Home

Tax User Manual - Oracle Documentation

1. Enter Query Scheme Code Description Input By Authorized Modification Date Time Date Time Number L Authorized open You must identify a Tax Scheme that you build with a unique Code and a brief Description A tax scheme is built specifically for a module in Oracle FLEXCUBE For example a scheme with Stock Exchange tax classes would only be relevant to the Securities module When you define a product in a module only those tax schemes that you have built specifically for the module will be available to you How a Scheme Works A class in a scheme will remain effective till another class for the same component but with a different Effective Date is encountered The following example illustrates how the different classes in a tax scheme defined for the same component is applied For example You have defined the following Tax classes only the fields relevant to the example are discussed Tax Class 1 Class Code Brok clas1 Effective 1 January 1999 defined for the associated tax rule Date Basis Brokerage Amount Amount Tax Rate 0 596 defined for the associated tax rule 2 29 ORACLE 2 9 1 2 2 9 2 Tax Class 2 Class Code Brok_clas2 Effective 1 April 1999 defined for the associated tax rule Date Basis Brokerage Amount Amount Tax Rate 0 75 defined for the associated tax rule
2. Authorized Date Time For a rate code you can enter the following details The Basis The basis the coupon amount the cash dividend amount etc on Amount Cur which a tax is calculated is referred to as the Basis Amount You can rency specify the currency of the Basis Amount The Benefi Issuer Tax Rates are specific to markets When maintaining a rate ciary Country value for a code you have to identify the market for which you are defining the rate The Benefi You can maintain unique tax rates for issuers of securities When ciary CIF you maintain a security the system applies the tax rate defined for the issuer If you have not maintained a rate for an issuer the system applies the rate maintained for the country to which issuer belongs The Effective Date The date on which a rate becomes effective is referred to as the Effective Date For a code and Effective Date you can maintain a rate The Tax Cur rency You can specify the currency in which the tax should be applied The Exchange Rate Type and Category If you specify a Basis Amount Currency that is different from the Tax Currency you have to indicate the type of rate standard spot cash etc and the rate category mid buy or sell rate that should be used in the currency conversion The Tax Rate In this field you can enter the actual rate value for a Code for an Effective Date When you associate a rat
3. If the tax component you are building is Enter a Country National Federal tax COUN a Payment Levy sort of tax LEVY a Local tax LOCL a Stock Exchange tax STEX a Transfer tax TRANSAC TION a Transaction tax TRAX a Value Added tax VATA a Withholding tax WITH Defining Issuer Taxes as Classes An issuer tax can be levied the coupon paid or on a cash dividend The issuer of a security determines the tax To process the tax levied on a security you have to maintain Issuer Tax classes An Issuer Tax class can be maintained in its corresponding section of the Tax Class Maintenance screen invoked from the Application Browser Note Please note that it is not necessary to associate tax rules to an Issuer Tax class For an Issuer Tax component you only have to furnish the following details The Association Event The Basis Amount The Rate Code Other operational controls 2 20 ORACLE 2 8 3 2 8 4 Tax Class Maintenance New Enter Query Class Code Class Description Module z Description Transaction Level Tax Issuer Tax Event For Association 2 Basis Component laz Default Rate Code laz Default Waiver Allow Rate Code Amend After Association Amendment Input By Authorized By Modification Date Time Date Time Number W Authorized Ope
4. For example A tax on a Letter of Credit LC can be levied either on the e Outstanding LC amount e Onthe commissions and charges that you earn to process the LC In both cases it is the bank that bears the tax this is an Expense type of tax The tax expense account should be debited and the tax payable account should be credited From this liability account the tax should be later on paid to the government You can invoke the Contract Tax Details screen while you are processing a contract Click Tax button in the contract details screen 2 ORACLE 2 10 1 Tax Details NU Contract Reference Tax Scheme Description Waive All Rule Details I Rule Basis Component Event Waive gt 7 4 b Amount Details Value Date Transaction Date Currency Amount Event Sequence Number You have a choice of waiving tax due to all the Tax Rule s linked to the Tax Scheme applicable to the product and hence the contract or that which is only due to specific Tax Rule s Note Only the tax that has not yet been liquidated can be waived Processing Tax on MM contracts The tax processing for MM contracts would occur as follows e First the Waiver maintenance for Interest Rate Period Amount defined at the at the LD MM product level would be checked The tax would be fully waived if any one of the
