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Tax Accounting Process
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Objectives
After completing this module, you should be able to do the following:• Overview of the Tax Accounting Process• Define General Tax Setup Steps• Enter Tax Adjustments• Explain Tax Reporting Ledger
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Agenda
• Overview of the Tax Accounting Process• Defining Generic Tax Setup Steps• Entering Tax Adjustments • Explaining Tax Reporting Ledger
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Order ManagementGlobal Taxes Overview
Sales Order with Tax Estimate
Options, Controls, and Defaults
Items Customers SitesTax Code
Tax Group
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Receivables Global Tax Overview
Options, Controls, and Defaults
Items Customers Sites
Transaction with Tax Distributions
Revenue Account
Tax Code
Tax Group
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Other Products
Order Management
Projects & Order Management
CRM Applications Order Capture
Tax Engine
AutoAccounting Invoices
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Global Tax Overview
Value Added Tax (VAT) Sales Tax
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Tax Overview
Input Tax Output Tax
Tax paid out onsupplier invoices
Tax collected oncustomer invoices
Amount Due to Tax Authority = Output Tax - Recoverable Input Tax
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Value Added Tax Overview
.50
1.00
.25
.50
VAT TAX = .50 + 1.00 + .25 + .50
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US Sales Tax Overview
Supplier remits sales tax to state
tax authority
State collects sales tax
Customer pays supplier cost of item plus sales tax
$100 item + $10 sales tax
$10 sales tax
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US Sales Tax Example
State.County.City + Zip Code
Tax Rates
Locations IL.Cook.Chicago + 60601
3% 2% 1.5% = 6.5%
Structure
Based on customer’s ship-to address:
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Tax Partner Process Overview
Oracle ReceivablesTax Tables Tax Partner
Tax Information
Tax RateTax Amount
AutoAccounting
Vertex or Taxware
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Other Taxes in Oracle Applications
• Recoverable and Non-Recoverable Input Taxes• EU Acquisition and Reverse Charge Taxes• Deferred Output Taxes• Withholding Taxes• Goods and Service Tax• Canadian Government, Provincial, and
Harmonized Sales Tax• Sales Equalization Taxes• Investment Taxes • Excise Duties• Latin and South American Tax regimes
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Agenda
• Overview of Tax Accounting Process• Defining Generic Tax Setup Steps• Entering Tax Adjustments • Explaining Tax Reporting Ledger
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Tax Setup Steps
Select a Tax Method
Define Tax Codes & Rates
Setup Inclusive & Exclusive Taxes
Setup Tax Groups (Optional)
Setup Item or Account Method (Optional)
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Tax Setup Steps Continued
Define Tax Preferences, Defaults, and Results
Define Tax Exemptions and Exceptions
Define Transaction Types
Define AutoAccounting for tax
Enable Calculation of Tax on Freight
Define Tax Profile Options
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Defining Tax Codes and Rates
Select a Tax Method
Tax Rate
Taxable Basis
Effective Dates
Tax Controls
Tax Accounting Information
Value Added Tax Sales Tax
5%
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Setting Up Inclusive and Exclusive Tax
Inclusive Tax Exclusive Tax
Allow Inclusive Override
Inclusive Tax
Item Cost + Tax = Line Cost
Item
Item
+ Tax
Total Cost
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Tax Groups Overview
• City Tax• County Tax• Metro Tax• State Tax• Country Tax
New York
Paris
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Tax Code
Tax Code
Tax Code
Tax Group
Default sources:System Options, Bill-to Customer, Ship-to Customer Site, Item, Memo Line
Order or Invoice Line
Enter Order or Invoice with Tax
Group
Tax Codes
Tax Rates
Accounting
Setting Up Tax Groups (Optional)
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Compound Tax Example
Line Number
1
2
Tax Amount
7.00
10.70
17.70
Tax Rate
7%
10%
Total:
Precedence Number
1
2
Tax Code
GST
PST
Based on an invoice line of 100
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Inclusive Tax with Compounding Example
CodeABCD
InclusiveYesYesNoNo
Precedence1
1.12
2.1
Rate20%10%10%30%
Taxable100120100110
Tax20121033
Based on an invoice line of 132 (100 plus Inclusive Tax of 32 for Code A and B)
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Defining Condition Sets
• Use Condition and Exception Sets and Group Constraints to specify one or more conditions for each tax code
• Optionally define actions for each condition set• Example: If ship-to country is Canada and ship-to
province is Ontario, use this tax code.• Example: If ship-to province is not found, display
system error message
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Select a Tax Control Method
Account Method
Inventory Item Ship To
Country
Revenue Accounts
Tax Code
Item Method
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Setting Up Account Method (Optional)
Assign Tax Code to Natural Account
Segment of Revenue Account
In Receivables System Options Window:
Validation
Enforce Tax
Set Revenue Accounts Hierarchy to 1
Allow Tax Code Override
In General Ledger Tax Options Window:
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Assigning Tax Codes to Items
Use the Tax Code field in the Invoicing region of the Master Item window to assign a tax code or a tax group to inventory items.
