eBTax Upgrades

Oracle 11i - R12 eBTax Upgrades Explained

Oracle 11i – R12 Tax Upgrades

The debate is still open as to whether a technical upgrade saves time and money over a reimplementation even if it is simply to upgrade exactly what you have. Either way, you will need to ensure the indirect tax is working which is not straightforward. Oracle R12 gives you new functionality in the e-Business Tax (eBTax) engine, a dedicated module purely for the determination of indirect tax, VAT, GST or Sales Tax. eBiz Answers can help you get your tax working, fully automated while saving your company money and allowing you, probably for the first time, to be fully compliant.

Don’t let your implementation partner fob you off by saying that upgrading your tax will take too long and is impossible to set up over a cutover weekend.

eBTax upgrade options

There are four options when you upgrade:

  • Upgrade for manual solution without using tax rules
  • Upgrade for manual solution using tax rules
  • Upgrade for automated solution using third party tax engine tax rules
  • Upgrade for automated solution using Oracle tax rules

Regardless of the choice you make, when the upgrade takes place Oracle will attempt to convert your tax solution in 11i to the new R12 setup. As Oracle is a global solution it needs to be able to handle every type of tax setup with two main types: VAT/GST or Sales tax which in the Oracle eBTax setup world basically means Rules based rates or Jurisdiction based rates. So the upgrade has to apply a common approach and in doing so can create confusion because the structure in which the tax has been set up is poor, linked to each operating unit and in most cases because the tax in 11i was set separately for AR and for AP, you get duplications of tax rate names which, had they been setup manually would have failed on the validation. However, for an upgrade the default tax determination method is set to STCC (Standard Tax Classification Code) which means that you if you choose a tax rate, that’s the one you will get. It’s good that you should be able to get some sort of tax working immediately after the upgrade but if you stick with this method you are putting your company at risk. The only time STCC is kept is because your integration partner is trying to save money by not spending any time putting in a proper tax solution for you.

In our experience from the numerous webinars and presentations at events including Oracle Collaborate and Oracle Open World, you are going to have a tangle to unravel one way or another.

Upgrade for manual solution not using tax rules

If you upgrade and choose to stick with the STCC rules you will most likely need to adjust your solution to get it working. Quite often we see clients with duplicate tax rates and statuses because they had the same rate name either in a different module (AP/AR) or setup for the same country but in a different Operating Unit (OU) because in 11i all tax setup was by module and OU. This will cause issues when selecting or interfacing the tax with auto invoice, intercompany etc because generally, Oracle can only have one tax rate/status with the same name. You are unlikely to have any offset taxes (reverse charges) working and as the tax was set up by OU you could have the same tax solution set up 10 times and need to maintain the same country 10 times for any changes etc.

By far the biggest issue is the fact that the upgrade creates a ‘Tax’ for most rates which for one client was over 100 taxes so if you do need to create a new rate, where do you create it and how do you maintain it?

With our eBTax Rapid Install™ tool eBiz Answers can install a fully automated tax solution much faster than trying to resolve an upgraded tax solution. In most cases, an upgraded solution will not even be compliant and because of this we do not promote nor will we undertake any work that uses this method for eBTax.

Upgrade for manual solution using tax rules

While we don’t promote it, we understand that clients want options and as such, if you insist that you want a manual tax solution then putting one in and moving to tax rules rather than using the STCC method for tax is going to be a better option. Unless you are sure that the upgrade created your R12 tax solution in a way that you can work with, our advice is to put in a new tax regime and start again rather than trying to salvage what you have. Create a new tax regime (or at least a new ‘Tax’ under the existing regime and make it globally owned not OU specific. The only advantage to having an OU specific tax solution is that when it comes to selecting the tax you will only see the tax rates set up against that OU. If you have just one OU per country you can set it this way but if you have more than one or the potential to have more than one per country then setting up as global is a much better approach.

You can then set the rules linked to the Tax Classification code so the rule will simple be ‘If the tax code is X simply use tax code X. What you’re doing is replicating the STCC way of determining the tax but you can now enhance the solution to add more rules if you want to and all the taxes rates will be set up under one or two ‘Taxes’ rather than under separate taxes that you get with an upgrade; maintenance is easier too.

eBiz Answers created the eBTax Rapid Install™ lite which is our tax solution but with only the bare minimum of rules to allow you setup; 30 countries for example in a couple of hours using a rules based solution and taking advantage of all the reports and guides that we provide. The main advantage however is that in the future you can upgrade to the fully automated solution without having to change any tax names etc.

