Case Study Canada Ebtax

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Case Study: Setup R12 E-Business Tax (EBTax) for Canada: Includes 2010 HST Changes [ID 577996.1] Modified 09-JUL-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 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 Receivables - Version: 12.0.0 and later [Release: 12.0 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] Information in this document applies to any platform.
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Purpose
In Release 12, Oracle introduced E-Business Tax as the new tax calculation engine for the Order to Cash and Procure to Pay business flows. Each of these modules proprietary tax engines from earlier releases were discontinued in favor of this new solution. (Latin Tax Engine, Golden Tax Adaptor and the India Globalization still exist) This White Paper documents how a simplified implementation might be performed for a customer using E-business Tax for Canada in Release 12. This is a living document and we encourage readers to post input, ask questions or share best practices on our community thread for Canada Tax Setup. This Note includes changes reflective of HST adoption by British Columbia (BC) and Ontario (ON) scheduled to take effect July 1, 2010. Also added to this note are the Nova Scotia HST rate increases (added June 21, 2010) This white paper combines, extends and superseeds the following: 1) Oracle E-Business Tax Configuration Library (CLIC) Note 463001.1 2) Oracle E-Business Tax Implementation Guide Chapter 4: Canadian Sales Tax 3) White Paper titled: Integrating Oracle E-Business Tax With Oracle Receivables and Oracle Payables For Country Canada Release 12 (this document is no longer available for viewing on My Oracle Support)
Scope and Application

This note was written in a case study format using Canada as the example. It assumes that you have an existing implementation and that you are adding a new country, Canada, to your configuration. Section 3 begins the case study with some mandatory setup steps. You should refer to the Financials Implementation Guide along with your module specific implementation documentation as appropriate for your implementation. The steps documented in this section do cover mandatory setups for modules impacted by E-Business Tax. Each section also attempts to document the tax implications of options you might select when performing the step. Section 4 begins the tax specific setups. In this section we walk you through the basic setup of your tax system. This section focuses on what E-Business tax calls the "Regime to Rate" flow where you identify the taxes that should be assessed. Also covered are the default settings used by the rule engine to determine if a tax should be charged and if yes, how to calculate and record the tax. Section 5 covers some of the more common business requirements applicable to this case study. In this section we explain in non-specific terms the general requirement that needs to be satisfied and provide references whenever possible to the origin of the requirement. We then provide a link to a note that provides in-depth examples, screenshots and video of how to configure a system to satisfy the requirement. Please note that these reference documents are not all specific to this case study but rather are intended to convey examples of how the requirement might be satisfied. Additional sections and content will be added to focus on Testing the solution and reporting. The intent of this Case Study is to help a new or existing user of E-Business Tax to understand concepts and setup that may otherwise be dispersed across numerous implementation and user manuals. It also attempts to show how you can comply with some general business requirements, thereby allowing you to focus on the less common requirements unique to your specific organization. We hope that this enables you to streamline your project to reduce the time/cost of the effort and raise the value realized by your business from E-Business Tax.
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 legal tax requirements and it is often the case that the same business requirement can be satisfied in many ways. Please consult your tax department or obtain professional tax assistance to determine the specific requirements for your organization. Assumptions: This case study will guide you through the creation of basic tax setup for Canada. It assume that you already have completed the setup/installation of the applications and that you wish to add a new Canada Legal Entity/Operating Unit under which you will transact and pay/levy /collect taxes. Note: For this Case Study, we have chosen 1-Jan-2001 as the Effective From date but you may need to choose some other date depending on your requirement. -------------------------------------------------------------------------------------------------
2. If You Are Using an Upgraded Environment....
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a. HST Setup:
If you are using an 11i upgraded environment and the upgrade was completed BEFORE you setup your system for the BC and Ontario HST adoption, you will need to take additional steps. Refer to Note 1062897.1 titled: Case Study: How to Switch from an Upgraded Tax Regime to a New Tax Regime - Canada HST example
b Tax Groups:
Tax Groups are no longer used in Release 12 - See Note 738000.1 Can I Create a Tax Group in R12 E-Business Tax? For more on the upgrade process refer to Note 810443.1 Troubleshooting and Overview of the E-Business tax R12 upgrade for Order to Cash -------------------------------------------------------------------------------------------------
3. Pre-Requisite Setup
Note that some pre-requisites are not required to be performed when using an upgraded instance.
a. Setup Geography Hierarchy Structure & Details

