Setting Up Tax Processing and Tax Reporting

This chapter provides an overview of Asset Management tax processing and reporting and discusses how to:

(AUS) Define VAT thresholds.
Define tax credits and tax credit status.
(FRA) Define business tax by location.
(CAN, IND, and USA) Define and maintain tax classes.
(IND) Set up tax asset blocks.
(IND) Define tax entities and tax options.
(JPN) Define residual rates.
(USA) Set up retirement basis reduction codes.
(USA) Define qualified investment codes.
Define property tax authorities.

Understanding Tax Processing and Reporting

Asset Management provides a number of tables to help you manage your tax precessing and reporting needs.

(AUS) Define value-added tax (VAT) thresholds.
(IND) Set up asset blocks.
(IND) Define tax entities.
(JPN) Set up residual rate definitions.
Set up retirement basis reduction codes.
Set up qualified investment codes.
Set up property tax authorities.

(AUS) Defining VAT Thresholds

Set up VAT Thresholds using the Thresholds - VAT (ASSET_THRESHOLDS) component, the VAT Defaults (VAT_DFLT_SRCH_DTL) component, .

This section provides an overview of VAT thresholds and discusses how to define VAT thresholds.

Understanding VAT Thresholds

The Asset Thresholds page enables you to store thresholds for a number of adjustment periods to satisfy Australia’s legislative requirements. Under Australia’s “Goods and Services Tax: Division 129 - Making Adjustments For Changes In Extent Of Creditable Purpose,” clients who make a form of supply known as Input Taxed Supply need to track fixed assets utilized in making this type of supply. You can track fixed assets used for Input Taxed Supply from reporting period to reporting period and make adjustments to account for any changes.

Pages Used to Define VAT Thresholds

Page Name	Object Name	Navigation	Usage
Asset Thresholds	ASSET_THRESHOLD	Set Up Financials/Supply Chain, Product Related, Asset Management, Taxes, Thresholds − VAT, Asset Thresholds	Store thresholds for a number of adjustment periods.
VAT Defaults Setup	VAT_DEFAULTS_DTL	Select VAT Default link from the Asset Class definition page.	Specify VAT Defaults Setup.

Defining VAT Thresholds

Access the Asset Thresholds page.

Enter the threshold’s from amount and to amount range, as well as the number of years required for mandatory review.

Note. The system does not validate the range of thresholds that you specify. To satisfy the threshold ranges specified by the legislation, the amount ranges do not overlap.

Keep the following criteria in mind when identifying thresholds:

The minimum threshold is 0.01.
The from amount, to amount, and number of years are required for each row.
The basis from amount must be 0.01 more than the previous basis to amount.
The number of years must be greater in each subsequent row.

Note. For calculation of last date of review, if an asset’s cost is greater than the maximum to amount threshold, the number of years for the maximum to amount threshold is used.

See (AUS) Using Asset Management Options to Meet Australian Requirements.

See Setting Up Asset Classes.

Defining Tax Credits

To define tax credits, use the Tax Credit (TAX_CREDITS) component and the Credit Status (TAX_CR_STATUS) component.

This section discusses how to set up tax credits.

Understanding Tax Credits

Asset Management is delivered with tax credits defined as business incentive credits:

Energy Tax Credit
Regular Investment Tax Credit
Rehabilitation Tax Credit

These credits are based on existing U.S. tax law, and it is recommended that you review the delivered Tax Credit table before adding any credits.

Pages Used to Define Tax Credits

Page Name	Object Name	Navigation	Usage
Tax Credits	TAX_CREDIT	Set Up Financials/Supply Chain, Product Related, Asset Management, Taxes, Credits	Set up your own tax credit tables or modify existing tables.
Tax Credit Status	TAX_CR_STATUS	Set Up Financials/Supply Chain, Product Related, Asset Management, Taxes, Credit Status	Set up credit statuses for tax credits by country.

Setting Up Tax Credits

Access the Tax Credits page.

Reduction Type

Indicates whether a reduction in the cost basis is required. Three codes are provided:

B: Basis reduction

P: Percentage rate reduction

N: No reduction

Credit Rate Percent

Enter the rate of the credit.

