sample ebusiness tax application workshop v 1.2

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Ms. Beverley Baker-Harris Senior Project Manager

GBT Application Design Workshop

E-Business Tax

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Agenda

Introductions Workshop Norms and Objectives Participant Responsibilities Introduction to E- Business Tax Initial Production Application Process Review – High Level Design Break Review – Design Considerations and Issues Interactive Discussion* Action Items and Next Steps

* During live Global Design Workshop sessions, interactive discussions will be 2-3 hours with the break taken near the middle of the 4 hour workshop block

To be done when new invitees in audience

Workshop - 4 hrs

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Workshop Objectives

Understand E-Business Tax and Capabilities in Oracle R12 eBS

Understand KCI EB Tax Determinants and Rules

Review – Design Considerations

Review – Key Design Decisions & Issues

Determine E-Business Tax Application Process for KCI Global footprint

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Key E-Business Tax Areas

Features Key Concepts Processes AR Screen Changes Setup Considerations

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Customer Billing - Process Overview

Copyright 2009 The Hackett Group

Inputs Process Outputs

Shipping

Customer Process Support

Document Manage-

ment

SLA Compli-

ance

Shipment Information

Tax Rates

Order Information

Information Updates & Requests

Storage & Requests

Volumes, Error Rates, etc.

General Accounting

Banks

Tax Authorities

Customers

BPO Invoice &

SLA Report Card

Billing Transactions

Billing Transactions

EFT Transactions

Tax Information

Invoice Transactions

Performance Metrics

AR

Accounts Receivable

OE

Order Entry

Customer Billing

§ Establish Maintenance of Customer Master Files

§ Collection of Billing Information

§ Determination of Appropriate Tax

§ Verification of Billing Input§ Reconciliation of Billing§ Creation, Distribution, Printing

of Invoices§ Billing Adjustments

Order-to-Cash Activities

Other Activities

§ Maintenance of Tax Status Records

§ Record Retention§ Billing Related Reporting· Billing Related Audit Support

Tax Authorities

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Current Tax Configurations Migrated During Upgrade To New Objects

Tax CodesTax Codes

–AA, BBAA, BB

Tax Group Tax Group CodesCodes

–CCCC

Tax Rate Tax Rate CodesCodes

–AA, BB, CCAA, BB, CC

Output Tax Output Tax Classification Classification

CodesCodes


Tax RulesTax Rules


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Current State - US

Vertex Sales Tax and TDM application interacts with the following applications/systemsApplications utilizing Vertex Sales Tax Data.

– Oracle Accounts Receivables– Delair (Claims Billing) – highly customized to meet KCI Business Needs. The

application is totally supported internally and not by Vendor. KCI created a custom view into Vertex to fetch tax rate.

– Oracle Order Management– Hero – Commissions – highly customized to meet KCI Business Needs. The application is

totally supported internally and not by a Vendor. KCI created a custom view into Vertex to fetch zip codes for territory identification

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E-Business Tax Integrations

Oracle E-Business Tax

Tax Services Request Manager

ServicesTax Content Services

Tax Determination Services

Tax Administration Services

PartnerTax Content

Interface

ContentRepository

RecordRepository

Partner Tax Services

Interface

Tax PartnerTax PartnerTax Content Tax Content Tax Services Tax Services

Oracle Receivables and other E-Business Suite ProductsTransaction Tax DataTransaction Tax DataTransaction DataTransaction Data

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E-Business Tax Components

eBusiness Tax consists of a tax knowledge base, a variety of tax services that respond to specific tax events, and a set of repositories for tax content and tax recording. The components are:

– Tax Content Services – Addresses the creation, maintenance, and management of tax content

– Tax Content Repository – Contains master and reference data– Tax Service Request Manager – Manages access to all tax data and services– Tax Determination Services – Made up of two sub-components:

Tax Determination Manager – Manages tax calculation Tax Rules Management – Manages the setup and definition of tax rules

Tax Record Repository – Contains the key attributes of each tax transaction Tax Administration Services – Manages the accounting for all tax transactions Tax Reporting Ledger – Manages access to the Tax Content and Tax Record

Repositories for reporting purposes

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Key Product Features Allows to maintain a tax configuration for each tax that you are

subject to

Allows to maintain records for your legal entities and operating units and the taxes they are subject to

Manage the sharing of tax configuration data by the legal entities and operating units in your organization

Maintain tax registrations and classifications for your legal establishments and third parties

Maintain classifications of the products that you buy and sell

Maintain classifications for your transactions.