Geography Hierarchy: A hierarchical relationships between a country and the specific geography elements that exist within a country (ex: State, Province, Territory, City, County, Parish, Postal Code, etc) To see how to setup a geography hierarchy, refer to Note 554492.1 Responsibility: Trading Community Manager Navigation: Trading Community > Administration > Geography Hierarchy For Canada, you must minimally define a geography type of "Province" under the country "Canada".
You may additionally wish to define lower levels in your hierarchy to enforce that users select valid city names and postal code combinations however this is not required for Canadian tax calculates as taxes are based solely on the Country and Province. Some customers do choose to take this additional step to ensure that the mailing addresses are valid. Refer to the Trading Community Architecture Administration Guide, Page 11-12 for more details on the complete implementation of this feature. Once the Geography Type of "Province" is defined, add each province under the "View Details" link
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Important Note: Due to an issue with TCA, when a Geography value is created (Say AB for Alberta) the system will set the default date to the system date. You cannot update this via the application. TCA product management is tracking a fix for this in Bug 7150723 If you have a need to import historical data a data fix will be required until this UI defect is resolved. Tax calculation uses the geography structure to identify relevant jurisdictions when calculating taxes and evaluating tax rules such as place of supply rule. -------------------------------------------------------------------------------------------------
b. Define Tax & Geography Validation

To see how to setup an a geography validation, refer to Note 554492.1 Responsibility: Trading Community Manager Navigation: Trading Community > Administration > Geography Hierarchy For Canada you must enable geography and tax validation at the province level for hz_locations
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You must also enabled Tax Validation for Reference1 for the hr_locations_all
Tax Relevancy: 1) Enabling Tax Validation for province ensures that all addresses match the province defined in TCA. Since TCA is the basis for the Jurisdictions and place of supply logic in E-Business Tax, it is critical that these be consistent. If you do not have tax validation enabled, the transactions in AR will not validate the tax location and tax calculation will not occur. 2) Enabling tax validation for HR_Locations ensures that the legal entity and operating unit addresses are valid for taxes and any rules referencing bill_from, ship_from, POO or POA will work as intended. -------------------------------------------------------------------------------------------------
c. Setup a Legal Entity, Establishment, Ledger and Operating Unit

Refer to Note 1064366.1 to see step-by-step instructions for implementing a Legal Entity, Establishment, Ledger and Operating Unit as required for this case study. Responsibility: Legal Entity Manager Navigation: Legal Entities > Create Legal Entity Legal Entity: A legal entity is a clearly identified entity, which is given rights and responsibilities under commercial law, through registration with the country's appropriate legal authority. Legal entities are responsible to account for themselves to company regulators, taxation authorities, and owners according to rules specified in the relevant legislation. In Release 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
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Tax Relevancy: 1) For E-Business tax, a tax regime can be associated to a Legal Entity and then optionally one or more Operating units in that Legal Entity can share the tax setup. 2) At least one Legal Entity for Canada must be created. The Legal Entity should include the Tax Registration and represents a level where tax setup can be attached. 3) The Registration defined on the Legal Entity record is the source for the legal establishment defaults. The Establishment tax profile in turn feeds the Bill From in AR and the Bill To / Ship to in AP. 4) The checkbox on the Legal Entity controls self-assessment of taxes. For Canada, GST and HST must be self-assessed for imported goods. Be sure you update the Legal Entity to reflect this after it is created Legal Establishment: First party legal entities identify your organization to the relevant legal authorities, for example, a national or international headquarters. First party legal establishments identify each office, service center, warehouse and any other location within the organization that has a tax requirement. When you create a legal entity, the system automatically creates a legal entity establishment. You can create additional legal establishments according to your needs. For each legal establishment there are one or more tax registrations, depending upon the tax requirements of the applicable tax authority. If you have multiple legal establishments you should additionally create records as children of the Legal Entity. Be sure to set the "Self Assessment" to the proper value when creating additional legal establishments. Note 604280.1 Explains How To Add New Legal Entity Registration Code for Countries that Are Not Available in the List Tax Relevancy: 1) The Registration defined on the 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 calculation. 2) The checkbox on the Legal Establishment controls self-assessment of taxes. For Canada, GST and HST must be self-assessed for imported goods. Be sure you update the Legal Establishment to reflect this after it is created Ledger: Also known as set of books in 11i and prior releases this is the object that owns the accounting structure used for transactions. Operating Unit: Assign operating units to the primary ledger to partition subledger transaction data when multiple operating units perform accounting in the context of one or more legal entities. At least one Operating Unit must be defined for each legal entity and set of books. Operating Units are also referred to as "Organizations". The Operating Unit Location is taken from the Legal Establishment record referenced in section 3 above Tax Relevancy: Operating Unit along with Legal Entity represent two levels where tax content can be owned and tax setup performed. ------------------------------------------------------------------------------------------------
d. Associate the Operating Unit with the Legal Establishment

