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 Lines	Checked
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
Tax Regime Code	XXX UK REGIME (From LOV – Regime 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 Lines	Checked
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 didn’t 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%.