APXTADTC How to Setup Tax Codes [ID 198616.1]

 
 



  
  


  
  
goal: How to Setup Tax Codes
fact: Oracle Payables 11.5
fact: APXTADTC - Tax Codes







fix:





In the Tax Codes window, you define the tax names, or tax codes, you use on 

invoices to record invoice taxes you pay to suppliers and tax authorities. Each 

tax code has a tax type, a tax rate, and an account to which you charge

tax amounts.



You can define tax codes that have different tax rates during an effective date 

range you specify. For example, you can define a tax code that has a 10% rate 

one year, and a 10.5% rate the next year. Payables automatically uses the 

correct rate depending on the invoice date.



You define the Tax Code Defaults hierarchy in the Payables Options window to 

determine the order in which Payables searches for tax codes when a Payables 

document requires a default tax code. See: Defaulting Tax in Payables. 



You can assign tax codes to expense or asset accounts so that Payables will 

automatically enter the appropriate tax code when you enter an account. 



If you use automatic tax calculation, Payables calculates the invoice sales tax 

and automatically creates tax distributions. You do not need to define special 

tax codes for distributions that include tax. Simply select the Includes Tax 

check box when you enter the distribution, and Payables adjusts the calculation.

 



During the Approval process, Payables uses the tax code to validate that you 

have entered tax distributions correctly.



Offset Tax Codes



Offset taxes are negative-rate taxes. In the Tax Codes window you can associate 

Offset taxes with Sales or User-defined taxes. When you use the Sales or User-

defined tax on an invoice, you record the tax, but the associated Offset tax 

reduces or eliminates your tax liability. 



To associate an Offset tax with a Sales or User-defined tax, first define the 

Offset tax. Then when you define the Sales or User-defined tax, enter the 

Offset tax code in the Offset Tax field. For details, see: Offset Taxes.



Withholding Tax Codes



Withholding Tax type tax codes can have multiple rates, effective date ranges, 

tax amount limits, and taxable amount limits. You can also link a tax authority 

supplier to a Withholding Tax type tax code so you can create invoices to

pay taxes you withheld from your suppliers.



Defining Tax Codes



Prerequisites



Define tax types. 



Define accounts. See: Defining Accounts (Oracle General Ledger User Guide).



(Optional) For recoverable taxes, to assign a tax recovery rule to a tax code, 

define tax recovery rules. 



To define tax codes for Sales, Use, Offset, and User-defined invoice taxes:



1. In the Tax Codes window, enter a tax code. The tax code must be unique for 

the effective dates you use. 



2. You can enter more than one rate for the tax code as long as the active 

effective dates are unique. For each tax rate, enter the following:



Tax code and tax type.



Tax rate percentage. For example, enter 5 if this is a 5% tax. If you are 

defining an Offset tax code, then enter a negative number.



In the From and To fields, enter the effective dates during which the rate is 

effective. 



If the Enable Recoverable Tax Financials option is enabled, then in the 

Recovery Rules tabbed region enter either a recovery rule name or any recovery 

rate. For Sales or User-defined tax types, the recovery rate will default from 

the Financials option Default Recovery Rate but can be updated to be any

percentage from 0 to 100. For Offset tax types, the recovery rate will default 

to zero and cannot be updated. If the Enable Recoverable Tax Financials option 

is not enabled, this value will default to zero and cannot be updated.



The Enabled check box will be selected by default.



Account to which you will charge this tax if the Enable Recoverable Tax 

Financials option is not enabled. If it is enabled, then only recoverable tax 

amounts will be charged to this account.



If you are defining a Sales or User-defined tax code and you want to associate 

an Offset tax with it, enter the Offset tax.



Description of the tax code. We recommend that you use the same description for 

all tax codes that have the same tax co.

de name (and different effective date 

ranges).