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Key Product Features

Maintain tax rules and default values to manage tax determination and tax recovery on your transactions

Create default values and a minimum number of tax rules for simple tax requirements

Create default values and a comprehensive set of tax rules to manage complex tax requirements

Maintain tax-related records for your important transactions

Maintain automatic accounting of all tax-related transactions

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Key Product Features

Manage user control of updates and overrides of tax information on transactions

Maintain codes for tax reporting purposes

Comes with a full set of reports for your tax authority tax requirements

Maintain access to third party tax calculation services

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Tax Integration

E-Business Tax provides tax services for Order to Cash and Procure to Pay business flows in these applications:

Advanced Global Intercompany Inventory General Ledger Internet Expense iProcurement iStore Order Capture

Order Management Payables Projects Purchasing Receivables Service Contracts Trade Management

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EB Tax Exclusions

E-Business Tax does not provide tax services for these transaction:

Payables withholding taxes Latin American Receivables transactions India transaction taxes

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Tax Authority Tax Regime Tax Tax Jurisdiction

California State Board of Equalization

HM Customs and Excise (U.K.)

Canadian Customs and Revenue Agency (Canada)

Secretaria da Receita Federal (Brazil)

Tax Authority:Tax Authority: A government entity that regulates A government entity that regulates tax law, administers, and/or audits one or more tax law, administers, and/or audits one or more taxes.taxes.

Key Concepts

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Tax Regime: The set of tax rules that determine the treatment of one or more taxes administered by a tax authority.

Tax Regime Tax Tax JurisdictionTax Authority


California Sales Tax


UK VAT


Canadian Goods and Services Tax


RICMS - Regulamento do ICMS

Key Concepts

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Tax Tax JurisdictionTax Authority Tax Regime

Tax: A classification of a charge imposed by a government through a fiscal or tax authority.


California Sales Tax State Sales Tax


UK VAT UK VAT



GST



CMS

Key Concepts

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Tax JurisdictionTax Authority Tax Regime Tax

Tax Jurisdiction: A geographic area where a tax is levied by a specific tax authority.


California Sales Tax State Sales Tax California (State)


UK VAT UK VAT UK



GST Ontario



CMS São Paulo

Key Concepts

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Fiscal Tax Classification System

EB Tax uses Fiscal Classifications in creation of Tax Rules for Tax Determination

For Inventory Items it provides a product fiscal classification using Inventory Category Sets

Inventory Category Sets can also be setup for ‘Product Intended Use’ of the Inventory Item when ‘Product Intended Use’ is a factor either in Tax Determination or Tax recovery

For Non Inventory Items it provides a flexibility to use EB Tax Product Category

Allows creating Party Tax Classifications

Allows creating Transaction tax Classifications

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Product Fiscal Classifications Flow

Item Categories

InventoryItems

Item Category

SetsInve

nto

ryPr

oduc

t F i

scal

Cl

assi

ficat

ions

External Components

eBTax Components

Fiscal Classif. Types

•Product FC•Intended Use

(inventory linked)

Regime Association

Tax Regimes

Fiscal Classif. Types

•Prod. Category •Intended Use

(non-inventory)

Fiscal Classification

Codes

Dependency

Flows

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Tax Rules Guided Flow

Flows

Optional Flows

• Rule Code

• Rule Name

• Law Reference

• Effective Dates

• Applicable Applications

• Etc.