5. Date Component Transfer amount Tax Rate 10 Tax Rule 2 Rule Code TaxP2 Effective 1 April 2002 Date Component Transfer amount Tax Rate 12 Tax Rule 3 Rule Code Taxl1 Effective 1 Jan 2002 Date Component Charges Earned Tax Rate 10 Tax Rule 4 Rule Code Taxl2 Effective 1 April 2002 Date Component Charges Earned Tax Rate 12 When all these rules are linked to a single tax scheme the tax will be applied in the following manner For the Transfer Amount If you initiate a transfer from 1 Jan 2002 to 31 Mar 2002 the transfer amount will be charged at 1096 If you initiate a transfer from 1 April 2002 onwards the transfer amount will be charged at 12 This is because after Tax Rule 1 Tax Rule 2 is for transfer and it has an 2 27 ORACLE 2 9 3 2 10 Effective Date of 1 2002 All transfers will continue to be taxed at 12 till another rule for the transfer amount with a different Effective Date is added to the scheme For the Charges Earned The charges will also be taxed in the same manner as the transfer amount as two rules have been linked to the Tax Scheme that have exactly the same Effective Date and rates as the ones for the transfer amount Note The basis component on which the tax should be applied principal interest transfer amount etc is specified through the Tax Scheme Maintenance screen Tax Schemes too are linked to a product through this screen You can invoke this
6. following conditions was satisfied The Interest rate pertaining to Interest Rate Code defined in the Tax Definition of LD MM product is more than the contract interest rate for the Basis Amount The interest period for the current interest being liquidated is more than the interest period defined in the Tax definition of LD MM product This would be applicable only for deposit and borrowing type of products total interest amount on which tax has to be computed is less than the minimum interest amount defined in the Tax Definition of LD MM product This is also applicable for deposit and borrowing type of products 2592 ORACLE Tax category is linked to a Tax Rule and the Waiver parameters have not been defined then a configurable override would be shown e Incase the Waiver conditions defined are not satisfied the tax computation would be done as follows This computation would be done only for Deposit LD and Borrowing MM type of products First the actual basis amount would be arrived at based on the Basis Percentage defined in Tax Rule Maintenance This Basis Amount would be rounded using the currency rounding parameters Then the availability of Tax Free Allowance at the contract level would be verified If the Limit has been defined then availability of the same would be verified in the sequence in which it has been defined In case the Tax Free Allowance has not been defined at the contract level th
7. ond tier slabs When this tax rule is applied on a deal tax will be calculated depending on the component amount example brokerage paid as follows If the component amount is USD 5 000 it falls in the first tier The tax amount will be calculated in the following manner Amount USD 5 000 Tax 0 0596 of USD 5 000 USD 2 5 If the component amount is USD 15 000 it falls in the second tier The tax will be calculated in the following manner Amount USD 15 000 Floor Charge 5 0 Amount to be taxed at 0 06 USD 5 000 Component Amount the floor amount of the second tier Tax USD 3 5 USD8 If the Component Amount is USD 30 000 it falls in the third slab tax amount will be calculated in the following manner Component Amount USD 30 000 Floor Charge Y 11 0 4 1 ORACLE 2 5 2 5 1 Amount to taxed at 0 08 USD 10 000 Component Amount the floor amount for the second tier Tax Amount USD 8 11 USD 19 Maintaining FATCA Withholding Rules If a with holdable payment is to be made to a recalcitrant customer or to a non participating foreign financial institution it is necessary to withhold 30 of the with holdable payment and transmit the rest to the beneficiary You can define the unique rule using Withholding Rule Maintenance screen To invoke this screen type TADFATTX in the field at the top right corner of the Application to
8. When these classes are linked to a single tax scheme the tax will be applied in the following manner e From 1 January 1999 to 31 March 1999 the brokerage paid on contracts will be taxed at 0 596 From 1 April 1999 onwards the brokerage paid will be taxed at 0 75 e Brokerage will continue to be taxed at 0 75 till another class with a different Effective Date is added to the scheme Putting a Component in a Scheme on hold You can choose to keep one or more tax components in a scheme on hold When you associate the scheme with a product those tax components that are on hold will not apply on contracts entered under the product This status can be changed at any time Defining a Money Taxation scheme Any transaction on which tax is applicable is linked to a Tax Scheme A Tax Scheme describes the method in which the tax has to be applied on a transaction A tax scheme can have a number of Tax Rules linked to it The attributes of all these rules will be applied on the transaction Thus a Tax Rule is made applicable on a contract through the Tax Scheme For instance let us assume we are building a tax scheme which should be used for the Funds Transfer module of Oracle FLEXCUBE You have defined the following Tax Rules only the fields relevant to the example are discussed 2 26 ORACLE Tax Rule 1 Rule Code TaxP 1 Effective 1 Jan 2002
