R12 Tax GST slides


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The eBS R12 Tax Engine and the Australian GST

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R12 Tax GST slides

  1. 1. The eBS R12 Tax Engine and the Australian GST Jeannie Dobney August 2010 Updated slides can be found at www.jdobney.com
  2. 2.  Introduction to R12 eBS Tax Application 2  Implementation example for Aust. GST  Tangent: Use of new Legal Entity architecture  Upgrade experiences 1
  3. 3.  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
  4. 4.  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
  5. 5.  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
  6. 6.  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)
  7. 7.  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
  8. 8.  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
  9. 9.  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)
  10. 10.  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.
  11. 11. Image is from Chapter 2 of Oracle Financials Concepts Guide
  12. 12. 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
  13. 13. 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
  14. 14. 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
  15. 15. 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”
  16. 16. 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/
  17. 17. Ledger Legal Entities BSV’s assigned
  18. 18.  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
  19. 19. 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
  20. 20.  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
  21. 21.  Use a Default, or  Let the system guide you through creating one (Guided Rule Entry) or  Just create the rule (Expert Rule entry)
  22. 22.  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)
  23. 23. 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
  24. 24.  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…
  25. 25.  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
  26. 26.  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
  27. 27.  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
  28. 28.  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.
  29. 29. MOS # 1117544.1
  30. 30.  If you have questions and comments about the Australian GST, contact Michael D’Ascenzo (ATO)  Other questions and comments: jdobney@bigpond.com  Updated slides can be found at jdobney.com