• Transaction Det. Factors

• Party Det. Factors

• Product Det. Factors

• Condition Result will depends on the Rule Type

(I.e. Determine Tax Status, the result will be a Tax Status)

• Specify which order the rule conditions must be evaluated

• Ability to re-use existing templates or create new ones

General Rule Info

RuleConditions

RuleResults

RuleOrder

RuleTemplates

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Processing Taxes on Transactions The tax determination process derives the taxes that apply to a transaction and the tax

amounts charged on the transaction by evaluating the factors of the transaction according to the rules that you define. These taxability factors are:

– Place - The places involved in the transaction, including the ship from and ship to locations, and the bill from and bill to locations

– Party - The parties of the transaction. This can include: First party legal entities. Ship from/ship to parties; bill from/bill to parties. Tax registrations and registration statuses of each party Type or classification of a party

– Product - The products transacted. This can include:Designation of physical goods or services.Type or classification of a product

– Process - The kind of transaction that takes place. This can include: Procure to Pay transactions, such as purchases, prepayments, and requisitions Order to Cash transactions, such as sales, credit memos, and debit memos. Type of sale or purchase: retail goods, manufactured goods, intellectual property and

re-sales.

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Tax Rules Guided Flow

Flows

Optional Flows

• Rule Code

• Rule Name

• Law Reference

• Effective Dates

• Applicable Applications

• Etc.

• Transaction Det. Factors

• Party Det. Factors

• Product Det. Factors

• Condition Result will depends on the Rule Type

(I.e. Determine Tax Status, the result will be a Tax Status)

• Specify which order the rule conditions must be evaluated

• Ability to re-use existing templates or create new ones

General Rule Info

RuleConditions

RuleResults

RuleOrder

RuleTemplates

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• Determine Tax Regimes and Candidate Taxes• Determine Place of Supply And Tax Registration• Determine Applicable Taxes & Jurisdictions

• Determine Tax Status for each applicable Tax

• Determine Taxable Basis• Evaluate Thresholds

• Determine Tax Rate• Evaluate Exemptions and Exceptions• Evaluate Thresholds

• Calculate Tax• Evaluate Thresholds• Perform Rounding

Tax Applicabilit

y

Tax Status

Tax Rate

Taxable Basis

Tax Calculation

Tax Determination Service Flow

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ProcessProcess ProductProduct

PartyParty

PlacePlace

Determining Factors = 4P’sDetermining Factors = 4P’s

Tax Tax ContentContent

Determining Factors

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Example of US Sales Tax in 12.0

Tax Regime Tax Tax

Status Tax

Rate OperatingUnit Tax Accounts

Regime Tax Jurisdiction Status Rate Account

US Sales Tax State Sales Tax California State

Sales Tax Standard 7.25% 01.005.004.033

US Sales Tax

County Sales Tax

San Mateo County Sales Tax Standard 1.0% 01.005.004.033

US Sales Tax City Sales Tax Belmont City

Sales Tax Standard 0% 01.005.004.033

TaxJurisdiction

Flows Optional Flows

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Example of UK VAT Tax in 12.0

Flows

Optional Flows

Tax Regime Tax Tax

Status Tax

Rate

Regime Tax Jurisdiction Status Rate Recovery

UK VAT UK VAT UK VAT Standard 17.5% 100%

UK VAT UK VAT UK VAT Reduced 8.0% 100%

UK VAT UK VAT UK VAT Zero Rated 00%

UK VAT UK VAT UK VAT Exempt 00%

TaxJurisdiction

OperatingUnit Tax Accounts

Recovery Rate

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Tax Reporting Types Use tax reporting types to capture additional tax information on transactions for your

tax reports. You can use tax reporting types for your internal reporting needs and tofulfill country-specific reporting requirements

A tax reporting type identifies a specific unit of information, such as a date or a textcomment, to associate with a specific tax usage, such as a fiscal classification or taxjurisdiction. You can also create a group of tax reporting codes for a tax reporting type,to provide additional granularity for tax reporting. You can add tax reporting codes to a

tax reporting type at any time

A tax reporting type region appears on the corresponding page of each E-Business Taxentity that you associate with tax reporting types. If applicable, the selection is limitedo the tax reporting types associated with the corresponding tax regime and associatedentities.