Basis Reduction Rate Percent

Enter the corresponding rate to reduce the basis. A basis reduction rate of 100 percent means that there will be no reduction in the cost basis of the asset to which the tax credit rate is applied.

(FRA) Defining Business Tax by Location

Use the Business Tax by Location (ASSET_LOC_RATE) component to define business tax by location.

Asset Management enables you to store tax rates by location. These tax rates are used to calculate and report business tax assessed on the gross value of fixed assets. This taxation method is used in global settings, especially France.

Page Used to Define Business Tax by Location

Page Name	Object Name	Navigation	Usage
Asset Loc Rate	ASSET_LOC_RATE	Set Up Financials/Supply Chain, Product Related, Asset Management, Taxes, Business Tax by Location, Asset Loc Rate	Enter and store tax rates by location. Rates are used to calculate and report a business tax assessed on the gross value of fixed assets in some countries, especially France.

(CAN, IND, and USA) Defining and Maintaining Tax Classes

Use the Tax Class Definition (TAX_CLASS_DEFN) component to set up tax classes.

This section provides an overview of how to use tax classes and discusses how to define tax classes.

Understanding How to Use Tax Classes

Tax class is a classification system established by the U.S. Internal Revenue Service (IRS) to determine the period over which you can expense tax depreciation. The IRS has assigned classes to particular types of depreciable property, and there are assigned rates for each class. The classifications delivered with Asset Management list the available IRS-defined tax classes.

Tax class rates are used in Canada to calculate depreciation as allowed by the Capital Cost Allowance (CCA). Asset pools or classes and CCA rates are set by governmental regulations. In the year that assets are acquired, 50 percent of the normal rate should be used. The value that you enter for an asset tax class for the CCA rate percent is used later when you run a process to calculate the CCA rate.

Tax class is also used to define tax rates by group for processing tax and depreciation in India. The tax group is a subcategory of the tax block in India. Asset Management defines tax blocks in the Asset Block component. Therefore, tax class is a subgroup of the asset block in Asset Management. The tax class is associated with assets in the Profile component and the Express Add component as Guideline Class.

(IND) Using Asset Management Options to Meet Indian Requirements

Page Used to Define Tax Class

Page Name	Object Name	Navigation	Usage
Tax Class	TAX_CLASS_DEFN	Set Up Financials/Supply Chain, Product Related, Asset Management, Taxes, Classes, Tax Class	Set up or review tax classes. Tax Class determines the period over which you expense tax depreciation. The Tax Class table for the SHARE tableset is shipped with guideline class lives for property. Tax Class is informational only and is not used in any calculations. You can set up your own tax classes or use those already set up in the SHARE Tax Class table. Define class and block rate for the tax class. This is equivalent to the tax group for India.

Defining Tax Classes

Access the Tax Class page.

Class Life Range

Lower	Enter the asset lifetime expectancy minimum in a range.
Middle	Enter the asset lifetime expectancy average or middle or range.
Upper	Enter the asset lifetime expectancy maximum in a range.

Class/Block Rate

Asset Block

Enter the asset block with which this tax class should be associated for depreciation and tax reporting in India. Asset tax blocks are defined by the Indian Tax Depreciation Act (Indian Income Tax Act 1961).

Rate % (rate percentage)

(CAN) Canada: Enter the appropriate CCA rate percentage for this tax class to calculate the CCA for Canada.

The Capital Cost Allowance (CCA) is "a tax deduction that Canadian tax laws allow a business to claim for the loss in value of capital assets due to wear and tear or obsolescence" (Canada Customs and Revenue Agency). If you buy a property or a piece of equipment to use in your business, you don't deduct the entire cost of it against your income for that particular year. Instead, you deduct a calculated portion of the expense over a period of years as the property or the equipment depreciates. The Canada Customs and Revenue Agency has assigned classes to particular types of depreciable property, and there are assigned rates for each class.

(IND) India: Enter the tax group rate percentage that will be associated with the asset block and tax entity used to process depreciation and tax reporting for India.

See Also

Calculating CCA Reporting

Using the Global Features of Asset Management

(IND) Setting Up Tax Asset Blocks

Use the Asset Block (ASSET_BLOCK) component to define asset blocks.