9. at the bank parameter level will be used to book the FT contract Ifthe beneficiary account is in another bank then the Referral Outgoing FT product maintained at the bank parameter level will be used to book the FT contract If the decision is Y WITHHOLD the debit account will be the Escrow GL and the Credit Account will be Tax Payable GL The Referral Internal FT product maintained at the bank parameter level will be used to book the FT contract The authorization status of the FT contract will be A authorized The contract reference number of the FT contract will be updated in the referral records transfer reference number field fthe decision status is C CANCELLED and the referral status is CLOSED then on authorization only authorization status will change to A and checker ID and date stamp will be updated Fetch and Cancel Only authorized referral records that have decision status as WITHHOLD NO WITHHOLD can be unlocked If an authorized referral record has decision status as CANCELLED and referral status as CLOSED it cannot be unlocked for further changes An authorized referral record that has decision as WITHHOLD NO WITHHOLD and referral status as CLOSED can be unlocked and the decision status changed to C CANCELLED No other decision WITHHOLD to NO WITHHOLD or vice versa is permitted On saving the change following steps will be followed Ifthe referral record has a transfer reference
10. basis for the Tax Currency is selected as Specific Exchange Rate Type Rate Type When maintaining a tax rule you must specify the type of exchange rate that you would like to use to compute tax At your bank you may have defined different types of exchange rates For example you may have defined a Central Bank Rate a Standard Rate a Cash Rate a Travelers Check Rate etc In Oracle FLEXCUBE these rates are referred to as Rate Types Rate Code If you have specified that tax is to be computed as a percentage of the taxable amount you should also specify if the rate to be used is e Buy Rate e Sell Rate e Mid Rate The rate value corresponding to the Rate Type will be applied to the Basis Amount as per the application basis defined slab or tier Basis Percentage You need to specify the factor for computation of the taxable amount The basis percentage should be greater than 0 and less than or equal to 100 The basis amount would first be multiplied by this percentage to arrive at the actual basis amount on which tax needs to be computed The reciprocal of the same factor would then be applied to the calculated tax amount to arrive at the actual tax amount Rounding Details Rounding Option for Calculation Currency You need to specify the rounding option to be used for conversion of the amount to calculation currency It could either be Currency Default or Specific 8 ORACLE Curre
11. for any loss costs or damages incurred due to your access to or use of third party content products or services Contents Preface ee eae ee eee ee A 1 1 1 1 oio 1 1 1 2 mM 1 1 1 3 Documentation 1 1 1 4 Organization e erret teet 1 1 725 Organization eb 1 1 T Glossary of ICONS cec et ete pepe tm edt ed Nei torn 1 2 7 47 Related Documents A An RE RR 1 2 Building Tax Components 110 2 1 2 1 Introduction iion dtum Chai nate v 2 1 2 2 Steps Involved in Processing 2 1 2 3 Maintaining Tax 2 1 2 4 Lex RUles iere itr RD 2 3 2 4 1 Currency in which the Tax has to be 2 5 2 4 2 Exchange Rate 221 5 00 0 diiit dba riadni tiaan indai diiidan 2 6 2 4 3 Rounding Details 5 e aee pite d oa nin 2 6 2 44 Application 2 0 01 200000000000000 2 8 2 445 d Ra Ra Va E 2 8 2 4 6 Tax SIabuitscsu itia t RH e Lee o e p t Pea bad 2 9 2 5 Maintaining FATCA Withholding 2 11 2 5 1 Spe
12. maintenance would have to be controlled operationally by the Bank e If the interest amount does not fall under the above waivers then the system will start the calculation process for the tax amount system will apply the of the Basis Amount for tax calculation This would give the amount on which tax has to be calculated The would be arrived at from the maintenance at the tax formula level After computing this amount the system would apply the rounding rules defined for the Basis Amount for this amount e the Basis is arrived at the system would look into the Customer Account Customer Level Allowance Limit for the Tax Cycle defined This would be in the system as a separate Maintenance The System would first look into the table where the Customer Account Limit is maintained for the customers If this is not found then the 289 ORACLE system would look into the Customer Allowance Limit Maintenance and get the Customer Level Limit maintained Once the value of the Allowance Limit is arrived at the system would deduct this from the Basis Amount obtained after applying the Basis and arrive at the Taxable Amount e system would update the Amount Utilized in a separate data store for Utilization of the Limit This would happen online Onthis amount only the system would apply the Tax Rate and compute Tax Amount e After calculating the Tax Amount the system would round the Tax Amount based
