EBTax and Its Integration - Regime to Rate Flow

A Self Service user Interface for defining and maintaining country specific tax rule and content tax as central repository for Tax definition and Maintenance.

Oracle EBTax is a module that provides a solution for managing transaction tax requirements, It provides a single point solution for Tax. It would deliver tax services to other modules. It comes with one application interface.  It is configurable and salable. It can handle simple and complex country specific tax legislation.

A Single System of taxation is called Tax Regime.

A Tax Regime is implemented by one or more distinct charges each such specific charge is called a Tax. A Tax Regime may include one tax or several different taxes.

The incidence of any Tax as a specific geographical area is called Tax Jurisdiction.

Regime to Rate Flow:

- Tax Regime

- Tax

- Tax Status

- Tax Jurisdiction

- Tax Rate

- Party Tax Profile.

11i Tax Vs R12.X Tax

Oracle e-Business Tax Architecture:

eBTax Solution:

Tax Determination Steps:

EBTax Setups:

• Create Tax Regime
• Register Vertex as the Service Provider
• Linking Vertex  to eBTax -  Tax, Tax Status, Tax Jurisdiction, Tax Rates, Tax Rules.

In Release 12, taxes are calculated for each line on an AR transaction.   EBTax consolidates the various attributes and uses them to determine how taxes should be derived. The following shows how this logic is performed:

1. Identifies the Operating Unit on the transaction and find Tax Regimes that are subscribed either directly or indirectly (through the Legal Entity or the operating unit owning tax content)
2. Determines if the Regime has an active subscription to Vertex in place
3. Identifies the relevant addresses(ship to, ship from, bill to, bill from, etc)
4. Converts addresses into locations or zones (zones are for zip code ranges)
5. Identifies the Jurisdiction for the location/zone
6. Identifies any relevant exemptions defined in EBTax (optionally can be defined in vertex instead)
7. Identifies the Geocode linked to the location/jurisdiction
8. Calls Vertex and passes all relevant data including (address geocodes, customer id, product code, transaction date, line amount, etc)
9. Vertex calculates the tax, considering exemptions, exceptions, location, etc
10. EBTax accepts the tax amount as a return and associates that to the generic STATE, COUNTY & CITY tax codes with null jurisdiction.  (used to derive tax accounts to be charged and support reporting)

Regime to Rate Flow Canada GST

Upgrade Impact:

Upgrade create a basic e-business tax setup, why  is  that a switch  over to a new regime is needed.

Post upgrade the upgraded regime Standard Tax Classification Code (STCC) Regime can work as 11i,  How ever there are quite a few limitations to this STCC regime.
 -  Cannot create a new Tax Regime.
 -  Cannot create new tax jurisdiction
 -  Cannot create new Taxes.
 -  Cannot create/Modify new Tax formulas.
The above limitations call for a switch over to a new regime.

Solution: 

• Setup a new Regime to rate flow.
• End date the old tax profile
• Update the tax profile with new regime.

Setups New Regime to Rate Flow:

- Define New Regime

- Define New Tax

- Define New Tax Status

- Define Tax Jurisdiction

- Define Tax recovery rates

- Define New Tax Rates.

Tax Profile is the link between an entity and the tax regime.

Make sure that you have the "Default Tax Classification" check box checked on the transaction type:

Navigation: Receivables Manager > Setup > Transactions > Transaction Types

This step is mandatory for vertex to be called during tax calculation but it should be noted that no tax classifications need be assigned to transaction lines.   This check box acts as a "taxable" flag for the transaction type.  To setup your system to not use tax classification codes in release 12, check the check box on the transaction type and then do the following:

Navigation: Tax Managers > Defaults and Controls > Enter OU and pick "Receivables" as the application > Go > Update

Remove all values from the defaulting order list and apply

This will result in no default being used on the transaction line but taxes will still calculate.

