Skip to main content

Solutions

Law firms

Tax, audit & accounting firms

Corporations

Governments

Products

Legal

Trade & supply

Tax, audit & accounting

Corporate tax

Risk & fraud

Books

Recommended products

Questions? We are here to help.
Contact us

Purchase

Buy solutions

Buy books

Contact sales

Questions? We are here to help.

Resources

Insights

Events

Product training

Product communities

Developers

Authorities

Authority tax rules

Determination identifies the taxing authority, then maps the product to a specific rate or tax treatment using the authority's tax rules.

Use a tax rule

Using a tax rule, you can do the following:
  • Link products to tax rates/fees and calculation methods.
  • Take into account:
    • Exemptions
    • Special tax situations
    • Withholding rates
    • Unusual calculation processing
    • Invoice descriptions
note
A
Default/Inherited
 switch on the
Rules
 screen controls which rules are available.
  • Default
     shows each company's own direct rules.
  • Inherited
     shows parent rules alongside child-inherited rules.
The switch resets to
Default
 every time you open a page and it's available on the
Custom
 tab in
Standard Authorities
.
You might need to create a custom rule for a tax holiday not supported by Determination. Rules are evaluated based on their order in the authority's list.
Rules get searched in this order:
  1. Custom rules:
     Rules you create specific to your implementation get evaluated first. You can configure these rules in the
    Rules
     page.
  2. Cascading custom rules:
     Cascading custom rules, shared by authorities of the same tax type, are evaluated next. Configure these rules on the
    Rules
     page.
  3. ONESOURCE Determination rules:
     Evaluated next. These rules can't be changed.
important
Rules get evaluated until a matching rule's found; the 1st matching rule's applied to the transaction.

Match a rule

A transaction's date has to be within a rule's
Start date
 and
End date
 to match. Rule order 1 can apply to different rules with non-overlapping dates. For example, it can be used for:
  1. Start date
     and
    End date
     of 1/1/2020-12/31/2022
  2. Start date
     of 1/1/2023
Transactions have to satisfy configured rule qualifiers before additional matching occurs. If any rule qualifiers don't match, the rule won't be applied. If all rule qualifiers match, additional matching happens.
  • If the rule specifies a product category, the transaction needs to include a product or commodity code that either exactly matches or fits a higher category.
    • For example, a transaction passing a product category of BREAD would match a rule specifying the product category
      FOODSTUFFS
       if the product exceptions list contained the entry
      Goods:FOODSTUFFS:BREAD
      .
  • The rule with the lowest process order that matches all the criteria previously stated gets applied.
  • Set up a catch-all rule with blank fields for product category, tax type, tax code, unit of measure, and exempt reason. Transactions not matching other rules will use this rule's rate.
    note
    The placement of the list is important because this rule will match all transactions:
    • If you place it at the end of the list, it will be applied to all transactions that don’t match higher-ordered rules.
    • If you place it higher in the list, rules following this catch-all rule will never be applied.
  • If the transaction doesn't satisfy any rules, an error message gets generated.
  • If the rule contains a tax type, tax code, unit of measure, and/or exempt reason, transaction values need to explicitly match the rule. If it doesn't, the rule isn't applied.
    note
    • If your company's configured to use the
      IC
       and
      VG
       transaction types, those calculation results will still match with NL rules.
    • IR
       and
      ER
       tax results will still match with RC rules.
    • This preserves backwards compatibility with previously created custom rules and ONESOURCE Determination Content.
    • If you use the tax types (
      ER
      ,
      IR
      ,
      IC
      , or
      VG
      ) on custom rules, you'll need to consider the order of those rules to receive the results.
    .

Exempt reason sources

The exempt reason used to match rules can come from either of these sources:
  • It can be passed in explicitly with the transaction using the <EXEMPT_REASON> XML input element.
  • It can be obtained from an exemption certificate that was used in the calculation. This capability's possible because exemption certificates get selected and applied before rule selection in the tax calculation process.

Rule calculation criteria

Each rule specifies a variety of calculation criteria. At a minimum, rules are required to specify 1 of the following:
  • A rate code from the associated authority's
    Rates and Fees
     page.
  • A no tax indication. If this rule's processed, no tax block gets returned for this rule and a system message will be returned.
  • An exempt indication. If this rule's processed, the entire tax will be exempted and returned as an exempt amount.
If a rate code is specified, select 1 of 14 calculation methods, ranging from basic tax calculations to advanced tax and Brazilian calculations.
Optional rule criteria parameters are:
  • No Tax:
     Indicates that no tax is charged for this rule.
  • Exempt:
     Indicates full exemption.
  • Related Charge:
     Specifies the product referenced by the rule inherits its product taxability from a parent product.
  • Allocated Charge:
     The taxable basis of a line item is adjusted according to the taxability of the non-allocated items in the invoice.
  • Basis Percent fields:
     Specifies the tax calculation will apply the mapped rate to one or more specified basis percentages of the gross amount. For example, if the basis percent is 75 with a gross amount of $100.00 and a rate of 5.00%, $75.00 (100 x 0.75) will be taxed at 5% for a tax amount of $3.75.
  • Input Recovery Amount or Percent:
     Specifies the portion of VAT that's subject to recovery when this rule is applied. It can be an amount or percentage. The default is full recovery.
  • Tax Treatment:
     Specifies this tax calculation's subject to deferred or withholding tax.

This article applies to:

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

Related Content