Oracle E-Business Tax and Brexit
As the United Kingdom (UK) leaves the EU from the 1/1-2021; E-Business Tax (ZX/EBTax) setup will require changes.
Disclaimer and warning:
EBTax setup is complex and flexible therefore the example below is unlikely to work with your instance, so please do use a skilled consultant for the changes and test carefully.
All the examples below are from a R12.2.9 Vision instance using:
User: UK User
Responsibility: Tax Managers Vision UK
The examples are from an upgrade so not typical for a greenfield implementation but the principle is the same.
Assumptions after 01-Jan-2021:
- UK will not be part of the EU customs union
- UK will treat any EU transaction as pure import/export as it was outside the EU
We will look at two scenarios:
- EU-based company: A company and legal entity based in one of the remaining the EU countries
- UK-based company: A company and legal entity based in the UK only
There are many combinations of the above like if the UK based company have a registered office in the EU it may be necessary to account for both UK and EU VAT.
EU-Based Company
After Brexit, an EU-based company should treat trade with a company in the UK as outside the EU.
To do this, simply end-date the UK in the EU zone definition.
It is important to end-date in case of back dated transactions.
Also ensure to use 01-Jan-2021 as end-date as this is 01-JAN-2021 00:00 so just after midnight of 31-DEC-2020.
Technically it is 31-DEC-2020 23:00 but time cannot be entered into the End Date field; so avoid entering transactions between 11pm and midnight.
Responsibility: E-Business Tax Managers
Menu: Advanced Setup Options > Tax Zone Types
Click: View Existing Zones
Click: Update
End Date the United Kingdom entry: 01-Jan-2021
Click: Apply
All done; now test!
UK-Based Company
After Brexit, a UK-based company should regard trade with an EU company as normal export/import without respect to VAT registration etc. This means tax rules needs to be changed.
We need two steps in this case:
- End-date existing tax rules
- Create new tax rules
End-date Existing Tax Rules
Menu: Tax Configuration > Tax Rules
Configuration Owner: Global Configuration Owner
Tax Regime Code: GB-Tax
Tax: GB-VAT
In this case we need to end-date rules with EU related tax rules.
We may normally have EU related tax rules in:
- Determine Place of Supply
- Determine Tax Registration
- Determine Tax Status
- Determine Tax Rate
Direct Tax Rate Determination: this is normally only used for upgrades and should not contain any EU related rules.
In the Vision example it looks like this:
The tax rules of interest in the above are:
- GB VAT PLACE OF SUPPLY
- GB VAT REGISTRATION
- GB VAT STATUS
There are no “Determine Tax Rate” tax rules in this case. This is because you can pick the tax rate either in “Determine Tax Status” or “Determine Tax Rate” for the same result.
For the purpose of the example the approach is the same for both types of rules.
Again, ensure to use 01-Jan-2021 as end-date as this is 01-JAN-2021 00:00 so just after midnight of 31-DEC-2020.
End-date rule GB VAT PLACE OF SUPPLY
For GB VAT PLACE OF SUPPLY click: Expert Rule Entry
Effective To: 01-Jan-2021
To review the condition sets, click: Next
This rule has the following active condition sets:
- GB INTRA EU GDS PURCH: Not needed after Brexit as related to EU only
- GB POS PURCHASE INTRA-EU SERVICES: Not needed after Brexit as related to EU only
As the above condition sets will not be needed after Brexit; no need to create new rules.
After the review, to save click: Next and Finish
End-date rule GB VAT REGISTRATION
For GB VAT REGISTRATION click: Expert Rule Entry
Effective To: 01-Jan-2021
To review the condition sets, click: Next
This rule has the following active condition sets:
- GB GDS PURCH REV CHG: Not needed after Brexit as related to EU only
- GB VAT PURCHASE INTRA-EU SERVICES: Not needed after Brexit as related to EU only
As the above condition sets will not be needed after Brexit; no need to create new rules.
