The eBS R12 Tax Engine and The Australian GST: Jeannie Dobney

The eBS R12 Tax Engine
and the Australian GST

Jeannie Dobney
August 2010
Updated slides can be found at www.jdobney.com

 Introduction to R12 eBS
Tax Application
2
 Implementation
example for Aust. GST
 Tangent: Use of new
Legal Entity architecture
 Upgrade experiences 1
 This paper has been enabled by:
◦ DEECD’s generously
sharing their learning
with the user community
◦ Solution Beacon’s R12 Vision
instance and
“Imelda” for her set-up
◦ Solution Beacon consultants
for sharing their knowledge
◦ Kiran Kunderu from Oracle Support
 New product in Release 12
◦ Supports international tax obligations for global
implementations
 Single control point for transaction
based taxes
◦ No need to set up tax separately in AP, AR & GL
 Components include:
◦ SetUp Repository
◦ Tax Engine (Services & Service Request Mgr)
◦ Tax Record Repository & Tax Reporting Ledger
◦ Tax Simulator (for testing)
 Schema ZX
 a) Non-Tax Configuration
◦ 1. First Party: Legal Entity
◦ 2. Reporting and Collecting Tax Authorities
 b) Tax Configuration
◦ 1. Tax Authorities Party Tax Profiles
◦ 2. Tax Regimes
◦ 3. First Party Legal Entity Party Tax Profile
◦ 4. Tax
◦ 5. Tax Status
◦ 6. Tax Jurisdictions
◦ 7. Tax Rate
◦ 8. Tax Rules
 There are several “parties” involved in
a transaction to which GST applies:
◦ The “First Party”:
the organisation remitting the tax
◦ The Legal / Tax Authority:
the organisation to which the tax is
reported e.g. ATO
◦ Third Parties
e.g. suppliers and customers
(not applicable for Aust GST)
 The 11i Legal Entity organisation classification
was essentially a placeholder for Financials
 Now has its own Schema (XLE)
 Set up via the Legal Entity Manager
Responsibility or via GL using the Accounting
SetUp Manager (the only way to assign
Balancing Segment values to Legal Entities)
 Bank Accounts are now owned by Legal
Entities and may span Operating Units.
 LE set up is also used by Intercompany
 Legal Entity
◦ has rights and responsibilities under commercial law, thru
registration with the country's appropriate legal authority.
 Establishment
◦ 100% owned and controlled sub-units e.g. branches,
divisions. Some countries require registration with local
regulatory bodies (e.g. US SIC code).
 Jurisdictions / Legal Authorities
◦ LE’s must be registered against a jurisdiction that is
governed by a legal authority. e.g. the tax jurisdiction for
Australian GST is the country of Australia
and the Authority is the ATO
 11i Organisations classified as GRE /
LE’s will be migrated as Legal Entities
and Main Establishments
 Operating Units and Inventory
Organisations associated with the GRE /
LE will be migrated as Establishments
 Legal Entities will also be migrated as
parties in the Trading Community
Architecture (TCA)
 Legal Entity Reporting now allows you to
filter transaction data based on the legal
entity stamped on them (for example, AP
Invoices, AR Transactions, etc) or based on
the ledger/balancing segment value that is
associated with a legal entity.
Image is from Chapter 2 of Oracle Financials Concepts Guide
Public
Legal Authorities Company
Countries, States, Local, (ultimate parent)
Agencies, Taxation,
Registrars, Regulators... Subsidiary Subsidiary
Public
Company Company
Company
Regulates Complies (regional parent) (business parent)
Legal Entities Subsidiary Subsidiary Subsidiary

Registered Companies, Company Company Company
Funds, Partnerships…
Inc. Ltd. SA. GmBH. Etc. Subsidiary Subsidiary
“exist in the outside world” Company Company
Managed & analyzed by
• Parent companies (LEs) “own or
Management Orgs control” subsidiaries (LEs)
Divisions, LOBS, Plants, • LEs create commercial transactions
Cost Centers, Whatever =
“Decision Making Tags”
Next 4 slides from a presentation by Oracle’s Mary Burns

Why We Care What we’ve done
• LEs pay the taxes

- need tax registrations
• Addresses, Officers, etc.
• Trade between LEs
• Enabled First Party stamp
needs intercompany
• Added Establishments:
• LEs own the money
map Registrations to
and bank accounts
Authorities
• LEs file the accounts,
• GRE/LE not touched
take care of accounting
• Authorities as TCA parties
• LEs comply with
• LE Configurator
whatever needs
compliance: “legal” in LE
Transaction Actual Registered
Taxes - Companies, etc.
Complies &
Files, Pays Business
Maintains Group
its Subledger
Registrations Legal
Files Entity Documents GRE/LE
with Authorities in many OUs
Default Legal Et Cetera, 11i
Exists
Context (DLC)
Locally Accounts Operating
for itself Units
Establishments in a Ledger
or BSVs
Legal Entity:
Files
Vehicle for compliance
Registrations Ledger
with Authorities
Let’s put LEs to work
• Isolate legal compliance from management needs
• Track your registered companies
• Make your compliance flow more easily
Accounting Setup Manager
Assign books, bookkeeping rules and currency
management to your registered companies
eBusiness Tax
Have your registered companies calculate, file, and pay the
transaction taxes they owe
Intercompany
Do business between and across your registered
companies with full legal documentation
Bank Model
Have your registered companies use their money to pay
their bills, et cetera
This and the last 4 slides are from Oracle’s Mary Burns’ presentation:
“Overview of the New Financial Architecture in Oracle E-Business Suite Release 12”
There is no longer a
direct relationship
between LE and OU.
The Relationship is
derived from the OU
assigned and the LE
mapped to the Ledger
Image from http://davidhaimes.wordpress.com/2008/01/28/