This section provides an overview of asset blocks and discusses how to define asset blocks.

Understanding Asset Blocks

Asset blocks are required for India tax reporting. According to the Indian Tax Depreciation Act (Indian Income Tax Act 1961), does not recognize depreciation on individual assets. Instead, it groups similar pools of assets under the concept of a tax block. There are only four blocks of assets prescribed under the act:

Buildings.
Furniture and fixtures.
Machinery and plants.
Intangibles.

Annual tax depreciation is reported to the India tax authority per tax block, per fiscal year. The PeopleSoft system uses the asset block to maintain tax block definitions for India.

Page Used to Set Up Asset Blocks

Page Name	Object Name	Navigation	Usage
Asset Block	ASSET_BLOCK	Set Up Financials/Supply Chain, Product Related, Asset Management, Taxes, Asset Block, Asset Block	Define assets blocks. This is equivalent to the tax block for India.

Defining Asset Blocks

Access the Asset Block page.

(IND) Defining Tax Entities and Tax Options

Use the Tax Entity Definition (TAX_ENTITY_DEFN) component to define tax entities and tax options.

This section discusses how to:

Set up tax entities for Indian tax reporting.
Set up tax options.

The tax entity is the reporting entity for depreciation and taxes in India. It is defined by the asset blocks, tax class tax rates, setID calendar, and business unit and books that are associated with it.

Pages Used to Define Tax Entities and Tax Options

Page Name	Object Name	Navigation	Usage
Entity	TAX_ENTITY_DEFN	Set Up Financials/Supply Chain, Product Related, Asset Management, Taxes, Tax Entity Definition, Entity	Define the tax reporting entity. Tax entity is composed of one or more business units, and tax reporting is required per entity for India.
Tax Options	TAX_ENTITY_ATTR	Set Up Financials/Supply Chain, Product Related, Asset Management, Taxes, Tax Entity Definition, Tax Options	Define the 50 percent rule as it applies for assets. Assets in India are subgrouped separately to include assets that have been in service for more than 180 days in one group and those that have been in service for less than 180 days in another. For assets in service less than 180 days, only 50 percent of normal depreciation rate is allowed (per Section 32).

Setting Up Tax Entities for Indian Tax Reporting

Access the Entity page.

Tax/Reporting Entity

Displays the name of the tax reporting entity that you are defining or working with.

Entity Book

The value selected here defines how to group the tax or reporting entity. All asset books are available regardless of setID.

Calendar SetID

Select the setID for the calendar that you want to associate with this entity book. Once a calendar setID is selected, you are limited to the calendar IDs available within that setID.

Calendar ID

Select the calendar ID from the available calendars for the selected setID.

Business Unit

Enter the business unit to be included in this tax reporting entity from the list of available business units.

Book Name

Enter the asset book name (business unit or book) to be included in this tax reporting entity from the list of available business unit or book definitions.

Calendar

Displays the calendar code.

Currency

Displays the currency code based on the value associated with the book entered.

Conversion Date

The conversion date is equal to the actual date or fiscal year start date of the beginning of asset management operations in India. This determines whether you can modify the opening balance calculated in the first fiscal year. This is used only for tax report entity and not just reporting entity.

Setting Up Tax Options

Access the Tax Options page.

This page defines whether to use the Indian 50 percent rule. Assets owned for less than the specified number of days are depreciated at half of the normal rate, or 50 percent. It also defines whether manual adjustments to the tax depreciation balance inquiry (TAX_DEPR_BAL) page are allowed.

50% rule, assets in service <

Enter the maximum number of in-service days to which the 50 percent rule applies. For example, if the 50 percent rule applies for assets in service less than 180 days, enter 180.

Country

Select the country for which the 50 percent rule applies.

Update on Close Balances

Select one of these options:

Update on Close Balances: Select this option if the calculated closing balance can be manually adjusted.

Update on other amounts: Select this option if other calculated amounts can be manually adjusted.

(JPN) Defining Residual Rates

Use the Residual Rate Definition (RESIDUAL_RATE_TBL) component to define residual rates.