After the review, to save click: Next and Finish
End-date Rule GB VAT STATUS
For GB VAT STATUS click: Expert Rule Entry
Effective To: 01-Jan-2021
This rule has the following active condition sets in priority order:
| Name | Result | Purpose |
| GB EXPORT SALES | GB VAT ZERO | Checks if goods sale is outside the EU |
| GB INTRA EU GDS SALE ZERO RATED | GB VAT INTRA EU ZERO | Checks if registered inside the EU |
| GB VAT INTRA-EU SERVICES | GB VAT INTRA EU ZERO | Checks if registered inside the EU |
| GB GOODS EXEMPT RATE | GB VAT EXEMPT | Inventory classification of GB Exempt Goods |
| GB GOODS REDUCED RATE | GB VAT REDUCED | Inventory classification of GB Reduced Rate Goods |
| GB GOODS ZERO RATE | GB VAT ZERO | Inventory classification of GB Zero Rated Goods |
| GB SERVICES ZERO RATE | GB VAT ZERO | Inventory classification of GB Zero Rated Services |
| GB SERVICES EXEMPT RATE | GB VAT EXEMPT | Inventory classification of GB Exempt Services |
| GB SERVICES REDUCED RATE | GB VAT REDUCED | Inventory classification of GB Reduced Rate Services |
Most of the above rules will be needed after Brexit except for:
- GB INTRA EU GDS SALE ZERO RATED
- GB VAT INTRA-EU SERVICES
One rule needs to be altered to exclude EU conditions:
- GB EXPORT SALES
After the review, to save click: Next and Finish
Create New Tax Rules
The old end-dated rules we based on the Determining Factor Sets:
- GB VAT PLACE OF SUPPLY: No new rule needed
- GB VAT REGISTRATION: No new rule needed
- GB VAT STATUS: Rules for manual classification and export sales needed
As we cannot reuse the Tax Determining Factor Set used in the end-dated rule sets; we need to create a new one.
Best practise is to split manual/inventory-based classification rules from other rules but in this case, we will just use a single rule set as an example.
So for GB VAT STATUS we need to:
- Create one new Tax Determining Factor Set
- Create 7 new Tax Conditions Sets using the Tax Determining Factor Set
- Create one new Tax Rule using the Tax Condition Sets
Tax Determining Factor Set
The old Tax Determining Factor Set was:
| Determining Factor Class | Class Qualifier | Determining Factor Name | Required | Needed |
| Transaction Generic Classification | Transaction Business Category | No | Yes | |
| Registration | Bill From Party | Registration Status | No | |
| Registration | Bill To Party | Registration Status | No | |
| Transaction Input Factor | Product Type | No | Yes | |
| User Defined Geography | Ship From | EU_TAX_ZONE | No | |
| User Defined Geography | Ship To | EU_TAX_ZONE | No | |
| Geography | Ship From | Country | No | Yes |
| Geography | Ship To | Country | No | Yes |
| Product – Inventory Linked | GB Product Classification Level 2 | No | Yes |
After Brexit we will only need the Determining Factor Classes as per column Needed = Yes
Transaction Generic Classification is not really needed either in the example.
However after Brexit; Registration Status and EU_TAX_ZONE is not relevant any more.
Menu: Advanced Setup Options > Tax Determining Factor Sets
Tax Determining Factor Set/Name: GB VAT BREXIT
Set Usage: Tax Rules
Regime Code: GB-Tax
Associate Tax Determining Factors:
| Determining Factor Class | Class Qualifier | Determining Factor Name | Required |
| Transaction Generic Classification | Transaction Business Category | No | |
| Transaction Input Factor | Product Type | No | |
| Geography | Ship From | Country | No |
| Geography | Ship To | Country | No |
| Product – Inventory Linked | GB Product Classification Level 2 | No |
Tax Condition Sets
We will need the following condition sets:
| Tax Condition Code/Name | Purpose |
| GB VAT BREXIT EXPORT | Exports |
| GB VAT BREXIT GOO EXE | Inventory classification of GB Exempt Goods |
| GB VAT BREXIT GOO RED | Inventory classification of GB Reduced Rate Goods |
