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Case Study: How to Switch From an Upgraded Tax Regime to a New Tax Regime - Canada HST example (Doc ID 1062897.1)
Modified: 15-Sep-2012

Type: WHITE PAPER

In this Document
Abstract
History
Details
Why Switch?
Options
Evaluating the Impact
Step 1 - Update the tax profile
Step 2 - Set up the new Regime to Rate Flow
Step 3 - Set up New Tax Rules
Step 4 - Update the Configuration Tax Options
Step 5 - Update Parties (Suppliers/Customers)
Step 6 - Test
References

APPLIES TO:
Oracle E-Business Tax - Version 12.0 and later
Information in this document applies to any platform.

ABSTRACT
The objective of this note is to present, in case study format, an example of how to migrate from an upgraded tax regime to a freshly configured tax regime in E-Business Tax.
For this case study we have chosen to focus on a triggering event that we expect will impact many customers, the Canadian tax law changes related to HST uptake in British Columbia and Ontario
provinces.
This note will guide you through the steps you might follow to make this transition. The note leverages a second case study, Note 577996.1 titled Case Study: Setup R12 E-Business Tax for Canada:
Includes 2010 HST Changes.

HISTORY
Author: Patrick McBride
Create Date 12-Feb-2010
Review Date 14-Nov-2011

DETAILS
Why Switch?
As discussed in Note 810443.1 'Troubleshooting and Overview of the E*Business Tax R12 Upgrade for Order to Cash', significant limits exist on what can and cannot be modified on an upgraded tax
regime.
Some of those limits include:
Restrictions on creating new tax rules
Restrictions on creating new tax jurisdictions
Restrictions on creating new taxes
These limitations often make it difficult to use an upgraded a tax regime for extended periods of time. Tax law changes or expansions into new regions covered by different tax laws often force
customers to fully implement E-Business Tax by creating a new taxing regime and disabling the old regime.
Fortunately for customers who find themselves in this situation or who elect to make the switch and implement a new regime at the point of migration, several benefits exist to configuration a new
regime in E-business tax. At the top of that list is a significant increase in flexibility with respect to the creation of tax rules. In release 12, tax rules can be configured such that a clerical user rarely
has to consider what tax is applicable when entering an invoice. Release 12 also provides a framework where a single tax regime can be created and cover the whole Credit to Cash and Procure to Pay
solution. Upgraded regimes typically result in two taxing regimes being created as a result of the separate tax solutions that existed in 11i.

Options
There are two options to consider when switching from the upgraded tax regime and calculation method.
Option 1 is to modify the upgraded regime. This can be done by changing the configuration tax options on that regime from STCC to Determing Tax Regime. This setting change disables the upgrade
calculation rules and allows you to implement new taxes, rates, rules. Making this change will also disable tax calculations based upon your 11i rules and logic thus you will need to make significant
changes to your setup and add in your tax rules.
Option 2 is the recommended option and that is to end-date your upgraded regime and replace it with a freshly configured regime.
This case study focuses on this second option. Again as discussed in Note 810443.1 elements such as exemptions, tax registrations and other data on your migrated regime will not be transitioned to
the new regime. You should factor this into your decision if you have a large number of impacted setup.

Evaluating the Impact

To get started we must first evaluate the impact of this change:
Logical Impact
BC is charging a non-standard HST rate of 12% while all other provinces charge 13%.
PST and GST must no longer be applied as of June 30th to effected provinces
HST should begin to be applied as of July 1st
(Lot's more - refer to Revenue Canada and Provincial taxing authorities for details on specific legal requirements)
Setup Impact
New Regime to Rate flows must be defined
Jurisdictions must be defined
Configuration Tax Options must be defined

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Tax Rules must be defined

Customer/Vendor (Party) Tax Profiles may require updating

Step 1 - Update the tax profile

Update the tax profile for your Canada Operating Unit to set an end-date for the upgraded regime. In Tax Manager navigate Parties > party tax profiles > Operating unit owning tax content. Select
the Operating unit then click update. Choose the configuration tab and set an effective to date on the upgraded regime.