13. minimum and maximum amount limits Note The minimum and maximum limits apply for specific rules linked to a Tax Scheme and not for the entire scheme Tax Flat If you opt to calculate tax as a flat amount choose the Flat option Rate You can specify the percentage in the Rate field This Rate is applied on the amount to be taxed to calculate the tax amount Exemption Allowed Deposit Interest Retention Tax DIRT is payable on interest on deposits and accounts Customers belonging to certain customer categories can be exempt from paying DIRT 28 ORACLE 2 4 6 As part the DIRT exemption maintenance you need to indicate such deposits and accounts which will not attract DIRT While doing so you will have to mark off specific tax components which you do not wish to be applicable to the account deposit In order that a particular tax component is available for marking off as non applicable during DIRT exemption maintenance you will have to select the exemption allowed option for that component while maintaining its tax rule Cumulative There are two ways of applying tax e Cumulative Non cumulative In a cumulative structure the rate of tax will be calculated in a cumulative manner where the tax of the previous slab is added to the tax of the next In a non cumulative structure the tax of the previous slab will not be added to the tax of the next slab Only the rate applicable to that particula
14. the Rounding Rule is Truncate the actual taxable amount would be EUR 29 The tax amount computed would be EUR 29 30 100 EUR 8 7 4559 ORACLE On applying the rounding rule Truncate the tax amount would be EUR 8 Now the Inverse of Basis Percentage would be applied to get the final tax amount The final tax amount thus would be EUR 8 100 50 EUR 16 Now the Customer Tax Group Waiver of 20 would be applied on the net tax amount The waived amount would thus be EUR 16 20 100 EUR 3 2 Thus the Net Tax Amount EUR 16 3 2 EUR 12 8 This is the final tax amount This tax amount would again be rounded using the tax currency rounding rule Truncate Thus the final tax amount to be charged to the customer would be equivalent of EUR 12 2 11 Note on Tax Processing for Rollovers Instead of liquidating a contract on maturity you can roll it over into a new contract The outstanding principal of the old contract can be rolled over with or without the interest outstanding on it When a contract is rolled over renewed it is processed in the following manner e Original contract is liquidated e Anew contract is initiated 2 11 0 1 Specifying Rollover Tax Details for the product In the Product Rollover Details screen you should specify the following tax details Whether tax has to be applied on the rolled over contract For tax to be applicable on a rolled over contract e It should be applicable to the
15. value will be returned from the FATCA Obligation record for the obligation number contract reference number or portfolio ID The system data element will be FATCA US SOURCED e Grandfathered Status This will be the grandfathered status of the obligation This value will be returned from the FATCA Obligation record for the obligation number Contract 4712 ORACLE Reference Number or Portfolio ID system data element will be FATCA_GRANDFATHERED e Module Code The module from where the tax is being evaluated This value will be returned by a system data element called FATCA MODULE CODE e Amount Tag The basis amount s amount tag Basically the amount tag which appears as the basis amount when the tax rule is linked in the product This value will be returned by a system data element called FATCA AMOUNT TAG e Transaction Code The transaction code of the basis amount tag transaction This value will be returned by a system data element called FATCA TXN CODE e Currency The currency in which the transaction is being posted This value will be returned by a system data element called FATCA CCY CODE e External Customer Indicator This indicates if the beneficiary customer account is held by a financial institution that has asked to be withheld against This value will be returned by a system data element called FATCA EXT CUST 2 6 Viewing FATCA Withholding Rules You can view the FATCA withholding rules the W
16. E 2 8 5 You can define a rate code and enter brief description for it in the Rate Code Maintenance screen You can invoke this screen by typing TADRTCD in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button Tax Rate Code Maintenance E Enter Query Rate Code Rate Code Description Country Code Country Code Description Input By Authorized By Modification Date Time Date Time Number W Authorized Open Since tax rates would vary across markets you can define rate codes specific to markets countries Furnishing the Rate Values for a Code The actual rate values for a rate code can be maintained in the Tax Rates Input screen You can invoke this screen by typing TADRATE in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button 2 22 ORACLE Tax Rates Input New Enter Query Rate Code Basis Amount Currency Beneficiary Country Beneficiary Customer Number Exchange Rate Type Tax Currency Effective Date Exchange Rate Category Tax Rate Rate Code Description Currency Description Beneficiary Country Name Beneficiary Customer Name Rate Type Description Tax Currency Name Mid Input By Date Time Modification Number Authorized