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) 2) 3) 4) 5) E-Business Tax Payables Receivables Order Management 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
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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 Value Reason in Case Study
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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
Error Yes Yes No Yes Yes
Required
Available to support data conversion
Available if rules wish to be created based upon tax codes Can lock down at lower levels if needed
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 the open balance for each type of associated charges. Refer to the Treasury Board of Canada and/or each provincial revenue agency to determine how to evaluate partial payments for your particular business need. Note that you can additionally control when/if a discount applies to a tax when you setup your receivable activity types. -------------------------------------------------------------------------------------------------
l. Setup Receivables AutoAccounting

Responsibility: Receivables responsibility from step 3f Navigation: Setup > Transactions > AutoAccounting To see how to setup an AutoAccounting in Receivables, refer to Note 885225.1 on implementing Tax Accounting for Receivables. For this Case Study, map the "account" segment for the "Tax" AutoAccounting so that it is derived from the 'Tax' account setup discussed later in this document. Details on how the tax account is derived during invoice entry will be discussed later in this document.
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.
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Note: If you define a tax rule to use the account combination, the account must be derived by AutoAccounting. Manually entered or overriden account combinations will be ignored during rule execution. Refer to Note 943657.1 for more details on this restriction -------------------------------------------------------------------------------------------------
m. Setup Receivables Transaction Types

Responsibility: Receivables responsibility from step 3f Navigation: Setup >Transactions > Transaction Types Transaction Types are seeded automatically when "Replicate Seed Data" is run in step 3f. Transaction types must be added only if you require additional transaction types beyond those seeded values. Tax Relevancy: 1) The "Default Tax Classification" checkbox must be checked on the transaction type if you intend to use the transaction line tax classification codes in your tax rule definitions. (Refer to Note:801535.1 for instructions on how this might be configured or reference section 5 of this document which discusses an example applicable to Exports). 2) If your AutoAccounting setup references the transaction type as the source for Tax, the Tax Account must then be defined on the transaction type in this step. -------------------------------------------------------------------------------------------------
n. Setup Transaction Sources

Responsibility: Receivables responsibility from step 3f Navigation: Setup > Transactions > Sources Transaction sources are seeded by "Replicate Seed Data". This step can be skipped if you have no changes or additions to the seeded values -------------------------------------------------------------------------------------------------
o. Initialize Operating Unit Party Tax Profile

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 to this activity. If you specify a Tax Rate Code Source of Invoice, then Receivables uses the tax accounting information defined for the invoice tax rate code(s) to automatically account for the tax. If the Receivables Activity type is Miscellaneous Cash, then you can allocate tax to the Asset or Liability tax accounts that you define for this Receivables Activity. If you set the Tax Rate code Source to "None" then taxes will not be applied on the adjustment. This is relevant for the discount example mentioned above. 2) Recoverable / Non-Recoverable: As the name suggests, this radio button determines if the adjustment should be considered when determining recoverable tax amounts. Note 1: If you wish to calculate tax on a miscellaneous receipt, the receivables activity type may not be linked to a jurisdiction specific tax rate because you cannot enter ship-to information in the Receipts window. Please keep this in mind when planning your implementation. Note 2: This step may need to be deferred until after the tax setup if you choose to set the tax rate code source to Activity and enter a code on the activity type. This is most frequently done when an activity type is created for a misc cash receipt -------------------------------------------------------------------------------------------------
q. Setup Banks, Branches and Accounts

Follow the steps in Note 415529.1 to add the necessary roles to the Legal Entity you created. To see how to setup a Bank, Branch and Account, refer to the AR Implementation guide -------------------------------------------------------------------------------------------------
r. Setup Receivables Receipt Class & Payment Method

Responsibility: Receivables responsibility from step 3f Navigation: Setup > Receipts To see how to setup a Receipt Class and Payment Method, refer to the AR Implementation guide -------------------------------------------------------------------------------------------------
s. Setup Approval Limits