This section lists the page used to set up residual rates for each useful life year of an asset.

This feature is used primarily in Japanese tax reporting.

Page Used to Set Up Residual Rate

Page Name	Object Name	Navigation	Usage
(JPN) Residual Rate Definition	RESIDUAL_RATE_TBL	Set Up Financials/Supply Chain, Product Related, Asset Management, Financials, Residual Rate Definition	Define the different residual rates for each useful life year for Japanese local tax.

Setting Up Retirement Basis Reduction Codes

To set up retirement basis codes, use the Retirement Basis Reduction (TRAN_EXCLUDE_TBL) component.

This section discusses how to define retirement basis codes.

Page Used to Set Up Retirement Basis Codes

Page Name	Object Name	Navigation	Usage
Retirement Basis Reduction	TRAN_EXCLUDE_TBL	Set Up Financials/Supply Chain, Product Related, Asset Management, Financials, Retirement Basis Reduction	Set up retirement basis reduction codes.

Defining Retirement Basis Codes

Access the Retirement Basis Reduction page.

These codes are used when you opt to retire an asset by using its original cost basis adjusted by all non-excluded transactions. In this way, for example, you could exclude any indexed revaluation adjustments.

Note. For this option to work correctly, any transaction type or types that you want to exclude must have unique transaction codes.

(USA) Defining Qualified Investment Codes

To set up qualified investment codes, use the Qualified Investment Codes (QIV) component.

This section provides an overview of qualified investment codes and lists the page used to define qualified investment codes.

Understanding Qualified Investment Codes

When one or more tax credits are taken for an asset, you may need to adjust the basis of that asset before additional credits can be computed. Asset Management uses the Qualified Investment Codes to determine the portion of the asset's basis that qualifies for the tax credit. Eligibility for each code is determined by the effective date compared to the placed-in-service date for the asset. In addition to tax credits, standard Qualified Investment Codes corresponding to a specific tax system and life are included with the delivered tableset.

Page Used to Define Qualified Investment Codes

Page Name	Object Name	Navigation	Usage
Qualified Investment	QUAL_INV	Set Up Financials/Supply Chain, Product Related, Asset Management, Financials, Qualified Investments	Add or modify qualified investment codes. Enter a unique ID to add a new code. Define the life expressed as periods in Compare Life. The life entered here is validated against the asset’s useful life.

Page Name

Object Name

Navigation

Usage

Qualified Investment

QUAL_INV

Set Up Financials/Supply Chain, Product Related, Asset Management, Financials, Qualified Investments

Add or modify qualified investment codes.

Enter a unique ID to add a new code. Define the life expressed as periods in Compare Life. The life entered here is validated against the asset’s useful life.

Defining Property Tax Authorities

Use the Tax Authority (AM_TAX_AUTHORITY) component to define the property taxing authority codes.

Property tax is administered differently based on the governing laws based on the taxing structure of the location of the property.

Page Used to Define Property Tax Authority Codes

Page Name	Object Name	Navigation	Usage
Tax Authority	AM_TAX_AUTHORITY	Set Up Financials/Supply Chain, Product Related, Asset Management, Taxes, Property Tax Authorities, Tax Authorities	Define codes for property tax authorities to be used to associate with taxable property assets.

Tax/Reporting Entity	Displays the name of the tax reporting entity that you are defining or working with.
Entity Book	The value selected here defines how to group the tax or reporting entity. All asset books are available regardless of setID.
Calendar SetID	Select the setID for the calendar that you want to associate with this entity book. Once a calendar setID is selected, you are limited to the calendar IDs available within that setID.
Calendar ID	Select the calendar ID from the available calendars for the selected setID.
Business Unit	Enter the business unit to be included in this tax reporting entity from the list of available business units.
Book Name	Enter the asset book name (business unit or book) to be included in this tax reporting entity from the list of available business unit or book definitions.
Calendar	Displays the calendar code.
Currency	Displays the currency code based on the value associated with the book entered.
Conversion Date	The conversion date is equal to the actual date or fiscal year start date of the beginning of asset management operations in India. This determines whether you can modify the opening balance calculated in the first fiscal year. This is used only for tax report entity and not just reporting entity.