E-Business Tax(EB-Tax) Setup

 

E-Business Tax provides a single point solution for managing your transaction-based tax requirements. E-Business Tax uniformly delivers tax services to all E-Business Suite business flows through one application interface. As a global system architecture, E-Business Tax is configurable and scalable for adding and maintaining country-specific tax content.

• Tax Authority=>A goverment entity that regulates tax law,administers, and/or audits one or more taxes
• Tax Regime=>The set of Tax rules that determine the treatment of one or more taxes administered by tax authority.That is the set of laws and regulations that determines the treatment of one or more taxes.
• Tax=>A classification of a charge imposed by a government through a fiscal or tax authority.
• Tax status=>The taxable nature of a product in the context of a transaction for a tax
• Tax rates=>The rates specified for a tax status for a given time period. The tax rate is expressed as a percentage, a value per unit quantity, or a fixed sum per transaction.
• Tax Jurisdiction=>A geographical area where a tax is levied by a special tax authority

Tax determination steps flow:

• Determine Place of Supply – Determines the location where a transaction is considered to have taken place for a specific tax.
• Determine Tax Applicability – Determines the taxes that apply to a given transaction.
• Determine Tax Registration – Determines the tax registration status for the applicable taxes of the parties involved in the transaction.
• Determine Tax Status – Determines the tax status of each applicable tax to use on the transaction.
• Determine Tax Rate – Determines the tax rate for each applicable tax status to use on the transaction.

Pre-Requisites

1. Navigate to Tax Manager->Parties->Party Tax Profiles and 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 on Go button and then click View Tax Profile.

2. Confirm if ‘Use Subscription of the Legal Entity’ is checked.

If this is checked, then the OU is set to use the subscription from Legal Entity. The regime is then subscribed (in a later step) to the First Party Legal Entity rather than the Operating Unit Owning Tax Content.
This is a one time setup and the value cannot be toggled. So enable this only after you determine you want to use this setup.
In our case its Checked and therefore we need to set our Tax Regime up against First Party Legal Entity and NOT against the Operating Unit

Steps

Step 1: Create Tax Regime

1. Navigate to Tax Manager->Tax Configuration->Tax Regimes and click on Create button
2. Enter Regime Code,Name and Country Name.Then Click on “Show Controls and Defaults”.
3. Enable “Allow Override and Entry of Inclusive Tax Lines”,”Allow Tax Exemptions” & “Allow Tax Exceptions”.Also enter the other default values and click Continue Button.

4. Enter your operating unit in Party Name.If it prompts to select Party Type, select “First Party Legal Entity” in our case.
If ‘Use Subscription of the Legal Entity’ was unchecked then Party Type would have been “Operating Unit Owning Tax Content”
Also select ‘Configuration for Taxes and Rules’ as “Common Configuration” & Effective date.Then click Finish button.

Step 2: Create Tax
1. Navigate to Tax Manager->Tax Configuration->Taxes and click on Create button.
Enter the details as shown in below screenshot and then click on Show Controls and Defaults

2. Enter the following information under Show Controls and Defaults section :


3. Click Apply button
Step 3: Create Tax Status
1. Navigate to Tax Manager->Tax Configuration->Tax Statuses and click on Create button.
2. Enter the details as in below screenshot and click on apply button

Note: Enter Tax Regime created in step 1 & Tax created in step2
Step 4: Create Jurisdiction
1. Navigate to Tax Manager->Tax Configuration->Tax Jurisdictions and click on Create button.
2. Enter details as in screenshot and click on Apply button.

Step 5: Create Rate
1. Navigate to Tax Manager->Tax Configuration->Tax Rates and click on Create button.
2. Enter the details as in below screenshot.

Then click on Rate Details button and scroll down to other details section.Enable “Set as Default Rate” and set the Effective From date.

3. Click apply so it comes to Create Tax Rate page and then click Apply button again.
Step 6: Enter Tax Accounts
1. Navigate to Tax Manager->Tax Configuration->Taxes, query Country & the tax we had created before and click on Go button.

2. Click on Update button and then click on “Tax Accounts” button.

3. Search for our OU’s Ledger and click Create button.

4. Enter the Operating Unit and Tax Expense & Tax Recoverable/Liability account

5. Click Apply button so it will come to Tax Accounts page and click Apply button again.Again once more click Apply button.
Step 7: Create Tax Rules
1. Navigate to Tax Manager->Tax Configuration->Tax Rules and query Configuration Owner,Tax Regime Code & Tax and click Go button.

2.Click the pencil icon in the Set Default column to change any of the defaults defined.Update the defaults as follows:


Step 8: Make Tax Available for Transaction
1. Navigate to Tax Manager->Tax Configuration->Taxes,query Country name,Tax Regime Code & Tax and click Go button.Then Click on Update icon.

2. Enable the Check-box ‘Make Tax Available for Transactions’ and click Apply button.

Note:It might throw warning “This tax does not have an exchange rate type. Are you sure you want to enable this tax?”,click Yes button for this since we know we didn’t enter an exchange rate type.

Testing

1. Create an invoice with Ship-To location at line level containing an United States location.Save the invoice after entering the distribution details and click on Calculate Tax Button.Now you can see the Tax line created at Line Level.

2. Click on Tax Details button to see details.