Responsibility: Receivables responsibility from step 3f
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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 defined at the country level.
Why Two Regimes? As a best practice a regime should be created for each tax type. Since PST is a sales tax and GST/HST are VAT type taxes two regimes are defined. While it is possible to combine these into a single regime, the compounding example for Quebec and Prince Edward Island presented later in the case study is based upon a two-regime model. This also has been the basis for the testing of this case study thus if you do elect to combine these into one regime, you may need to invest additional time to validate your solution.
Field 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 Yes No CAD 0.01 Nearest 2
Standard Non-Inclusive Handling Standard Non-Inclusive Handling
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Allow Multiple Jurisdictions Allow tax Rounding Override Exchange Rate Type Reporting Tax Authority Default Recovery Settlement Tax Accounts Precedent Level Use Legal Registration Number Allow Cross Regime Compounding Compounding Precedence
Yes Yes
Yes Yes
Immediate
Immediate
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 Legal Entity or the tax will not be calculated. Also if you choose "Legal Entity" then it is not required that you subscribe the operating unit as the aforementioned checkbox will cause the OU to defer to the LE setup. Finally, if you subscribe to the Legal Entity then any tax setup that might exist at the OU level (Taxes, Rates, etc) would be ignored during tax calculation.
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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 1 2 Value CA GST AND HST Global Configuration Owner Create a new Tax CA GST Federal Goods and Services Tax VAT 01-Jan-2001 Yes PROVINCE COUNTRY Canada CAD 0.01 Nearest 2 Value CA GST AND HST Global Configuration Owner Create a new Tax CA HST Harmonized Sales tax VAT 01-Jan-2001 Yes PROVINCE COUNTRY Canada CAD 0.01 Nearest 2 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
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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 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 Allow Secondary Recovery Rate Determination Rules Primary Recovery Type Secondary Recovery Type Allow Tax Rate Rules Default Recovery Settlement
Recalculated No No Standard Non-Inclusive Handling Yes Yes Yes Yes No No Yes Yes Create Tax Accounts No Yes
Yes Yes Yes No STANDARD
Yes Yes Yes Yes STANDARD SREC
Yes Yes Yes No STANDARD
Yes Immediate
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 same or similar nature. Example: One tax can have separate tax statuses for standard, zero, exemption, and reduced rates. A zero rate tax status may have multiple zero rates associated with it in order to handle different reporting requirements for zero rate usage, such as Intra EU, zero-rated products, or zero-rated exports. For Canada we have documented the setup to allow for this possibility though no specific example is provided in this limited setup shown below
Field Tax Regime Code
Value CA GST AND HST
Value CA PST
Value CA PST
Value CA PST
Value CA PST
Configuration Global Global Global Global Global Global Global Global Global Global Owner Configuration Configuration Configuration Configuration Configuration Configuration Configuration Configuration Configuration Configuration Owner Owner Owner Owner Owner Owner Owner Owner Owner Owner
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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 Settlement
CA GST CA GST STANDARD CA GST Standard Yes
CA GST CA GST ZERO CA GST Zero No
CA GST CA GST EXEMPT CA GST Exempt No
CA HST CA HST STANDARD CA HST Standard Yes
CA HST CA HST ZERO CA HST Zero No
CA HST CA HST EXEMPT CA HST Exempt No
CA PST CA PST STANDARD CA PST Standard Yes
CA PST CA PST SPECIAL RATE CA PST Special Rate No
CA PST CA PST ZERO
CA PST CA PST EXEMPT
CA PST Zero CA PST Exempt No No
01-Jan-2001
01-Jan-2001
01-Jan-2001
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Immediate
Immediate
Immediate
Immediate
Immediate
Immediate
Immediate
Immediate
Immediate
Immediate
1) Set as default Tax status: Each tax status must have at least one default. Tax Rules must be written to set alternate values as required. 2) Allow Tax Exemptions: With a rule based approach to setting tax exemptions, exempt transactions will be linked to an exempt tax status and rate. Setting the "Yes" value to this configuration option will also allow a user to define a tax exemption on a transaction or directly in the party tax profile to record the exempt reason code. This is however not required nor enforced. Because the exemptions are primarily tracked by way of tax status/rates we suggest that you use Caution when reporting if you intend to use the tax exemption fields on the seeded reports. Sample Screenshot of Tax Status
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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 commonly the borders of a country. Often this is represented by a state, province, city or a county tax jurisdiction. In E-Business Tax, a tax jurisdiction can use the geography setup from your TCA geography hierarchy to identify a tax rate. Taxes such as HST and PST therefore may require rates at the jurisdiction level.
Example: Canadian PST and HST are applicable based upon the jurisdictions. Important Note Do not begin this step if you plan to import historical transactions and have not applied the data fix referenced in step 3.a You will not be able to back-date the jurisdiction start dates if this fix has not been applied and your LOV for the Geography will return no rows. Setup Jurisdictions for CA GST AND HST
Field Tax Jurisdiction Code Tax Jurisdiction Name Value CA AB Value CA BC Value CA BC Value CA MB Value CA NB Value CA NL Value CA NS Value CA NT Value CA NV Value CA ON
CA Alberta
CA British Columbia CA GST AND HST CA HST Province
CA British Columbia CA GST AND HST CA GST Province
CA Manitoba CA GST AND HST CA GST Province
CA New Brunswick CA GST AND HST CA HST Province
CA CA Nova Newfoundland Scotia and Labrador CA GST AND HST CA HST Province CA GST AND HST CA HST Province
CA Northwest Territories CA GST AND HST CA GST Province
CA Nunavut
CA Ontario
Tax Regime CA GST Code AND HST Tax Geography Type CA GST Province
CA GST AND HST CA GST Province
CA GST AND HST CA HST Province
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Parent Geography Type Parent Geography Name Geography Name
Country
Country
Country
Country
Country
Country
Country
Country
Country
Country
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
AB
BC 1
BC 1
MB 1
NB 1
NL 1
NS 1
NT 1
NV 1
ON 1
Precedence 1 Level Collecting Tax Authority Reporting Tax Authority Effective From Effective To Set as Default Tax Jurisdiction Default Effective From No
01-Jan-2001 01-Jul-2010 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 30-Jun-2010 No No Yes Yes No
01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jul-2001
No
No
No
No
01-Jan-2001 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 Credits. Rebates may also occur in other 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
Value CA PST
Configuration Global Global Global Global Global Global Global Global Global Global Owner Configuration Configuration Configuration Configuration Configuration Configuration Configuration Configuration Configuration Configuration Owner Owner Owner Owner Owner Owner Owner Owner Owner Owner Tax Tax Recovery Rate Code Recovery Type Percentage Recovery Rate CA GST CA GST STD REC RATE Standard 100 CA GST CA GST ZERO REC RATE Standard 0 CA HST CA HST STD PROV REC RATE Sec Rec Type1 61.54 CA HST CA HST BC PROV REC RATE Sec Rec Type1 58.33 CA HST CA HST CA HST CA HST NS FED REC RATE Standard 33.33 CA HST CA HST BC FED REC RATE Standard 41.67 CA HST CA HST ZERO REC RATE Standard 0 CA PST CA PST ZERO REC RATE Standard 0
CA HST CA HST ZERO PROV STD FED REC RATE REC RATE Sec Rec Type1 0 Standard 38.46
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Effective From Effective To Set as Default Effective From
01-Jan-2001
01-Jan-2001
01-Jan-2008
01-Jul-2010
01-Jan-2008
01-Jul-2010
01-Jul-2010
01-Jul-2010
01-Jan-2001
01-Jan-2001
Yes 01-Jan-2001 Yes Yes Yes Yes Yes Yes Yes Yes
Yes 01-Jan-2001 Yes
Allow Ad Hoc Yes Rate
Note: Do not use a '%' sign in the tax recovery rate code as this will return errors when attempting to set the recovery rate on a tax rate. Internal bug 9343870 was logged. Error that will occur if this is done is: "The rate period and the associated default recovery rate must overlap. You can: adjust the rate period; enter another default recovery rate that is valid for the entered rate period; or clear the default recovery rate." -------------------------------------------------------------------------------------------------
f. Define Tax Rates

