Setup for EBTax on Payables Invoice in R12

Setup for EBTax on Payables Invoice in

R12
EB Tax:

Purpose of EB Tax:

Use E-Business Tax to set up and maintain your transaction tax requirements in all
geographic locations where you do business. You can set up tax configurations to include
the rules, default values, and other information necessary for each separate tax
requirement. At transaction time, E-Business Tax uses your tax configuration to determine
the taxes that apply to each transaction and to calculate the tax amounts.
With E-Business Tax, you can:
Set up and maintain a tax configuration for each tax that you are subject to.
Set up and 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.
Set up and maintain tax registrations and classifications for your legal establishments and
third parties.
Set up and maintain classifications of the products that you buy and sell.
Set up and maintain classifications for your transactions.
Set up and maintain tax rules and default values to manage tax determination and tax
recovery on your transactions:
Set up default values and a minimum number of tax rules for simple tax requirements.
Set up default values and a comprehensive set of tax rules to manage complex tax
requirements.
Set up and maintain tax-related records for your important transactions.
Set up and maintain automatic accounting of all tax-related transactions.
Manage user control of updates and overrides of tax information on transactions.
Set up and maintain codes for tax reporting purposes.
Run a full set of reports for your tax authority tax requirements.
Set up and maintain access to third party tax calculation services.
You can use the E-Business Tax Home page to manage access to all parts of the E-
Business Tax system for setup and maintenance. The tasks involved in setting up a tax
requirement in E-Business Tax fall into three
general categories:
1. Setting up transaction taxes.
2. Completing all of the setups and settings related to the processing of taxes on
transactions.
3. Setting up tax rules and defaults to manage tax processing.

Steps for EB Tax:

Step 1: Create Tax Regime

Step 2: Create Tax

Step 3: Create Tax Status

Step 4: Create Jurisdiction

Step 5: Create Rate

Step 6: Enter Tax Accounts

Step 7: Create Tax Rules (Populate values for all defaults)

Step 8: Make Tax Available for Transaction

Step 9: Test the TaxCheck how the Party/OU has been setup

Tax Manager/Administrator > Parties > Party Tax Profiles

Query for the following:

Party Type: Operating Unit Owning Tax Content

Party Name: Vision Operations (Name of the OU you wish to setup for tax)
Click Go

Click View Tax Profile

Confirm if 'Use Subscription of the Legal Entity' is checked.

Step 1: Create Tax Regime

Navigation : Tax Manager/Administrator > Tax Configuration > Tax Regimes

Click Create to enter a new Tax Regime.

We are going to create a United Kingdom regime.

Enter the following:
Field Value
Tax Regime Code XXX UK REGIME
Name XXX UK REGIME
Regime Level Country
Country Name United Kingdom
Effective From 10-Jan-2000
Parent Regime Code NULL
Used to Group Regimes Unchecked

Click on Show Controls and Defaults.

Enter settings for Controls and Defaults as follows:
Field Value
Controls:
Allow Tax Recovery Unchecked
Allow Override and Entry of Inclusive Tax
Checked
Lines
Allow Tax Exemptions Checked
Allow Tax Exceptions Checked
Defaults:
Tax Currency GBP
Minimum Accountable Unit 0.01
Rounding Rule Nearest
Tax Precision 2
Allow Multiple Jurisdictions Unchecked
Click Continue

Enter the following information:

Field Value
Party Name Operating Unit
Party Type Operating Unit Owning Tax Content *
Configuration for Taxes and Rules Common Configuration
Configuration for Product Exceptions Common Configuration
Effective From 10-Jan-2000
* If Use Subscription of the Legal Entity was checked in the prereq step then this would have
been entered against the First Party Legal Entity and not the OU

Click on Finish

Ensure you see confirmation message:

Step 2: Create Tax

Navigation: Tax Manager/Administrator > Tax Configuration > Taxes

Click on Create

Enter the following information:

Field Value
XXX UK REGIME (From LOV Regime
Tax Regime Code
defined in Step 1)
Configuration Owner Global Configuration Owner
Tax Source Create a New Tax
Tax XXX UK TAX
Tax Name XXX UK TAX
Tax Type VAT
Geography Type Country
Parent Geography Type Country
Parent Geography Name United Kingdom
Set as Offset Tax Unchecked
Set Tax for Reporting Purposes Unchecked
Click on Show Controls and Defaults

Enter the following information:

Field Value
Controls:
Allow Tax Inclusion Unchecked
Allow Override and Entry of Inclusive Tax
Checked
Lines
Allow Tax Rounding Override Checked
Allow Override for Calculated Tax Lines Checked
Use Legal Registration Number Unchecked
Allow Multiple Jurisdictions
Allow Mass Creation of Jurisdictions Checked
Defaults: Checked
Allow Tax Rate Rules Checked
Click Apply and ensure the confirmation message appears.