Note: Let's assume you set June 1st as the start date for this new regime (tax law changes July 1st). Use this as the start date for all of your records instead of 01-Jan-2001 as noted in the case
study. We recommend that you choose a start date prior to the beginning of the new tax regulations since some transactions may be processed from prior to the cutover with the old rates but
entered on or after the cutover date. This allows for the flexibility in using both the old GST/PST model and new HST model for these records after July 1 as the setup will exist. It does require that
you implement both the old/new tax logic in your tax regime but accommodates the scenario described above.
As mentioned in Bug 12954839 the new regime cannot be backdated only future dated.

Note: Be careful with setting the 'Use Subscription of LE' flag on your operating unit tax profile as this might cause issues:
Errors such as 'FRM-40350 Query caused no records to be retrieved' will occur while attempting to create/query an invoice based on old upgraded regime. Enhancement request 8619810 was
created to remove this dependency.

Step 2 - Set up the new Regime to Rate Flow

Refer to Note 577996.1 - Section 4 on Tax Setup for instructions
For step 4.6 on the Tax Profile setup, this step can typically be skipped as a tax profile would normally already exist for the upgraded regime.

Step 3 - Set up New Tax Rules

Refer to Note 577996.1 - Section 5 Tax Rules for examples and guidance

Step 4 - Update the Configuration Tax Options

Configuration Tax Options control how the system calculates tax, either through the upgraded tax logic or using the E-business tax "regime determination method".
To make this switch:
Tax Managers (Responsibility)
Navigation: Defaults and Controls > Configuration Owner Tax Options
In the Configuration Owner box, pick the configuration owner level (LE or OU) where you have the regime subscribed (see step 1 above). For this case study it is Operating Unit
Press GO
For each row returned, select "Update" and then enter an effective to date (The same one you entered in step 1)
Note that the Regime Determination Set = "STCC"
Once all configuration options have been updated with an effective to date, click Create and create new configuration owner tax option values for each combination. Take care to select the
appropriate checkbox values as per your business requirements.
For Regime Determination Set, select "Determine Applicable Regimes"

DO NOT BACKDATE the effective end- date of the configuration tax options for the upgraded regime or the start date of the new regime.

Step 5 - Update Parties (Suppliers/Customers)

Tax profiles may need to be modified for your supplies and/or customers. This is most often required if the following criteria are true:
1) You record tax registration information for your parties
2) You use the tax exemption feature in E-Business tax. Most customers in Canada simply use the Exempt tax rate and forgo the use of the Tax exemptions. This is more often used in the US where a
tax exempt reason code and tax exemption certificate must be recorded along with an override tax rate.
3) Your tax rules were created to use party fiscal classifications or tax classification codes and you need to set default values on your party records. For example, in section 5.2 of note 577996.1 we
document a method to flag a record as being delivered to a Canada address for immediate export (say to a port). In this case the tax classification code can be set to "Export" to trigger alternate tax
handling. R12 allows you to set a default so that the ship-to site defaults this value. This might be helpful if you have a customer that will always be charged the zero rate when shipping to that
address. You can optionally set this tax classification code on the party site's party tax profile and then define application tax options in E-Business Tax to default this onto invoice lines while entering
an invoice.

Step 6 - Test
With these changes in place the upgraded tax regime will be used through the "Effective To" date at which point the new tax regime and tax logic will be used. The configuration tax option change
will also force the application to start using the newly implemented tax logic for calculations instead of the migrated tax logic.

REFERENCES
NOTE:577996.1 - Case Study: Setup R12 E-Business Tax (EBTax) for Canada: Includes 2010 HST Changes
NOTE:810443.1 - Overview of the R12 E-Business Tax (EBTax) Upgrade for Order to Cash
BUG:8619810 - ERRORS WHEN VIEWING TAX DETAILS OF TRANSACTIONS WITH MIGRATED TAXES

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