Tax Rates - At least one tax rate is required for each tax status. Additional Tax Rates may be needed at the Jurisdiction Level if the tax rate applicable for the tax is unique for a particular jurisdiction. Example: - In Canada, HST is applied at a 13% rate in Most provinces that have adopted HST except for BC where the Rate is 12% and Nova Scotia where the rate is 15%. To satisfy this requirement a single rate of 13% can be defined with no jurisdiction and then a 12% rate can be defined and associated with the BC jurisdiction (15% rate assigned to Nova Scotia). This minimizes the setup required by creating an exception based setup. Note: In some cases such as Alcohol sales, taxes are applied at the quantity level. If therefore a $0.05 tax is applicable for each bottle a secondary tax, status and rate can be created to apply this tax. This is not reflected in the examples below Setup Rates for GST AND HST
Field Tax Regime Code Configuration Owner Tax Tax Status Code Tax Jurisdiction Code Tax Rate Code CA GST STANDARD RATE Percentage 5 01-JAN-2008 6 01-JUL-2006 7 01-JAN-2001 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 15 01-JAN-2001 Value CA GST AND HST Global Configuration Owner CA GST CA GST STANDARD Value Value Value CA GST AND HST Value CA GST AND HST Value CA GST AND HST Value Value Value CA GST AND HST Global Configuration Owner CA HST CA HST STANDARD CA BC CA HST STANDARD RATE Percentage 12 01-Jan-2001
Global Global Global Configuration Configuration Configuration Owner Owner Owner CA GST CA GST ZERO CA GST CA GST EXEMPT CA HST CA HST STANDARD
Rate Type Percentage Rate Effective From Effective To Tax Rate Name
31-DEC-2007 30-JUN-2006 CA GST Standard Rate CA GST STANDARD REC RATE STANDARD Immediate CA GST STANDARD REC RATE STANDARD Immediate CA GST STANDARD REC RATE STANDARD Immediate CA GST Zero Rate CA GST ZERO REC RATE STANDARD Immediate CA GST Exempt Rate CA GST ZERO REC RATE STANDARD Immediate CA HST Standard Rate
31-DEC-2007 30-JUN-2006 CA HST Standard Rate
Default Recovery Rate Code Recovery Type Default Recovery Settlement
CA HST STD CA HST STD CA HST STD CA HST BC FED REC FED REC FED REC FED REC RATE RATE RATE RATE STANDARD Immediate STANDARD Immediate STANDARD Immediate STANDARD Immediate
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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
Yes 01-Jan-2008
Yes 01-Jul-2006 31-Dec-2007
Yes 01-Jan-2001 30-Jun-2006
Yes 01-Jan-2001
Yes 01-Jan-2001
Yes 01-Jan-2008
Yes 01-Jul-2006 31-Dec-2007
Yes 01-Jan-2001 30-Jun-2006
Yes 01-Jul-2010
Standard Standard Standard Standard Standard Standard Standard Standard Standard Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Handling Handling Handling Handling Handling Handling Handling Handling Handling Yes Yes Yes Yes Yes Yes Yes Yes Yes
No No No
No No No Taxable Basis Optional
Yes No No Taxable Basis Optional
Adjustment for Ad Taxable Hoc Amounts Basis Tax Accounts: Optional Tax Recovery/Liability
Setup Rates for PST