3. Save your work.



Defining Tax Codes for Withholding Taxes



Payables provides flexibility in defining withholding tax rates with specific 

controls. When you define a withholding tax

code, you indicate first whether you will have any amount or rate controls by 

selecting one of the following rate

structures:



Period Limit. After you pay a certain amount for withholding tax in a period, 

Payables stops withholding taxes. For example, for each special calendar period,

 Payables will withhold no more than $10,000.



Flat Rate. The withholding tax has no amount or period limits. 



Amount Ranges. The tax rate depends on how much you have already paid during a 

time period. Base the paid amount on the gross amount of total paid invoice 

amounts, or on the total amount of tax withheld. The time period can be either 

per withholding tax calendar period or per invoice. For example, define a tax 

that for each year will withhold at a rate of 10% until you pay $100,000 in 

invoices, and then it withholds at a rate of 15% after you pay $100,000.



In addition to these controls, the same withholding tax code can have different 

rates depending on the effective date.

For example, a withholding tax has a rate of 10% one year and 11% the following 

year.



Prerequisites



(Optional) Define AWT Rate Types. 



Attention: Payables uses only the Standard AWT Rate Type. If you want to use an 

AWT rate type other than Standard, you may want to customize Automatic 

Withholding Tax to perform special behavior based on the AWT rate type. 



Define accounts. See: Defining Accounts (Oracle General Ledger User Guide).



Define your tax authorities as Tax Authority type suppliers. See: 

Classification Region of the Suppliers window.



Define Withholding Tax Periods if you want to be able to review online period-

to-date amounts for a Withholding Tax code. See: Special Calendar.



To define tax codes for withholding taxes:



1. In the Tax Codes window, enter a tax code. For detailed information on any 

field, see Tax Codes Window Reference.



Enter Withholding Tax as the tax type, and enter a description of the tax code. 



Do not enter effective dates or a rate in this window. Enter them later in the 

Withholding Tax Details window.



2. Enter the account to which you will charge this tax. 



3. Choose the Withholding Tax Details button. The Withholding Tax Details 

window opens. For detailed information on any field, see: Withholding Tax 

Details Window Reference.



4. In the Withholding Tax Details window, specify the tax authority by entering 

either its supplier name or supplier number. Enter the tax authority supplier 

site.



5. Select one of the following values for Rate Structure, then complete the 

associated fields:



Period Limit: To limit the amount of tax withheld during a withholding tax 

calendar period select Period Limit. Then enter values for Calendar and Period 

Limit.



*** Enable the 'Enable for Internet Expenses' to allow users to use this tax 

code in the iExpenses module.



Flat Rate: If you do not want to control the tax based on amounts paid, then 

select this option.



Amount Ranges. To base the rate on the amount of the total invoices paid to 

date or the amount withheld to date, choose Amount Ranges. Then enter values 

for Amount Basis (Gross or Withheld Amount) and Period Basis (Invoice or Period)

. If you choose Period for Period Basis, also enter a value for Calendar. If 

you choose the Amount Basis option, you can enter values in the Amount Range 

fields

below.



6. To review online period-to-date withheld amounts for this tax code, then 

enter a special calendar name, if you haven't already.



7. To automatically create a tax withholding group for this tax code, select 

the Create Tax Group check box.



8. In the Tax Rates region, enter rate details. Enter the rate type.



Attention: You can define your own AWT rate types in the Oracle Payables 

Lookups window. Payables uses only the Standard AWT rate type. To use an AWT 

rate ty.

pe other than Standard, you may want to customize Automatic Withholding 

Tax to perform special behavior based on the AWT Rate





To set effective dates for the rate, enter values for one or both fields. The 

dates must not overlap.



Enter the rate percentage for the tax code you are defining. For example, enter 

5 if this is a 5% tax.



Enter any comments for your future reference.



9. If you selected Amount Basis for the rate type, enter one or both Amount 

Range fields to set upper and/or lower amount limits for taxable amounts or tax 

amount.



10. Save your work..