Tax Code
Tax Code
Tax Code
Tax Group
Tax Code Attribute
…
Tax Group
List of Values
Pick One
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Defining Tax Preferences,Defaults, and Rules
In System Options Window:
Tax Defaults
and Rules
Tax Preferences
Tax Defaults
Tax Rules
Tax
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Defining Tax Exemptions
• Select the Exempt check box on the tax code.• Define Exemptions and Exceptions in the
corresponding forms.• For customer exemptions, assign tax code to
customers at either the customer or site level.• For product exemptions, assign tax code to
products in the Master Item window.
Tax Code
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Defining Transaction Types
Exempt Tax Code
Assign
Customer Sites Not Subject to Tax
Tax Calculation Check Box
Calculate Tax on All Invoices
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Defining AutoAccounting for Tax
In the AutoAccounting Window
enter:• Tax in the Type Field• Segment Names• Value used to derive the
Account
AutoAccounting
01-110-7340-0000-000
General Ledger
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Enabling Calculation of Tax on Freight
• Create freight amounts as regular invoice lines.• Use an inventory item to define freight services
and enable AutoAccounting to distinguish between freight and regular line items.
AutoAccounting
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Defining Tax Profile Options
• Tax: Allow Manual Tax Lines• Tax: Allow Ad Hoc Tax Changes• Tax: Allow Override of Customer Exemptions• Tax: Allow Override of Tax Code
Profile Options
5%
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For Order Management Profile Options
Profile Option
Tax: Invoice Freight as Revenue
Tax: Inventory Item for Freight
Reason
Enables freight amounts entered in Oracle Order Management to be passed to Oracle Receivables as taxable line items.
Lets Oracle Order Management identify an inventory item on a transaction line imported into Oracle Receivables via the Receivables Interface program.
Setting
Yes
Freight (Inventory Item)
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Agenda
• Overview of Tax Accounting Process• Defining Generic Tax Setup Steps• Entering Tax Adjustments• Explaining Tax Reporting Ledger
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Tax Accounting Overview
Set up Tax Accounting Information for Tax Codes and Receivables Activities
Earned
Unearned
Adjustments Discounts
Miscellaneous Cash
Finance Charges
Deferred Tax
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Setting Up Tax Accountingfor Deferred Tax
Tax Code
Tax Rate
5%
Deferred Tax
Deferred Tax
Tax Collected
Tax & Interim Tax Accounts
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Defining Receivables Activities
To set up ReceivableActivities for Tax Accounting:
1. Define GL Account 2. Select Tax Code Source3. Check Recoverable
or Non Recoverable4. Enter Tax Code if Tax Code
Source Option isthe Activity
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Changing Tax Transactions
Transactions or Transactions Summary
Profile Option
Tax: Allow Override of Tax Code
Tax Code
With AutoAccounting
Rerun Review Accounting To Update the
Tax Account
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Adjusting Tax on Invoices
Adjustment entry with
Receivables Activity
Approval limit$500
Validationprocess Approved
or Pending
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Tax Credit Memo
Credit Memo
Customer Account
Amount Percent
OR
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Agenda
• Overview of Tax Accounting Process• Defining Generic Tax Setup Steps• Entering Tax Adjustments• Explaining Tax Reporting Ledger
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Tax Reporting Ledger Overview
Payables
Global Tax Management
Receivables
General Ledger
RXi ReportingTax Registers
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Tax Extract OverviewOracle
ReportsRXi RX
Global DescriptiveFlexfields
General Ledger Tax Journals
ReceivablesDocuments
PayablesDocuments
Interface Table
RXi AttributeSets
Tax Extract
TaxReport
Calls
Populates
Formats
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Sources of Data
Payables
• Standard invoices
• Prepayments• Credit and
debit memos• Expense
report invoices
Other
• General Ledger manual journal entries
• Global descriptive flexfields
Receivables
• Invoices, credit and debit memos
• Line, tax, and invoice adjustments
• Payment applications for deferred tax
• Earned and unearned discounts
• Finance charges• Miscellaneous
receipts and payments• Bills receivable
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Tax Ledger Reporting Options
Set Reporting Level on the MO: Top Reporting Level Profile Options with the following Reporting Contexts to achieve the desired Tax Ledger Report Content.
Reporting Level
Set of Books
Legal Entity
Operating Unit
Report Content
All operating units in the set of books
All operating units in your legal entity
Only the operating unit associated with your responsibility
Reporting Context
Set of books defaults
Select legal entity
Select operating unit
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Matrix Reporting
Show a single line in the Tax Reporting Ledger for two or more tax amounts.
Input Tax Output Tax
Up To Two Taxes split between Recoverable and
Non-Recoverable
Up to Four Taxes
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RXi Report Steps
Publish reports in different formats
Extract DataDesign content and layout of reports
Meet reporting requirements
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Modifying Attribute Sets
Displayed columns
Column DetailsPage Formatting
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Defining Summary Details
Use the Summary Details window to define columns as summary columns in a report.
Running Page Total
Page Total
Report Total
Previous Page Total
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Publish RXi Reports
Select Publish Report Add Attribute Set
SubmitView Output
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Managing Accessto RXi Reports and Attribute Sets
To limit user access to RXi reports, perform the following tasks:• Assign each RXi report to a request group.• Assign the request group to one or more
responsibilities.• Assign each RXi report attribute set to a
responsibility.
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Summary
In this module, you should have learned how to:• Overview of Tax Accounting Process• Define General Tax Setup Steps• Enter Tax Adjustments• Explain Tax Reporting Ledger
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