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Tax Zones

Use tax zones to group existing geographical regions that share the same taxrequirement. You can use tax zones with tax regimes, to identify tax requirements for aspecial geographic area and to create parent tax regimes that represent a relatedgrouping of geographic regions for tax reporting purposes. You can also use tax zoneswith tax rules, to create tax rules that refer to a specific geographic location

The use of tax zones is optional and depends on your overall tax setup planning. Forexample, if a separate economic community exists in part of a country only, you caneither set up a tax zone and corresponding tax regime for the applicable geographicarea, or set up a country tax regime and use applicability rules to exclude the parts ofthe country where the tax requirement does not apply

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Integration and Extensions

Confirm Interfacing systems to/from process Confirm Metrics / KPIs Identify Any Dependencies / Barriers to Implementation

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Third Party Service Subscriptions

External Service Providers– Taxware– Vertex

Prerequisites– Before you can set up service subscriptions, you may need to complete one or more of

these tasks:– Set up tax regimes. (mandatory)– Set up party tax profiles. (mandatory)– Set up configuration options. (mandatory)

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Tax Simulator

E-Business tax comes with a Simulator that allows you to enter transactions in order to simulate the tax determination process without creating live data. The Oracle Tax Simulator lets you preview the workings of your tax configuration before you enter transactions in an application, such as the Payables or Receivables workbench. In this way a tax manager or implementation consultant can simulate transactions to test the entire tax and related configuration. The Oracle Tax Simulator provides immediate verification that the tax configuration and tax rules were created and applied according to your requirements

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Noteworthy Points – Legal Entity and Ship to

– Legal Entity is required on all transactions and receipts Defaulted from transaction type, batch source, organization Credit memos default legal entity from target transaction Adjustments assume legal entity from target transactions Receipts default legal entity from remittance bank account

– Ship to customer and address information can now be recorded at the line-level Ship to is now an optional grouping rule for transactions A transaction can have multiple ship-to addresses

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E-Business Tax Design Consideration

How many different Tax Authorities per legal entity are required? Are there multiple Tax Regimes per Tax Authority? For example City Tax and

State Tax governed by State Authority Do you have multiple tax codes, and taxing methods? For example

percentage, compound taxes, deferred taxes What are the different tax jurisdictions under the Tax Authorities? What are the different supply points, and Tax Registrations? What is the frequency of change for Tax Rates? Are the Tax rates changes done manually? Do you require Tax content to be loaded on regular basis ? What is the frequency of the Tax Rates upload? Do you recover Tax at the time of Invoicing or Deferred? If you use Deferred Taxes, what is interim tax account to be used for Deferred

Taxes?

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Do you Transactions with inclusive Tax? Do you allow customer tax exemptions? Do you have Product Tax exceptions? Do you have Taxes that apply to Multiple Jurisdictions? What are the different types of Offset taxes and its recovery rates? What are the Tax Accounts to be used for the following?

– Payables Tax Expense– Tax Recoverable/Liability– Interim Tax– Finance Charge Tax Liability (An account that records tax amounts on finance charges that are

used as a deduction against overall tax liability)– Non- Recoverable tax Accounts (Accounts that record tax amounts on earned and

unearned discounts and adjustments that you cannot claim as a deduction against taxliability)

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What tool will be used for compiling and filing Sales Tax Returns? For example, Oracle Reports, Vertex or third party software

Are the customer address streamlined with the Tax Software's? For example in US the Address Validation for customer address must meet the State, County, City and Zip Code + 4 for correct determination of Tax Rates

sample ebusiness tax application workshop v 1.2

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