Step 3: Create Tax Status

Tax Manager/Administrator > Tax Configuration > Tax Statuses

Click Create
Enter the following information:

Field Value
Tax Regime XXX UK REGIME (From LOV in Step 1)
Tax XXX UK TAX (From LOV in Step 2)
Tax Status Code XXX UK STATUS
Name XXX UK STATUS
Effective From 10-Jan-2000 (Defaults)
Set as Default Tax Status Checked
Default Status Effective From 10-Jan-2000 *
* Does not default and is not required so remember to enter this.
Click Apply

View confirmation message:

Step 4: Create Jurisdiction
Tax Manager/Administrator > Tax Configuration > Tax Jurisdiction
Click Create (see above screenshot)
Enter the following information:

Field Value
Tax Jurisdiction Code XXX UK JURISDICTION
Tax Jurisdiction Name XXX UK JURISDICTION
Tax Regime Code XXX UK REGIME (From LOV Step 1)
Tax XXX UK TAX (From LOV Step 2)
Geography Type COUNTRY
Effective From 10-JAN-2000
Geography Name United Kingdom
Default Tax Jurisdiction Settings:
Set as default Tax Jurisdiction Checked
Default Effective From 10-Jan-2000

Click Apply

Ensure confirmation message is received.

Step 5: Create Rate
Tax Manager/Administrator > Tax Configuration > Tax Rates
Click Create (screenshot above)

Enter the following information:

Field Value
Tax Regime Code XXX UK REGIME (From LOV Step 1)
Configuration Owner Global Configuration Owner
Tax XXX UK TAX (From LOV Step 2)
Tax Status Code XXX UK STATUS (From LOV Step 3)
Tax Jurisdiction Code XXX UK JURISDICTION (From LOV Step 4)
Tax Rate Code XXX UK RATE
Rate Type Percentage
Rate Periods:
Percentage Rate 20
Effective From 01-Jan-2000
Click on Rate Details button and scroll down

Enter the following:

Field Value
Set as Default Rate Checked
Default Effective Date 01-Jan-2000

Click Apply.

Click Apply again.

Ensure confirmation message is received
Step 6: Enter Tax Accounts

Tax Manager/Administrator > Tax Configuration > Taxes

Query XXX UK Tax

Click Go

Click Tax Accounts

Search for Vision Operations OU and click create

Enter the Operating Unit and populate Tax Expense and Tax
Recoverable/Liability accounts.

Click Apply.
Click Apply again
Click Apply a third time

Step 7: Create Tax Rules (Populate values for all defaults)

Tax Manager/Administrator > Tax Configuration > Tax Rules

Enter the following:

Field Value
Configuration Owner Global Configuration Owner
Tax Regime Code XXX UK REGIME
Tax XXX UK TAX

Click Go to search for existing default rule

Click the pencil icon in the Set Default column to change any of the defaults
defined

Update the defaults as follows:

Field Value
Determine Place of Supply Ship to, use bill to if ship to is not found
Determine Tax Applicability Applicable
Determine Tax Registration STANDARD_TB
Calculate Tax Amounts STANDARD_TC
Step 8: Make Tax Available for Transaction
Tax Manager/Administrator > Tax Configuration > Taxes
Query Tax

Click on Update Pencil Icon

Check the box 'Make Tax Available for Transactions'

Click Apply

This warning is ok since we know we didnt enter an exchange rate type.

Click Yes and receive confirmation of changes saved

Step 9: Test the Tax

Payables > Invoices : Entry > Invoices

Enter Invoice for Supplier with a UK Ship-To address

Enter Line information
Ensure the SHIP TO location at the line level contains a UK location (As that is how we determine
place of supply)

Click distributions
Enter Invoice distribution

Save
Go back to Invoices and click Calculate Tax

Tax line is created click on Tax Details

You can see that the SAM UK REGIME has been applied and tax calculated at 20%.