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How To Configure VAT in 12 Easy Steps with Oracle E-Business Tax (EBTax)

by | May 12, 2018 | Oracle EBTax, VAT/GST

Configuring a VAT Regime for a country in Oracle E-Business Tax (or EBTax) in 12 easy steps is a relatively straightforward exercise that can usually take about half a day to configure.

Oracle E-Business Tax surfaced with the advent of R12 back in January of 2007. For the most part Tax always seems to take a back seat to all of the exciting reporting projects and dashboards even though tax done wrong loses money and creates unnecessary risk. Part of the story with EBTax not getting leveraged had to do with those persons who do Oracle Consulting for a living. Tax is for experts. Understanding Tax should not be left to PL/SQL converts since understanding Indirect Tax and Laws is a tad more difficult and nuanced than the old-fashioned AP or AR invoicing and payments or receipts.

Here are the 12 Steps to doing a VAT Regime. The software solution is pretty intuitive but Tax Law certainly is not and the laws and the understanding of laws is where things go sideways for many projects.

I.     Categories, Categories, Categories, Get Them in Shape First

See the article on Categories that details out how important these things are for automating VAT calculations

II.    Define One Regime Per Country

III.   Define your VAT and VAT Offset Tax

Essentially you need to define only two Taxes here

IV.   Define all Tax Statuses (Each Tax Scenario is a Group)

Use a solid naming convention here to name each Status as it will also be used in defining the rates. Here we are talking about Standard, Exempt, Zero, Reduced, Out Of Scope etc. Statuses play a key role as we derive our rates from them via the default rate assigned

V.    Map Every Category to a Status

With Step 1 completed and a full appreciation for Categories, it is time to map each Category to its proper tax grouping i.e. Status. It the thing Exempt, Zero Rated, Reduced or Standard.  These groups matter.

VI.   Map Tax Rate Codes to Tax Status Codes

Rates are easy, just create Rates with the same Codes/Names as their Status counterparts and then set each of these rates as the default for each corresponding Status.

VII.  Define Your Jurisdiction

Again, an easy one. If you are in the UK the Jurisdiction for VAT is the country United Kingdom.

VIII. Create your Offset Tax (Reverse Charge)

Do the bits and pieces to set-up this Tax for handling Reverse Charge situations

IX.   Define Your Recovery Rates (Usually 100%)

Yeah, yet another easy configuration. If you have the right to recover the VAT outlays then you will simply configure this in a matter of minutes.

X.    Create Broad Tax Determination Factor Sets

These things are basically templates that your Tax Condition Sets (coming up next) will use to create the individual or group of Factors that may consider in a Tax Condition Set.

XI.   Create Your Tax Condition Sets

Where Tax Determination Factor Sets are the templates Tax Conditions Sets are the details.  They provide individual conditions or groups of conditions that must be met for some outcome to come back true. If a Tax Condition used in a rule does NOT come back true then it is ignored.

XII.  Define Rules that handle deviations from Standard Status

There are two ways to handle tax determination when using rules. One is simply create rules that handle EVERY possible outcome and the other is to simply use rules to deviate from the Default. Well, there is even a third way but that is just a modification of method two in that we set defaults for each type of transaction i.e. O2C and P2P and then run additional rules to handle deviations from those defaults. Here we will just assume the more common approach and that is to use Tax Rules for those statuses that deviate from the default settings.

Clearly there are the nitty gritty details in each configuration step but they are not too burdensome. Driving a car is probably more complicated then setting up EBTax but we take for granted all that we learned in order to carry out that complex process. If you don’t know how to drive just call an Uber and if you don’t feel comfortable with the details of configuring just find an expert that does then there is no need for fear and no need to be stressed out. It will just get sorted out.

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