Upgrade for automated solution using third party tax engine tax rules

Third party tax engines were created because before R12 came along Oracle and other ERP solutions simply could not handle the US Sales and Use tax requirements with the thousands of rates and exemptions to maintain. Even with the R12 eBTax engine there is still a challenge in being able to manually create and maintain tax logic for the US and so even now there is a place for these third party tax engines. While they do a good job for the more complex US rollouts, we believe they are a waste of money for outside the US and are working with more and more clients who have made the mistake of using a third party tax engine to convert the solution back to Oracle using our Oracle solution. eBiz Answers has a far more cost effective solution for the US should you wish to consider one that does not involve a costly third party product.

Upgrade for automated solution using Oracle tax rules

Any tax solution should not simply be about calculating a tax rate percentage even though from our experience over 90% of the Oracle ERP systems do just that. If we take UK tax we currently have 20%, 5% and 0% tax percentages but in our solution we have around 40 tax rates. We need this number because we use tax rates not just to tell us the percentage but why it is that percentage. Take intra EU Zero rate for example. If we followed the Oracle documentation, they have just one tax rate for Intra EU zero rates but in reality we need this split to EU Sales of Services, EU Sales of Goods and EU Triangulation Sales. On the AP side we need to reverse charge EU Purchase Goods, EU Purchase Services and if you want to be technically correct, EU Purchase Triangulation and EU Purchase reduced 5%; so one rate is now seven. The reason for this is tax reporting, submitting the returns is not simply about reporting how much tax has been collected but about statistics. Indirect tax is the most accurate way of getting information on transactional sales and purchases and indirect tax is linked to many different fiscally required reports including the European Sales listing report, BAS in Australia, GAF report in Malaysia, Belgium and Portuguese Allocations etc.

Oracle eBTax allows your company to fully automate and become fully compliant for tax and with the enhanced reporting and methods that eBiz Answers has created we will save your company money with a return on investment possible in under just one year. So don’t look at your upgraded tax solution as a burden but as an opportunity. At eBiz Answers we can setup even the most fully automated solution faster that it would take to manually get the most basic upgraded solution working.

What can you expect with an enhanced tax solution maximising R12 functionality?

Eliminate user error

We reduce user error by reducing user interaction and with built-in tax logic to stop users making mistakes, the risk of non-compliance is hugely reduced. A fully automated tax solution with built-in tax analytics allows you to identify, fix and prevent further issues from taken place, reducing the chance of fines and bringing real cost savings in processing transactions and reporting of VAT.

Full automation

The tax solution is fully automated, no manual intervention is needed on any AR or OM transactions and minimal needed in AP.

Never choose a tax rate

AP users only choose information that leads to the tax rate, never directly choosing the tax rate itself. An AP clerk should not be responsible for choosing the correct tax as they rarely have the enhanced tax knowledge needed; instead the tax group controls the rules through tax logic (Rules). Our solution means that users only choose information that the source data does not contain, leading toward the correct tax rate.

No Defaulting

No defaulting of tax codes anywhere. This is 11i technology; we drive the tax by rules so if a supplier is from Europe and we are buying a service then the system knows to charge GB VAT AP EU Services.

Multiple determining factors

We can drive the tax rates automatically by Items, customer and supplier locations, our locations, GL codes, Customer or Supplier classifications, Tax registration reasons and transaction types etc.

Goods and Services split

Full split between goods, services and triangulation: the split between goods and services is needed by many country tax regimes particularly on purchases where an international supply of services is reverse charged because it does not pass through customs whereas goods do.

Global naming convention

A truly global solution, every country will share the same naming convention, structured so that maintenance and expansion is as simple as it can be.

Faster maintenance

A new rate will take just three minutes to set up with no other changes needed for the rate to become effective.

Reverse charge taxes

All reverse charge requirements met – we use self-assessed tax in the US and offset taxes in the UK.

Automate recovery rates

Fully automated recovery rate based on purchasing criteria.

Country localisations met

Localisations for countries including Italy and Belgium are fully met.

Digital downloads

Digital download solution for 2015 – we can fully automate this, choosing the correct country tax regime based on the IP download location and charging the local VAT.

Enhanced reporting

Now that we have captured all of this data we have enhanced reporting functionality to not only allow you to effortlessly submit your VAT returns but to conduct tax analytics and identify the difficult transactions before they become problems. There are many more seeded Oracle reports to use that cover most country localisations and items including the European Sales listing report.

Super fast implementation

With our trademarked eBTax Rapid Install™ tool we can rollout your upgraded tax solution in the fastest possible time, making that upgrade cutover window a possibility for a fully automated solution.

For assistance with your 11i – R12 tax upgrade or to disucss any other eBTax related issue please contact eBiz Answers directly.