17. Exemption Details screen from the Application Browser You can invoke this screen by typing TADACMNT in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button From the list of values select the contract that you wish to specify as DIRT exempt Those tax components attached to the contract for which the exemption allowed option has been selected while maintaining tax rules are displayed 238 ORACLE Refer to the Specifying Tax Exemption section earlier this chapter for details on marking tax components for exemption Select the components that you wish to be waived for the deposit For each component that you mark off as waived you can select a reason from the pre shipped list of values and also enter additional information as text 6 39 ORACLE 3 1 3 Reports Tax Payable Report The Tax Payable Report gives details of all taxes that are to be paid over a period in time You can specify the period for which you require the report when you invoke the report function In the Application Browser this report is available under the Modularity Tax module To invoke this screen type TARAYABL in the field at top right corner of the Application tool bar and click the adjoining arrow button Tax Payable Report Record preferences Rule Account From Date To Date ReportFormat PDF Printer At Client Report Output Print Printer Tax P
18. In order to waive DIRT on interest earned on CASA you have to first build the DIRT exempt SDE into an interest rule build an interest product using that rule and attach the product to the relevant account Refer to the Maintaining System Data Elements and Maintaining Interest Rules chapters of the Interest and Charges user manual for details on the above Invoke the DIRT Exemption Details screen from the Application Browser DIRT Exemption Details E New Enter Query Account Number Account Details Effective Date Dirt Exempt Reason Text Additional Text Input By Authorized By Modification Date Time Date Time Number Authorized Open Select the relevant account number which you wish to specify as DIRT exempt from the list of values Select the DIRT Exempt option to mark the account for exemption from DIRT on interest earned You have to enter the date from which DIRT exemption is to take effect You also need to select the reason for DIRT exemption from the list of values built into Oracle FLEXCUBE Additionally Oracle FLEXCUBE gives you the facility for capturing any pertinent additional information as text You need to visit this screen in order to change the DIRT exempt status of any customer account Exempting DIRT on Interest on Deposits For marking term deposit contracts as DIRT exempt invoke the DIRT
19. Tax User Guide Oracle FLEXCUBE Universal Banking Release 12 0 3 0 0 Part No E53393 01 April 2014 ORACLE Tax User Guide April 2014 Oracle Financial Services Software Limited Oracle Park Off Western Express Highway Goregaon East Mumbai Maharashtra 400 063 India Worldwide Inquiries Phone 91 22 6718 3000 Fax 91 22 6718 3001 www oracle com financialservices Copyright 2007 2014 Oracle and or its affiliates All rights reserved Oracle and Java are registered trademarks of Oracle and or its affiliates Other names may be trademarks of their respective owners U S GOVERNMENT END USERS Oracle programs including any operating system integrated software any programs installed on the hardware and or documentation delivered to U S Government end users are commercial computer software pursuant to the applicable Federal Acquisition Regulation and agency specific supplemental regulations As such use duplication disclosure modification and adaptation of the programs including any operating system integrated software any programs installed on the hardware and or documentation shall be subject to license terms and license restrictions applicable to the programs No other rights are granted to the U S Government This software or hardware is developed for general use in a variety of information management applications It is not developed or intended for use in any inherently dangerous applications including
20. aintained only if tax rules of your country require maintenance of tax allowances and tax waivers for customers Description Enter a tax category along with a description This becomes a valid tax category maintained in the system Aggregation Required You need to indicate whether or not aggregation of tax for all transactions under the selected Tax category is required If this option is checked the entire tax allowance utilized by the customer is calculated even if it exceeds the allowable limit for that tax period If this option is unchecked the tax allowance utilized by the customer is calculated only till the maximum amount of the allowable limit is reached Consolidated Certificate Required You need to indicate whether or not Consolidated Tax Certificate is required for all transactions in a given tax cycle This option would work in conjunction with a similar option in the Customer Information Maintenance screen and the Tax Details screen accessed from the Branch Parameters Details screen The message type for consolidated tax certificate would be CONSOL_TAX_CERT Depending on the periodicity maintained at the branch level the system will generate the Consolidated Tax Certificate for a customer if Consolidated Tax Certificate Generation is required at the Customer level and the same is maintained at the Tax Category level There is a pre shipped advice format for generating a Consolidated Tax Certificate The certificate will be pr
