Jurisdiction is a physical territory such as a group of countries, country, state, county, or parish where a particular piece of legislation applies. French Labor Law, Singapore Transactions Tax Law, and US Income Tax Laws are examples of particular legislation that apply to legal entities operating in different countries' jurisdictions. Judicial authority may be exercised within a jurisdiction.
For each legal entity, select an identifying jurisdiction. An identifying jurisdiction is your first jurisdiction you must register with to be allowed to do business in a country. If there is more than one jurisdiction that a legal entity must register with to commence business, select one as the identifying jurisdiction. Typically the identifying jurisdiction is the one you use to uniquely identify your legal entity.
Income tax jurisdictions and transaction tax jurisdictions do not represent the same jurisdiction. Although in some countries, the two jurisdictions are defined at the same geopolitical level, such as a country, and share the same legal authority, they are two distinct jurisdictions.
Create income tax jurisdictions to properly report and remit income taxes to the legal authority. Income tax jurisdictions by law impose taxes on your financial income generated by all your entities within their jurisdiction. Income tax is a key source of funding that the government uses to fund its activities and serve the public.
Create transaction tax jurisdictions through Oracle Fusion Tax in a separate business flow, because of the specific needs and complexities of various taxes. Tax jurisdictions and their respective rates are provided by suppliers and require periodic maintenance. Use transaction tax jurisdiction for legal reporting of sales and value added taxes.
A legal authority is a government or legal body that is charged with powers to make laws, levy and collect fees and taxes, and remit financial appropriations for a given jurisdiction.
For example, the Internal Revenue Service is the authority for enforcing income tax laws in United States. In some countries, such as India and Brazil, you are required to print legal authority information on your tax reports. Legal authorities are defined in the Oracle Fusion Legal Entity Configurator. Tax authorities are a subset of legal authorities and are defined using the same setup flow.
A tax profile is the body of information that relates to a party's transaction tax activities. A tax profile can include main and default information, tax registration, tax exemptions, party fiscal classifications, tax reporting codes, configuration options, and service subscriptions.
Set up tax profiles for the following parties involved in your transactions:
Set up third-party tax profiles for parties with the usage of customer, supplier, and their sites. Enter the default information, tax registrations, party fiscal classifications, and reporting codes required for your third parties or third-party sites. You can set up tax exemptions for your customers and customer sites.
Banks are also considered third parties. When a bank is created, the tax registration number specified on the bank record is added to the party tax profile record in Oracle Fusion Tax. You can't modify the party tax profile for a bank as it's view only. You can only modify the bank record.
Set up a tax authority party tax profile using the Legal Authorities setup task. The tax authority party tax profile identifies a tax authority party as a collecting authority or a reporting authority or both. A collecting tax authority manages the administration of tax remittances. A reporting tax authority receives and processes all company transaction tax reports.
The collecting and reporting tax authorities appear in the corresponding list of values on all applicable Oracle Fusion Tax pages. All tax authorities are available in the list of values as an issuing tax authority.
Set up a separate tax registration to represent each distinct registration requirement for a first-party legal reporting unit. Oracle Fusion Tax uses tax registrations in tax determination and tax reporting. If your first party has more than one tax registration under the same tax regime, then the application considers the tax registration in the order: tax jurisdiction; tax; tax regime.
You must enable the Use tax reporting configuration option on the first-party tax regime to allow entry of global tax reporting configuration details during tax registration setup for legal reporting units for these tax regimes.
If applicable, associate first-party fiscal classification codes with this party. The party fiscal classification codes you enter become part of tax determination for invoices associated with this party. Specify start and end dates to control when these fiscal classifications are applicable for this party and transaction.
For legal entities, you can view the associated legal classifications that were assigned to the tax regime defined for this first party. The legal classifications are used in the tax determination process, similar to the party fiscal classifications.
Set up tax reporting types to capture additional tax information on transactions for your tax reports for your first parties. Depending on the tax reporting type code, you either enter or select a tax reporting code for this party. Specify start and end dates to control when these tax reporting codes are applicable.
The legal entities and business units in your organization are each subject to specific sets of tax regulations as designated by the tax authorities where you do business. Use configuration options to associate legal entities and business units with their applicable tax regimes. You can set up tax configuration options when you create a tax regime or when you create a party tax profile. Both setup flows display and maintain the same party and tax regime definitions.
Oracle Fusion Tax lets you use the tax services of external service providers for tax calculation of US Sales and Use Tax on Receivables transactions. The setup for provider services is called a service subscription. A service subscription applies to the transactions of one configuration option setup for a combination of tax regime and legal entity or business unit. Set up service subscriptions when you create a tax regime or when you create a party tax profile for a first-party legal entity or business unit.
1. Save a tax regime to which the legal tax entity subscribes.
2. Save the configuration owner tax option that are defined for the legal entity.
3. You can also create a party tax profile for a legal entity manually. Use the Create Legal Entity Tax Profile page or edit the tax profile that was automatically generated with the relevant tax information.