VAT Validation

Oracle R12: The problem with using Legal Entities for Tax!

So, here is my problem. We have a client who has a UK legal entity but has several locations globally that are registered for local indirect tax and some other reporting but are not legal entities in their own right. According to Oracle, these are legal entity Establishments.

Oracle Definition of Legal Entity Establishment

“Legal Establishment: First party legal entities identify your organization to the relevant legal authorities, for example, a national or international headquarters. First party legal establishments identify each office, service center, warehouse and any other location within the organization that has a tax requirement. When you create a legal entity, the system automatically creates a legal entity establishment. You can create additional legal establishments according to your needs. For each legal establishment there are one or more tax registrations, depending upon the tax requirements of the applicable tax authority.”

More can be found at note 1064366.1

So what is wrong?

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Oracle eBTax Exempt, Zero or Out of scope – does it make a difference

Unfortunately there is a big difference between ZERO and EXEMPT. If we were to sell everything as EXEMPT then we would not be able to recover any tax at all, if we sold everything as ZERO then we can recover 100% of the tax. Because banks sell many things as either EXEMPT or out of Scope (Exempt, Out of Scope and Zero are 3 very different rates) they can only recover a certain amount of tax, the amount could be as low as just 1%. Luckily in AP, if we accidentally put something as Zero when it should be EXEMPT then it does not matter so much.

 

VAT Number Check

VAT Number Check

Below are  links to help with Tax/VAT number checking for various countries. If you require an automated number check then please contact us

For EU members:

http://ec.europa.eu/taxation_customs/vies/?locale=en

France:

Companies can be checked by SIRET number on these websites. Unfortunately only available in French language:
http://www.verif.com/
http://www.cofacerating.fr/portail/general_accueil/accueil.asp?metier=ALL&geo=ALL&idnav=&lg=uk
The second website can be viewed in English and French. Those websites can be helpful for invoices where only SIRET is put.

Australia:

You can verify ABN number (Australian Business Register):
http://abr.business.gov.au/

Denmark:

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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?

Oracle ebtax Tax countries with VAT validation

The following are the list of countries that currently validate the VAT number when it is entered.

Currently, Switzerland has incorrect validation

REM | (26 countries) |
REM | AT – Austria |
REM | BE – Belgium |
REM | DK – Denmark |
REM | EE – Estonia |
REM | FI – Finland |
REM | FR – France |
REM | DE – Germany |
REM | GR – Greece |
REM | IE – Ireland |
REM | IT – Italy |
REM | LU – Luxembourg |
REM | SK – Slovakia |
REM | NL – Netherlands |
REM | PL – Poland |
REM | PT – Portugal |
REM | ES – Spain |
REM | SE – Sweden |
REM | GB – United Kingdom |
REM | CH – Switzerland |
REM | RU – Russia |
REM | HU – Hungary |
REM | BR – Brazil |
REM | AR – Argentina |
REM | CL – Chile |
REM | CO – Colombia |
REM | TW – Taiwan |
REM | |
REM | MT – Malta |
REM | CV – Cyprus |
REM | LV – Latvia |
REM | LT – Lithuania |
REM | SI – Slovenia