Field Tax Regime Code Configuration Owner Tax Tax Status Code Value CA PST 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 Global Global Global Global Global Global Global Global Configuration Configuration Configuration Configuration Configuration Configuration Configuration Configuration Configuration Owner Owner 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 01-Jan-2001 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 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 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 Yes 01-Jan-2001 Yes 01-Jan-2001 CA PST ZERO REC RATE STANDARD Immediate Yes 01-Jan-2001 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 CA PST CA PST SPECIAL RATE CA ON CA PST ON SPECIAL RATE Percentage 1 01-Jan-2001 30-Jun-2010 CA PST ZERO RATE Percentage 0 01-Jan-2001 CA PST CA PST ZERO
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
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Default Effective To Allow Tax Inclusion Allow Override and Entry of Inclusive Tax Lines Allow Tax Exemptions Allow Tax Exceptions Allow Ad Hoc Rate
30-Jun-2010
30-Jun-2010
30-Jun-2010
Standard Standard Standard Standard Standard Standard Standard Standard Standard Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Non-Inclusive Handling Handling Handling Handling Handling Handling Handling Handling Handling Yes Yes Yes Yes Yes Yes Yes Yes Yes
No No No
Adjustment for Ad Taxable Hoc Amounts Basis Tax Accounts: Optional Tax Recovery/Liability
Sample Screenshots: Tax Rate
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, party fiscal classifications, tax reporting codes, and account tax details. Steps Required: 1) Setup a tax profile for the Operating Unit and Legal Entity. Make sure that you have selected both tax regimes as associated to the Operating Unit (will automatically copy to the Legal Entity) or that you set both tax regimes as associated to the legal entity and you check the "Use Subscription of the Legal Entity" checkbox on the Operating Unit tax profile. For this case study we are subscribing at the operating unit. 2) Make sure the "Set for Self Assessment / Reverse Charge checkbox is checked if you wish to self-assess in AP (required for imports) Sample Screenshot of OU Tax Profile
Tax Relevance: 1) Tax Profiles contain vast amounts of data that can influence tax calculations and reporting. Most significantly, the configuration options tab on the Legal Entity and Operating Unit identify the tax regimes that will be invoke when a transaction is created. Note: If you select the "Use Subscription of the Legal Entity" on the Operating unit tax profile, the configuration options will be ignored and instead the application will reference the legal entity. This also eliminates some features in E-Business Tax such as the ability to define tax rules that reference operating unit "owned" components such as transaction type. Use caution when selecting this value as you can not reverse this selection. 2) Self-Assessment is critical for AP if you import materials. -------------------------------------------------------------------------------------------------
h. Setup Default Tax Rules

Tax Rules are evaluated by the rule engine for each enabled tax within a tax regime. Rules use a combination of defaults plus 1..N number of additional user defined rules to determine if a tax should be applied, what the taxable basis should be for the tax application, what rate to use, what jurisdiction is relevant (Place of supply), what source to use for a tax registration, what tax status to apply, what calculation method to execute and finally what recovery rate to apply (if applicable). Setup defaults for each of the taxes defined in step 4b as shown below
Rule CA GST CA HST CA PST
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Direct Tax Rate Determination Determine Place of Supply Determine Tax Applicability Determine Tax Registration Determine Tax Status Determine Tax Rate Determine Taxable Basis Calculate Tax Amounts
Blank 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
Blank Ship to, use bill to if ship to is not found Applicable Ship From Party CA HST STANDARD CA HST STANDARD RATE STANDARD_TB STANDARD_TC
Blank Ship to, use bill to if ship to is not found 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 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
-------------------------------------------------------------------------------------------------
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i. Make Tax Available For Transactions