Reference : Oracle Support Note# 761438.1  

Overview of Oracle Advanced Global Intercompany System (AGIS)

AGIS is a new feature introduced in R12 to facilitate transactions between two Legal entities, these transaction occur between two legal entities are called as the Inter company transactions.

Inter company transactions are transactions that occur between two or more related internal legal entities which belong to a single ledger or between unrelated legal entities that belong to different Ledgers.

Advanced Global Inter company System (AGIS) enables you to create, settle and reconcile inter company transactions. AGIS is a vast improvement of the Global Intercompany System functionality in GL.
- Interaction with sub ledgers facilitating invoicing using Receivables and Payables
-A brand new ingenious and robust security model
- Facilitates transaction processing between different Legal Entities under one or more Ledgers.
- Completely operated from SSWA Pages(Web Pages) with out any forms

Inter company Accounting in 11i:
Inter company transaction: An intra-set of book transactions which happens with in the set of books.
GIS Transaction: An inter-set of book transaction that takes place between the set of books. GIS transactions are restricted in General ledger and sub ledger level transaction are never allowed.

Inter company Accounting in Rel 12.
Transaction happens within a single legal entity or within a group of balancing segment values mapped to a ledger

Setup are covered in Four parts:

1. Environment setups
2. General Ledger Setups
3. Receivables(AR) and Payables (AP) setups
4. Advanced Global Intercompany (AGIS) setups.

Transaction Processing in AGIS is as follows:

• Initiation of Transactions by an Intercompany Organization.
• Completion of Accounting from the initiator side.
• Completion of the Accounting by the Recipient Side.
• Approval of the transaction by the Recipient.

If the invoicing is enabled/required in the transaction type setup, then

- Processing of the invoice from Receivables - for the initiator subsidiary side.

- Processing of the invoices in Payables - for the Recipient Subsidiary Side.

AGIS Setup Navigation:

Inter company Setup Pre-Requisites:

• Define the Employee in HRMS Responsibility.
• Assign employees to the user in the sys administrator responsibility
• Complete definition of Legal entity and ledger in General ledger responsibility
• Complete operating unit setup for Accounts Payable and Accounts Receivables responsibilities 

In an Inter company Transaction there are 2 or more Legal entities involved.One would be the initiator or Transacting LE and one or more would be the Recipient or trading partner LE.

In AGIS always The Initiator or Transacting LE would be creating an Inter company transaction and send it to the Recipient LE for Approval The transaction type will identify if transaction requires manual approval and also invoicing is required In case transaction need invoicing then destination would be sub ledger applications if transaction does not need invoicing then the destination would be General Ledger.

AGIS Flow:

 

Note that when a transaction is created by ACE East to be transferred to ACE West, 

ACE East is initiator of transaction and ACE West is Recipient of transaction.

Transacting LE is ACE East LE
Trading Partner LE is ACE West LE

We check if invoices are required and there are two places that we look for that. First is the AGIS transaction type flag, seen on the AGIS Transaction Page in the Set Up Tab.

You can also create a rule in the Legal Entity setup, we create that rule at the registration level. This is set by selecting the Legal Function ‘Create Inter company Invoice’ when entering the Legal Entity Registration. If the this rule is set for one of the Legal Entity involved in an AGIS transaction it will take precedence over the Transaction Type rule and the invoice will be created.

 

We create an AR invoice (via an Invoice API or the Open Interface tables) at that point the eTax module will kick in and calculate the tax for you and add that to the invoice. When the AR invoice has been created we create the AP invoice (via the AP Invoice Interface) using the invoice number from the AR invoice , so it will be easy to match those invoices. We also ensure that the same information required by eTax is on the AP invoice so the tax calculation will be the same on the AR and AP invoices.

Setups:

• Ledger Creation
• Legal Entities creation, balancing Segment Value assignment.
• Assignment of Legal Entities to the Ledger.
• Operating units creation and assignment to the Ledger.
• Definition of Intracompany Accounting Rules.
• Definition of Intercompany relationship definitions and respective account definition.

