Self Assessed Tax (perviously Use tax) in Oracle Payables 12i

Self-Assed Tax :
Self Assessed tax differs from regular taxes in one way: as a purchaser, you are responsible for reporting and paying the tax and the supplier is not.
This was also known as USE TAX in previous releases.
For example: You receive an invoice for $1000 which is due to be paid to the supplier. Tax A for 10% was not charged on the invoice however, as the purchaser, you recognize that you are responsible to pay tax A. You would self-assess Tax A for the $100 and include it in your filings to the corresponding tax authority.

Features:
•The flexibility to have self assessed tax automatically assessed (based on tax setup) or to manually mark the calculated tax as self assessed during invoice entry.
•An ability to have recoverable and non-recoverable portions of self assessed tax amounts based on your invoice details.
•The ability to report and account detailed recoverable and non-recoverable self assessed tax AND the corresponding Self Assessed Tax Liabilities when the transaction is accounted.

Benefits:
Improved Fiscal Discipline
•Automatic reporting and accrual helps maintain an audit trail for the tax amounts and the invoices they tie to.
•Separate liability accounts for self assessed taxes translate to more granular and accurate accounting.
Improved Operational Excellence
•By automating previously manual processes and providing functionality available during invoice entry, the propensity for human error or delayed information is reduced.

Self Assessed Tax Predetermined Process:
•During Invoice Entry, Validation, and Import, Payables gathers information known as “tax drivers’ entered on the invoice header and lines and passes that information to the new E-Business Tax module.
•Based on these tax drivers and additional information derived by E-Business Tax such as the supplier’s party tax profile and buyer’s and supplier’s tax registrations, the engine determines if any self assessed tax is applicable to the invoice.
•The self assessed tax will be passed back to Payables along with the recoverable and non-recoverable tax amounts and the General Ledger Accounts for the recoverable tax and self assessed liability.
•Payables displays the self assessed tax amount in a column on the Invoice header in the Invoice Workbench. Payables will also derive the accounts for the non-recoverable portion of the self assessed tax then store all accounts to be used later when the invoice is accounted.
•When the Invoice is Accounted, the self assessed tax and corresponding self assessed tax liabilities will be accounted along with the rest of the invoice.

Self Assessed Tax Manual Determination Process:
•This slide illustrates the process for an invoice where the calculated tax returned by the E-Business Tax engine is expected to be paid to the supplier and the Payables’ user updates the it as Self Assessed instead.
•Just like the first example, Payables gathers tax drivers entered on the invoice header and lines and passes that information to the E-Business Tax module.
•Based on these tax drivers and additional information derived by E-Business Tax, the engine calculates the tax that is expected to be paid to the supplier (in other words: Non-self assessed taxes)

Self Assessed Tax: Predetermined Set Up – First Party, Party Tax Profile:
To enable the application to automatically assess self assessed taxes for the First Party or for certain Third Party Suppliers, you need to first set up the Party Tax Profile. The Party Tax Profile is party specific, tax related information that can be associated to 1st and 3rd parties. It includes information such as defaults, tax registrations, classifications and tax reporting codes.
Using the Tax Managers responsibility, navigate to the Parties, Party Tax Profiles page. Search based on the Party Type of First Party Legal Establishment and the desired party name.
You have the flexibility to configure First Party Establishments for Self Assessed Taxes at the following levels based on your needs:
•Registration, Regime
•Registration, Regime, Tax
•Registration, Regime, Tax, Tax Jurisdiction
•From the Tax Summary Window, the Payables user marks the tax as self assessed. E-Business Tax updates their records and returns the tax details to Payables.
•Payables stores the GL Accounts, displays the self assessed tax amount in a column on the Invoice header and the validated invoice is ready for accounting.

Self Assessed Tax: Predetermined Set Up – First Party, Party Tax Profile:

•Enable Self Assessment on the Party Tax Profiles tab
•By checking the Set for Self Assessment/Reverse Charge option at a particular level, E-Business Tax returns applicable taxes for supplier invoices that fall within the level
–For example, if you enable this option at the Registration – Regime level, all invoices to be taxed within that regime will be considered Self Assessed tax

You can also set up a particular supplier’s Party Tax Profile by doing either of the following:
•Use the Tax Managers responsibility to query a Third Party
•Navigate to the Tax Details page from the Supplier (Entry) pages from the Payables Responsibility

Implementation Considerations:
E-Business Tax is a common module available with Oracle Financial Applications.
•The E-Business Tax engine is responsible for calculating tax amounts applicable to invoices.
•It also assists in automatically identifying taxes as self assessed and allows setting options for manual determination.
Subledger Accounting is also a common module available with Oracle Financial Applications.
•Subledger Accounting is not specific to this feature but a general tool to configure accounting entries and to provide accounting reports to meet your needs.