Rate Code
CA GST STANDARD REC RATE CA HST 100 PCT FED 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.
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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)
-------------------------------------------------------------------------------------------------
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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.
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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 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 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. 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 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 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 ------------------------------------------------------------------------------------------------Note 817698.1.
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> 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 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
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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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There are 43 Replies Last post: October 20, 2010 7:09 AM by User186548 This discussion has been viewed 8594 times. 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
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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. Subscribe to Communities 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 suggestions so we can enhance this note further. Create subscriptions to specific communities to customize we will to your specific similar notes for EMEA and the US tax setup. If we get a good response content explore creating needs and interests. Subscribe now Remind me later Tags: I Tags | Refreshdo not wish to subscribe. Do not remind me again. Add Tags | Delete Tags Continue Reply | Subscribe | Report abuse no rating
Top Participants Community active users within last 90 days: 91 Pro 549 points / 564 total Patrick McBride Newbie 4 points
1. January 28, 2010 12:18 PM in response to: Patrick McBride Re: Send us your Requirements for HST migration for BC and Ontario 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.
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
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Scope and Application

2. If You Are Using an Upgraded Environment.... a. HST 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 https://support.oracle.com/CSP/main/article?cmd=show&type=NOT&doctype=BULLETIN&id=577996.1 Page 9 of 26

s. Setup Approval Limits

t. Run Geography Name Referencing Program

Sample Screenshot of how this would be defined:

Yes Yes Create Tax Accounts No Yes

Yes Yes Create Tax Accounts No Yes

Yes Yes Create Tax Accounts No Yes

Yes Yes Yes

Yes Yes Yes Yes STANDARD SREC

Yes Yes Yes No STANDARD

Sample Setup Screenshots:

c. Define Tax Statuses

Value CA PST Global Configuration Owner CA PST

Value CA PST Global Configuration Owner CA PST

Yes Yes Immediate Yes Immediate Yes Immediate

d. Define Tax Jurisdictions

Setup Jurisdictions for CA PST

Set as Default Tax Jurisdiction No Default Effective From

Sample Screenshot of a Jurisdiction Setup

e. Define Tax Recovery Rates

f. Define Tax Rates

Global Configuratio Owner CA HST

CA HST STANDARD RATE

STANDARD Immediate Yes

Default Effective From Default Effective To Allow Tax Inclusion

01-Jan-2001 30-Jun-2006 Standard NonInclusive Handling Yes

01-Jan-2001 30-Jun-2006 Standard NonInclusive Handling Yes

Standard NonInclusive Handling Yes

Standard NonInclusive Handling Yes

Standard NonInclusive Handling Yes

Standard NonInclusive Handling Yes

Standard NonInclusive Handling Yes

Standard NonInclusive Handling Yes

Standard NonInclusive Handling Yes

Standard No Inclusive Handling Yes

No No No Taxable Basis Optional

No No No Taxable Basis Optional

No No No Taxable Basis Optional

No No No Taxable Basis Optional

Yes No No Taxable Basis Optional

No No No Taxable Basis Optional

No No No Taxable Basis Optional

No No No Taxable Basis Optional