Enable each tax for transaction processing. To see how to enable a tax and learn more about the settings and validation required to enable a tax, refer to note the E-Business Tax User Guide Note: Not shown are several steps required to define a tax recovery rule. If you have selected to allow primary tax recovery rate determination rules then at least one such rule must exist for each tax. These steps involve setting up inventory and thus are not currently shown in this case study. They will be added as supporting content is created. To enable a tax for this case study take the following actions: 1) 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 this recover rate.
Note: Bug 9762787 has reported a problem where the message below is displayed even when a tax rate has been defined: Row 1 Error - You must first define a tax rate for this tax. This is currently unresolved however 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
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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)
-------------------------------------------------------------------------------------------------
k. Perform a Baseline Test in AP

Perform AP Setup as required for your site. See the AP Implementation Manual for required steps.
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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 1108463.1 where we list each determining factor and provide sample tax rule setup built upon this case study.
a. Adjusting the Taxable Basis for Quebec and Prince Edward Island
The taxable basis formula for most transactions is (line amount) *(tax rate). Since the PST in Quebec and on Prince Edward Island is calculated on the selling price plus GST, you will need to define a Determine Taxable Basis tax rule to identify when a different taxable basis is needed and which taxable basis tax formula to use. Note 1063491.1 documents the step-by-step setup required to comply with this requirement. Tax Setup Impact of Note on Case Study: 1) Tax Regime compounding must be enabled and precedence set (Already shown in step 4a on Tax Regime setup) 2) Tax Zone setup required (New step - no impact on prior setup) 3) Tax Formula setup required (New step - no impact on prior setup)
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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 exports in certain circumstances such as when the purchase is not a consumer and the purchaser exports the goods as soon as is reasonable in the circumstance after you deliver them. The default logic will automatically exclude items with a ship-to address outside of Canada from having GST applied. This example assumes that all exports should in fact have a tax line with a zero rate tax instead of no tax line at all. It addresses two scenarios: Scenario 1: Goods are sold with a ship-to address outside of Canada Scenario 2: Goods are delivered in Canada for immediate export Again in both of these cases the tax should apply with a Zero Rate. Note 1063534.1 'How To Apply A Zero Rate Tax To Exports' has been created to provide step-by-step instructions for setting up rules to comply with this requirement. A similar approach can be taken when creating tax rules for other Exempt or Zero Rated goods as defined by Canada Revenue Tax Setup Impact of Note on Case Study: 1) 2 Tax place of supply rules required 2) Tax rate must be added to regime to allow for LOV selection -------------------------------------------------------------------------------------------------
c. Applying Tax to Freight

In Canada, GST and HST are normally assessed on the transportation expenses. Refer to the GST/HST Info Sheet published by Canada Revenue for more details. The requirement is therefore to tax freight charges along with the item cost. This is done by following the instructions referenced in the note below. Note 764297.1 - How Tax on Freight Works in R12 Order to Cash Note: The example in the note is not specific to this case study but the same flow/approach can be used for Canada. Tax Setup Impact of Note on Case Study: 1) Tax Profile Option Settings required 2) Freight must be defined as inventory item 3) Product Fiscal Classification setup may be required 4) Tax applicability rule may be required 5) Tax exception may need to be created -------------------------------------------------------------------------------------------------
d. Self-Assessed Taxes
In Canada, taxes must be self-assessed for a number of scenarios including against purchases where the supplier is outside of Canada and not registered to assess taxes. To see how to configure your system to comply with this sample scenario, refer to Note 948414.1 How to Configure a Tax for Automatic Self-Assessment in R12 E-Business Tax and Payables 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.
Note 817698.1.
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Be sure to create a Tax Authority for Canada Revenue Agency as well as one for each PST taxing authority. A tax authority can be defined as a collecting or reporting tax authority. Tax Setup Impact of Note on Case Study: 1) Legal Authority must be created 2) Legal Authority must be linked to existing tax objects (jurisdiction, rates, etc) as needed for business requirements -------------------------------------------------------------------------------------------------
f. Charging Different Tax Accounts For Each Tax