| GB VAT BREXIT GOO ZER | Inventory classification of GB Zero Rated Goods |
| GB VAT BREXIT SER EXE | Inventory classification of GB Zero Rated Services |
| GB VAT BREXIT SER RED | Inventory classification of GB Exempt Services |
| GB VAT BREXIT SER ZER | Inventory classification of GB Reduced Rate Services |
Menu: Advanced Setup Options > Tax Condition Sets
Click: Create
Tax Condition Set/Name: GB VAT BREXIT EXPORT
Determining Factor Set Name: GB VAT BREXIT
Click: Continue
| Determining Factor Class | Class Qualifier | Determining Factor Name | Operator | Value | Ignore Condition |
| Transaction Generic Classification | Transaction Business Category | Yes | |||
| Transaction Input Factor | Product Type | Yes | |||
| Geography | Ship From | Country | Yes | ||
| Geography | Ship To | Country | No Equal To | United Kingdom | No |
| Product – Inventory Linked | GB Product Classification Level 2 | Yes |
Click: Create
Tax Condition Set/Name: GB VAT BREXIT GOO EXE
Determining Factor Set Name: GB VAT BREXIT
Click: Continue
| Determining Factor Class | Class Qualifier | Determining Factor Name | Operator | Value | Ignore Condition |
| Transaction Generic Classification | Transaction Business Category | GB Exempt Goods | No | ||
| Transaction Input Factor | Product Type | Yes | |||
| Geography | Ship From | Country | Yes | ||
| Geography | Ship To | Country | Yes | ||
| Product – Inventory Linked | GB Product Classification Level 2 | Yes |
Same procedure for:
- GB VAT BREXIT GOO RED: GB Reduced Rate Goods
- GB VAT BREXIT GOO ZER: GB Zero Rated Goods
- GB VAT BREXIT SER EXE: GB Exempt Services
- GB VAT BREXIT SER RED: GB Reduced Rate Services
- GB VAT BREXIT SER ZER: GB Zero Rated Services
Tax Rules
Menu: Tax Configuration > Tax Rules
Configuration Owner: Global Configuration Owner
Tax Regime Code: GB-Tax
Tax: GB-VAT
Select Determine Tax Status and click: Expert Rule Entry
Rule Code/Name: GB VAT BREXIT
Effective From: 01-Jan-2021
Determining Factor Set Code: GB VAT BREXIT
Click: Next
Condition Set Code: GB VAT BREXIT EXPORT
Click:
Pick Condition Set Name: GB VAT BREXIT EXPORT
The above is a long standing “feature”; entering a unique Condition Set Code does not automatically select the name.
Order: 10
Result: GB VAT ZERO
Click: Add or
Condition Set Code: GB VAT BREXIT GOO EXE
Click:
Pick Condition Set Name: GB VAT BREXIT GOO EXE
Order: 20
Result: GB VAT EXEMPT
Do same for remaining order 30-70:
| Tax Condition Code/Name | Order | Result |
| GB VAT BREXIT EXPORT | 10 | GB VAT ZERO |
| GB VAT BREXIT GOO EXE | 20 | GB VAT EXEMPT |
| GB VAT BREXIT GOO RED | 30 | GB VAT REDUCED |
| GB VAT BREXIT GOO ZER | 40 | GB VAT ZERO |
| GB VAT BREXIT SER EXE | 50 | GB VAT ZERO |
| GB VAT BREXIT SER RED | 60 | GB VAT EXEMPT |
| GB VAT BREXIT SER ZER | 70 | GB VAT REDUCED |
Click: Next
Rule Order: 5
Enable: Yes
Click: Finish
All done; now test!
Technical Appendix
Tables:
- Tax zone type: HZ_GEOGRAPHY_TYPES_B
- Tax zones: HZ_GEOGRAPHIES
- Tax zone members: HZ_RELATIONSHIPS
select *
from HZ_GEOGRAPHY_TYPES_B
where GEOGRAPHY_TYPE like 'EU%'
;
| GEOGRAPHY_TYPE | GEOGRAPHY_USE |
| EU_TAX_ZONE | TAX |
select *
from HZ_GEOGRAPHIES
where GEOGRAPHY_TYPE='EU_TAX_ZONE'
;
| GEOGRAPHY_NAME | GEOGRAPHY_USE | GEOGRAPHY_CODE |
| European Economic Community | TAX | EEC |
select
g.geography_name "Geography Name",
to_char(r.start_date,'dd-mon-yyyy hh24:mi') "Start Date",
to_char(r.end_date,'dd-mon-yyyy hh24:mi') "End Date"
from
ar.HZ_RELATIONSHIPS r,
ar.HZ_GEOGRAPHIES g
where 1=1
and r.subject_id=g.geography_id
and r.object_type like 'EU%'
and r.relationship_type='TAX'
and g.geography_name='United Kingdom'
;
| Geography Name | Start Date | End Date |
| United Kingdom | 01-jan-1974 00:00 | 01-jan-2021 00:00 |
Notice the default time for the date is 00:00 at midnight.