Note that the Balancing Segment Value Assignments can be done at the LE level or at the Ledger level depending on the requirements.

1 Setup Employee in HRMS, these employee definitions are used later on in security setup for AGIS.

Navigation: HRMS>People>Enter and Maintain.

2. Create the user and assign the employee to the user and assign the GL,Inv, AR, AP, AGIS, eBtax responsibility to the user.

3. Setup Ledger.
The Ledger Definition is done using GL- Accounting Setup Manager
Navigation: GL> Setup> Financials > Accounting Setup Manager > Accounting Setups.

Ensure that the relevant Legal Entities are assigned to the Ledgers.
Note that the balancing Segment values have been assigned as adn when the Legal entities were created.

Two Operating units.
1 ACE East Operating unit
2 ACE West Operating unit
have been created and assigned to ACE Ledger.

4. Define Intra-Company Balancing Rules, option to define intra company rules option would be visible, If and only If intra company balancing option is enabled for the concerned Ledgers,
GL provides to define the intra company balancing rules for different LE's.

5. Setup Receivables module
Note :
1) In AR system options for both OU's , the system options defined columns shows as Yes, this shows that the required setup is completed from receivables side.
2) Check the transactions form if the LOV appears correctly for the OU's or not , Check if Batch Sources LOV is appearing with the OU names that means the responsibility has been setup correctly.

3) Both the OU's are appearing in the LOV since the Security Profile has been set like that.

4) Receivables Transaction types and receivables memo line can be linked only if receivables setups are complete. if those setups are not complete then the lov will not appear, The values appearing there Intercompany and Global Intercompany respectively are new seeded values in receivables, these have been specifically seeded in receivables for AGIS

The recipient subsidiary will have this invoice transferred in their payables hence need to setup Payables.

6. Setup Payables Module

7. Setup AGIS 

•    Organization creation
•    Accounting-  Balancing Accounts search, Intercompany Balancing Rules, Intercompany Accounts.
•    Security setup for users
•    Transaction type creation
•    Invoicing options- Receivables Assignments
•    Invoicing options- Customer/Supplier Assoication Definition
•    Defining System options
•    Period Control (optional)

Security is defined as which user/person will have access to which and how many intercompany organizations.

Transaction types- if invoices are required to be generated for the AGIS transaction is defined here, if the invoicing is set to required then receivables and payables setups are mandatory.

System options: If you intended to use separate calendar in AGIS then you can define the same here , if a calendar is defined in system options then the period statuses can be controlled based on transaction types as well.

If the system options is setup to online, there is no need to run the Transfer to Payables and Transfer to Receivables Program , then instead of using concurrent requests the workflow will be used to populate the interface tables.

if this option is set to Batch then the data will be transferred to receivables and payables interface on running the requests only.

The period opening and closing is done in periods tab.

Invoice options: There are two parts in invoicing options definition.
- Receivables assignments
- Customer and Supplier Associations

Create the relationship setups and account definition for the intercompany accounts.
Under Intercompany accounts link there is a link called Define Relationships where one can create the relationships between various Legal Entities. This is the place where GL is notified of from where and to where the transactions are going to Flow.
Define the relationship, there are two parties in a relationship.
Transaction Entity and Trading Partner Entity.

Note that for using the invoicing feature in AGIS it is mandatory that the receivables responsibility has been created and setup correctly for both the operating units unless the receivables is setup for both OU's the AGIS transaction processing does not work correctly.

Transactions:
The Transaction created by Initiator transacting LE is called as an outbound transaction and the transaction received by the recipient LE is called as inbound transaction.

The outbound fields are Transaction type, Initiator, GL Date and currency.

The Initiator Subsidiary organization uses the outbound  and the recipient subsidiary organization is inbound.

Intercompany Reconciliation:

Reports:

• Transaction Summary Report
• Oracle Intercompany Account Details Report.
• Intercompany Reconciliation Report.

