Intercompany and AGIS

No Ship to on intercompany invoices – solution

This posting is a direct copy from the Oracle website based on note 1048431.6

For years we have been using a work around but Oracle have now provided the following solution to help with the missing ship-to information badly needed to correctly determine the tax.

Reference INCIAR – Ship-To/Shipto Address Does Not Appear On Intercompany AR Invoices (INCIAR) (Doc ID 1048431.6)

GOAL

The “ship to” address is not appearing on intercompany AR invoices.

The “ship to” address for Intercompany AR Invoices is not populated after the AR Autoinvoice process is completed.

This document includes all version of Oracle E-Business Suite 11i and Release 12.

SOLUTION

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Oracle AGIS – Should we always create a VAT invoice for intercompany recharges?


One of the main reasons why the Oracle AGIS module was created was to ensure that the correct VAT was charged on intercompany transactions when an intercompany journal was created. However, many sites that I work on will still recharged or allocated costs from one legal entity to another as a direct journal with no VAT considerations. Is this correct or should every intercompany recharge where it is form one legal entity to another be subject to VAT. I am not a VAT expert, so would like to through this out there to see what the correct action should be.
As an example, take a situation where Company A is registered for VAT but company B is not. Over the course of the month, company A incurs the costs of several services that is recovers the VAT on fully. But then at the end of the month it recharges a proportion of these costs to company B. If AGIS is used to recharge these costs but no AR or AP transaction is created and so no VAT is calculated, then has VAT fraud been committed as VAT that would have otherwise been absorbed as an expense for company B has actually been fully recovered by company B!
What is the correct way – should a VAT invoice always be charged between two legal entities? Are there cases when VAT is not required, are there certain expenses such as interest and insurance that do not need to have a VAT invoice raised or should a VAT invoice still be raised with a VAT Exemption made clear? What if the two legal entities shared the same VAT number as part of having one VAT number of the Group?

AGIS and eBTAX – how to make the most out of your eBusiness Tax solution

What is the best way to drive your taxes from an AGIS transaction?

One of the primary drivers for the AGIS (Advanced Global Intercompany Solution) module was to ensure that the correct tax was calculated for transactions that were created by journals. The problem, from an eBTax point of view, is that the useable tax information is restricted by an AGIS generated transaction that originates from GL.
Take for example the requirement under EU law to separate out the sale of Goods and Service for intra-EU trades. The only way to do this in Oracle, for the Oracle eBusiness (eBTax) tax engine, is to first create a dummy tax rate called ‘SERVICE ITEM’, and then assign this rate to the tax classification code field on an AR memo line. In turn, this memo line is linked to the AGIS Transaction Type. Rules are then used to drive the correct tax, i.e. if the transaction is between two EU entities and the SERVICE ITEM is used then ‘Intra EU Sales Services’ will be calculated rather than the ‘Intra EU Sales Goods’.

When the AGIS AP invoice is created, you need to pull the same Tax Classification Code through, i.e. ‘SERVICE ITEM’  so that the correct AP ‘Intra EU AP Sales Services’ is calculated.

But how else can AGIS be used for  tax calculations? is there an enhancement to allow not only a memo line to be added to an AR transaction type, but also to allow additional information for tax purposes such as ‘Intended Use’ or the ‘Fiscal Classification’ that can be used by AP and AR?