Receivables: In many cases, companies desire to track their tax liabilities using unique tax account combinations for each Tax that is assessed on an invoice. For example, in Canada an invoice may be charged both PST and GST. To report on the liability out of GL these would need to hit separate account combinations. This is accomplished by setting up Receivables AutoAccounting and mapping E-Business Tax accounts at the proper level. To see a detailed example of how this setup is performed and how E-Business Tax and Receivables work together to derive interim tax accounts, refer to Note 885225.1 Setting up Tax Account for R12 E-Business Tax and Oracle Receivables. Payables: To see more information about how tax accounting is configured for Payables, refer to the accounting section in <Note735991.1> Tax Setup Impact of Note on Case Study: 1) Tax setup may require changes (NOTE: Changes must be made prior to performing section 4!) 2) Jurisdiction setup may require changes (NOTE: Changes must be made prior to performing section 4!) 3) Tax Accounts must be set at appropriate levels -------------------------------------------------------------------------------------------------
g. Setting up Tax recovery for ITC and Rebates

As discussed earlier in section 4e of this note, Canada allows for recovery on HST and GST and some provinces allow recovery of all or some PST payments. To satisfy this requirement you will need to configure recoverable taxes. For HST recovery both a primary recovery rate and secondary recovery rate are typically required. Configure primary recovery for the federal portion of your tax recovery and secondary recovery for the provincial recovery. If you can recover both through Input Tax Credits and Rebates, consider setting up unique recovery rates for each. You can then set accounts for each scenario to simplify your reporting and tax form preparations. To see a detailed example of how recoverable taxes are implemented, refer to Note 735991.1 -------------------------------------------------------------------------------------------------
6 Testing Your Tax Configuration

This section will be expanded greatly in the coming months with detailed test cases and more comprehensive scenarios. The intent of this section is to provide a listing of topics that should be considered when testing your setup.
a. Receivables
1. 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. Standard Invoice Entry with tax control amount
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2. 3. 4. 5. 6. 7.
Self-Assessment Credit Memo's Tax Recovery Tax Reporting Tax Exception Rates Tax Exemptions
Community Discussion
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My Communities Find a Community Journeyman 465 points Patrick McBride
January 19, 2010 7:29 AM Dedicated Thread: Case Study on Canada Tax setup - Including HST uptake by BC and Ontario
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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 ar created. 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. If we get a good response we will explore creating similar notes for EMEA and the US setup.
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References
NOTE:1062897.1 - Case Study: How to Switch From an Upgraded Tax Regime to a New Tax Regime - Canada HST example
Related Products Oracle E-Business Suite > Oracle E-Business Suite > Oracle E-Business Suite > Oracle E-Business Suite > Oracle E-Business Suite > Keywords DYNAMIC ADV FEATURES; FEATURES; DYNAMIC TAX REGIME Procurement > Procurement > Oracle Purchasing Financial Management > Credit to Cash > Oracle Receivables Financial Management > Financials Common Modules > Oracle E-Business Tax Order Management > Order Management > Oracle Order Management Financial Management > Procure to Pay > Oracle Payables
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Case Study Canada Ebtax

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Scope and Application

2. If You Are Using an Upgraded Environment....

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

Error Yes Yes No Yes Yes

Available to support data conversion

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

Navigation: Setup > Transactions > Approval Limits

t. Run Geography Name Referencing Program

Standard Non-Inclusive Handling Standard Non-Inclusive Handling

Sample Screenshot of how this would be defined:

Yes Yes Yes No STANDARD

Yes Yes Yes Yes STANDARD SREC

Yes Yes Yes No STANDARD

Sample Setup Screenshots:

c. Define Tax Statuses

Field Tax Regime Code

Value CA GST AND HST

Value CA GST AND HST

Value CA GST AND HST

Value CA GST AND HST

Value CA GST AND HST

Value CA GST AND HST

CA GST CA GST STANDARD CA GST Standard Yes

CA GST CA GST ZERO CA GST Zero No

CA GST CA GST EXEMPT CA GST Exempt No

CA HST CA HST STANDARD CA HST Standard Yes

CA HST CA HST ZERO CA HST Zero No

CA HST CA HST EXEMPT CA HST Exempt No

CA PST CA PST STANDARD CA PST Standard Yes

CA PST CA PST SPECIAL RATE CA PST Special Rate No

CA PST CA PST ZERO

CA PST CA PST EXEMPT

CA PST Zero CA PST Exempt No No

d. Define Tax Jurisdictions

CA British Columbia CA GST AND HST CA HST Province

CA British Columbia CA GST AND HST CA GST Province

CA Manitoba CA GST AND HST CA GST Province

CA New Brunswick CA GST AND HST CA HST Province

CA Northwest Territories CA GST AND HST CA GST Province

CA GST AND HST CA GST Province

CA GST AND HST CA HST Province

Parent Geography Type Parent Geography Name Geography Name

01-Jan-2001 01-Jul-2010 01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jan-2001 30-Jun-2010 No No Yes Yes No

01-Jan-2001 01-Jan-2001 01-Jan-2001 01-Jul-2001