defining-intracompany-balancing-rules/
Ledger
Legal Entities BSV’s assigned

 Reading the fine print:
◦ David Haimes confirms that non-US architecture
should be 1:1:1 (i.e. Ledger: Op Unit: Legal
Entity)
 Refer:
http://www.orafaq.com/forum/t/70130/2/
on 15 January 2008, and
 http://davidhaimes.wordpress.com/2007/11/2
1/how-do-i-define-my-legal-entities/
◦ Oracle Support confirmed that eBus Tax was
designed based on the assumption of this 1:1:1
architecture
Concept Meaning Value Used
Tax Authority Gov’t Entity that regulates tax ATO
Tax Regime Country of Taxation Australia / country
Tax Tax imposed GST
Tax Jurisdiction Area where tax is levied Australia / country
Tax Status Applicability of tax Standard
Tax Rates 10% and 0%
Recovery rates Full or partial reclaim of taxes Full

paid on the purchases
 4 steps performed by the tax engine
◦ Applicability
 Determine tax regime and candidate taxes
 Determine place of supply and tax registrations
 Determine applicable tax and jurisdiction
◦ Status
 Determine tax status for each applicable tax
◦ Tax rate
 Determine tax rate
 Evaluate exemptions and exceptions & thresholds
◦ Tax calculation
 Calculate tax
 Evaluate thresholds
 Perform rounding
 Use a Default, or
 Let the system guide you through
creating one (Guided Rule Entry) or
 Just create the rule (Expert Rule entry)
 Determining Factor
◦ Class: Transaction Input Factor
◦ Name: Tax Classification Code
 Condition
◦ Operator: Equal To
◦ Value: Will be the same as your tax names e.g. GST
10%
 Tax Rules
◦ Combine the Determining Factors with the
Conditions
◦ (see next slide for screen image)
11i  12
AP / AR Tax Types  Tax Regime Code
Tax Code  Tax Code & Rate Code
All Tax Codes  Tax Status “Standard”
Tax Rate Details  Tax Rate record
% rate, dates etc
Location based rates  TCA geographies,
Tax Jurisdictions
Tax Calc details  Tax Classification Codes
 Every 11i tax rate created it’s own
◦ R12 tax
◦ R12 tax status
◦ R12 tax Classification code
 The Upgrade process applies STCC as
the Regime Determination Set (see
next slide)
 It worked…
 Oracle’s Recommendation:
◦ Replace the upgraded configuration with a fresh
R12 implementation
 But consider:
◦ On going reporting.
Can you obtain the reporting you need?
Especially if you upgrade mid-month.
◦ Defaults from existing suppliers, customers etc
 The Tax Reporting Ledger consists of
tax information recorded in each of the
related Applications (i.e. AP, AR, GL).
 The tax extract simply copies the original
accounting data from each application and
stores it in an interface table without
performing any calculations or derivations
on it.
 The Tax Reporting Guide describes each of
the many columns (100’s) in the single
reporting view ZX_REP_EXTRACT_V
 Tax Reporting is not mature or robust…
 The Financial Tax Register
is the key report, it is an RXi report, it
must be run from the Forms interface
and offered limited flexibility.
 Based on the view ZX_REP_EXTRACT_V
 Other standard reports include:
◦ Tax Register
◦ Tax Reconciliation by Taxable Account
◦ Tax Reconciliation
 Business Requirements
◦ Produce BAS input (summary data)
◦ A mechanism for reconciling the summary data
against transaction detail and account details
 Our Solution Proposal:
◦ Produce 2 custom reports based on the view used
by this report i.e. ZX_REP_EXTRACT_V – one
summary level grouped by tax code and one with
transaction detail for each tax code
◦ Use the Account Analysis (with sub ledger details)
report as it might provide a reconciliation solution
for the tax account.
MOS # 1117544.1
 If you have questions and
comments about
the Australian GST, contact
Michael D’Ascenzo (ATO)
 Other questions and comments:

[email protected]
 Updated slides can be found at
jdobney.com

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The eBS R12 Tax Engine

and the Australian GST

Updated slides can be found at www.jdobney.com

Legal Entities Subsidiary Subsidiary Subsidiary

Next 4 slides from a presentation by Oracle’s Mary Burns

• LEs pay the taxes

Image from http://davidhaimes.wordpress.com/2008/01/28/

Legal Entities BSV’s assigned

Tax Regime Country of Taxation Australia / country

Tax Tax imposed GST

Tax Jurisdiction Area where tax is levied Australia / country

Tax Status Applicability of tax Standard

Tax Rates 10% and 0%

Recovery rates Full or partial reclaim of taxes Full

 Other questions and comments:

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