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About deferred taxes

You may need to defer taxes until the payment of an invoice gets received or until some other point in the future.
By default, Determination considers calculated taxes due and payable upon invoicing of a transaction. However, you can change this default behavior by invoking special tax treatment types.
For transactions that need special treatment, Determination calculates tax normally but then flags them for special treatment by your integration software. It does this by inserting a value into the XML element <TAX_TREATMENT>. You can control how these flagged invoices are recorded in your business source system by modifying your integration software.

Types of special tax treatment

Determination offers several special tax treatment type flags.
Deferred tax
This is when taxes are deferred as a result of tax authority rules and regulations. An authority may specify tax is due at a time later than the invoice date, for example at the point of invoice payment. The tax treatment type for these transactions is marked by D (Deferred) or DI (Deferred Invoice). The difference between D and DI is how they are handled by integrations. Tax amounts associated with a tax treatment type of D are recorded as a statistical value in the host system and not posted to the general ledger. With DI, the associated tax amounts are not statistical values and are able to be posted to the relevant general ledger account, for example Deferred Taxes Payable.
Deferred payment
These are payments received for invoices that had deferred taxes calculated on them and tax is now due to the tax authority at point of payment. The tax treatment type for these transactions is marked by DP (Deferred Payment).

Set special tax treatment types

There are 2 methods for setting special tax treatment types:
  • Tax rules
  • TransEditors
Determination tax rules
You can rely on a standard Determination tax rules to provide special tax treatment types, or you can create custom tax rules that contain a particular tax treatment type.
TransEditors
Instead of relying on tax rules in Determination to flag your invoices for tax treatment types, you can create special TransEditors.
To use this approach, you set up conditions your transactions must meet in order to receive special tax treatment types. If your transactions meet these conditions, the TransEditor assigns an appropriate value (D, DI, and DP) to either the invoice or line level input tag <TAX_TREATMENT>.

Output for special tax treatment

When you flag transactions for special tax treatment types, the output's affected as follows:
  • The output element <INVOICE>.<TAX>.<TAX_TREATMENT> or <LINE>.<TAX>.<TAX_TREATMENT> contains the value D (Deferred), DI (Deferred Invoice), DP (Deferred Payment), or W (Withholding).
  • The <TAX_TREATMENT> value's stored in the Audit database so that reports can be generated based on special tax treatment.
  • Tax advisories are provided in the XML output if only some lines of a transaction receive special tax treatment. You can see these <ADVISORY> tags in your output if you enable the
    Gather Invoice Tax Summaries
     in the company
    Options
     tab or by setting the Configuration value to Y for GATHER_INVOICE_TAX_SUMMARIES.

This article applies to:

  • PRODUCT: ONESOURCE Determination, ONESOURCE Indirect Tax
  • Subject: Authorities

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