Reconciliation is the process of ensuring an intercompany transactions
- accounted in AR for initiator legal entity
- Payables for recipient legal entity
- Intercompany reconciliation report allows for checking of discrepancies or missing transactions

online reconciliation reporting tool.
- Allow drill down from account balances to transactions
- uses xml publisher to provide export to excel and customization of outputs.

Open Interface Tables:

Intercompany transactions from external source populate following intercompany interface tables
- FUN_INTERFACE_CONTROLS
- FUN_INTERFACE_BATCHES
- FUN_INTERFACE_HEADERS
- FUN_INTERFACE_DIST_LINES

Intercompany import program will import transactions in base tables(FUN)

Business Events:
AGIS supports Multiple business events which enables real time outbound/inbound intergration with legacy systems.



Source: My OracleSupport.

R12.X -Opening and Closing Accounting Periods

Open and close accounting periods to control journal entry and journal posting, as well as compute period-end and year-end actual and budget account balances for reporting.

You can open and close accounting periods in two ways:

• The Open and Close Periods window
• The Open and Close Periods programs

If you have Ledger Sets defined, you can open and close periods for multiple ledgers in a single process using the Open and Close Periods programs.

Accounting periods can have one of the following statuses:

• Open: Journal entry and posting allowed.
• Closed: Journal entry and posting not allowed until accounting period is reopened. Reporting and inquiry allowed.
• Permanently Closed: Journal entry and posting not allowed. You cannot change this period status. Reporting and inquiry allowed.
• Never Opened: Journal entry and posting are not allowed. General Ledger assigns this status to any period preceding the first period ever opened in your calendar, or to any period that has been defined, but is not yet future-enterable. You cannot change this period status.
• Future-Entry: Journal entry is allowed, but posting is not. Your period is not yet open, but falls within the range of future-enterable periods you designated when defining your Ledger. You cannot change this period status without using the concurrent process to open the period.

 Open and Close Periods Programs

You can open and close periods for a single ledger or multiple ledgers in a ledger set with one of the following programs:

·         Periods – Open Periods: To open periods up to and including the specified target period for one or more ledgers.

·         Periods – Close Period: To close a single period for one or more ledgers. Only open periods can be closed.

Note: The Close Period program completes with a warning if unposted journals exist in the period.

·         Periods – Gapless Close Period: To close a consecutive range of open periods for one or more ledgers. This program closes the specified period and all prior periods that are still open.

·         Periods – Permanently Close Period: To permanently close one or more closed periods for one or more ledgers. Periods starting from the initial period must be closed before you can permanently close them. To permanently close a range of closed periods, the specified period and any prior periods must have a status of Closed or Permanently Closed.

Caution: When you permanently close a period, all prior periods are also permanently closed and can never be re-opened.

You can schedule your Period programs to run automatically based on schedules you define in Oracle Applications or in General Ledger.You must have read and write access to the ledger and all of its balancing segment values and management segment values to open and close periods.

Prerequisite:·         Define your ledger and ledger sets.

To run the Periods programs:

1.      Navigate to the Submit Request window.

2.      Choose to Submit a Single Request.

The Submit Request window appears.

3.      In the Request Name field, select one of the following Period programs:

o    Period: Open Periods

o    Period: Close Period

o    Period: Gapless Close Period

o    Period: Permanently Close Period

 

4. Complete the following parameters:

• Ledger/Ledger Set: Enter the name of the ledger or ledger set. You can only access ledger sets that are included in your data access set. 

         Note: You must have read and write access to the ledger and all of its balancing segment 

         values and management segment values to run the Period program.

• Period Name: Enter the period you want to open, close, or permanently close.

 

5 .Select OK to close the Parameters window. 

6. Submit the program. A concurrent process is launched.

 

For a ledger set, the program launches a parent request and separate child requests for each ledger in the ledger set. The parent request execution report outlines all the ledgers that were processed.