This is the final part of a series discussing impacts for tax processing when upgrading from 11i to R12. Part IV will identify some issues and considerations of the tax upgrade.
Because of the new data structures, tax lines associated with migrated transactions need to include data values for the new data structures and are dependent on successful migration of the EBTax data structure components.
After the upgrade, all tax calculations rely on the migrated data structures and associated rules even for adjustments to converted transactions.
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Direct Rate rules apply the tax rate associated with the Tax Rate / Tax Classification code to the transaction line amount (taxable basis) to calculate tax amount. There is no functionality to apply other factors or conditions. This method of tax calculation is very limited.
Location-based tax uses address data to identify all geography hierarchy and jurisdiction records for applicable tax for a transaction. The accuracy of these calculations is highly dependent on accurate and valid address information.
Very limited changes can be made to migrated tax structures. No new Tax Rules can be implemented within a migrated Regime structure. The only change allowed is the addition of a numeric rate under an existing Tax Rate (to accommodate rate updates).
Because of the issues and limitations with migrated tax structures and rules, many clients will opt to define all new tax structures for use on new transactions. This allows the structures to be planned and designed with more user-friendly naming conventions and more flexible, complex tax calculation rules. It also provides the ability to use the same Regime-to-Rate flow structures for both Payables and Receivables to stream-line data entry and reporting.