21. applications that may create a risk of personal injury If you use this software or hardware in dangerous applications then you shall be responsible to take all appropriate failsafe backup redundancy and other measures to ensure its safe use Oracle Corporation and its affiliates disclaim any liability for any damages caused by use of this software or hardware in dangerous applications This software and related documentation are provided under a license agreement containing restrictions on use and disclosure and are protected by intellectual property laws Except as expressly permitted in your license agreement or allowed by law you may not use copy reproduce translate broadcast modify license transmit distribute exhibit perform publish or display any part in any form or by any means Reverse engineering disassembly or decompilation of this software unless required by law for interoperability is prohibited The information contained herein is subject to change without notice and is not warranted to be error free If you find any errors please report them to us in writing This software or hardware and documentation may provide access to or information on content products and services from third parties Oracle Corporation and its affiliates are not responsible for and expressly disclaim all warranties of any kind with respect to third party content products and services Oracle Corporation and its affiliates will not be responsible
22. ayable Report The parameters specified while generating the report are printed at the beginning of the report The contents of this report are discussed under the following heads Header The Header carries the title of the report information on the branch code the ID of the user who generated the report the date and time at which it was generated the branch date the modules covered in the report Body of the Report The following details are displayed in the report Rule The rule of the transaction Account The account class of the transaction Currency The currency of the transaction From The period of the transaction from when the tax has to be paid To The period of the transaction till when the tax has to be paid l ORACLE Reference The contract reference number Number Value Date The value date of the transaction Amount The amount payable 3 2 ORACLE T _ TADCATG TADRATE 4 1 4 Function ID Glossary E 2 22 E 2 3 TADSCHEM 2 24 TADTAXCL 2 17 TARAYABL 3 1 ORACLE
23. ce of the customer specific tax rules can be applied Tax Category Various Tax categories open and authorized are maintained in the system Specify the tax category from the option list provided for the given Tax Rule If the tax category is not maintained then the tax booked under this Tax Rule will not be considered for tax waiver tax allowance processing However normal tax processing as it happens today in Oracle FLEXCUBE will continue to happen Effective Date Every tax rule is associated with an Effective Date On the specified Effective Date the rule becomes applicable When more than one rule is linked to a Tax Scheme a rule will be applied till the next rule for the same component with a different Effective Date is encountered FATCA Tax Rule Check this box to indicate that the tax rule maintained is a FATCA tax rule This field is enabled only if the FATCA Applicable field at bank level is enabled If the tax rule is marked as a FATCA tax rule then the system will create a FATCA withholding rule using FATCA withholding rule maintenance which will be linked to the tax rule At the time of tax computation the system will first evaluate the withholding rule Based on the outcome of the withholding rule the system will compute the tax FATCA Rule Specify the FATCA validation rule that needs to be applied to evaluate the FATCA tax Currency in which the Tax has to be Calculated This can be the local currenc
24. cessing Tax on MM contracts 00000 2 0 0000000000000 2 32 2 10 2 Processing Tax on Customer Accounts 2 1 00000000000000000 0008 2 33 2 11 A Note on Tax Processing for 2 36 2 12 Specifying Exemption of Tax on Interest Earned on accounts deposits 2 37 2 12 1 Features of Application of DIRT enne 2 37 2 12 2 Exempting DIRT on Interest for Current Savings Accounts CASA 2 38 2 12 3 Exempting DIRT on Interest on Deposits 2 38 iino e 3 1 4 3 1 Tax Payable Report 3 1 1 Payable oi aa d ite HE RUE Ae deed Function ID Glossary 1 1 1 Introduction This manual is designed to help you maintain and process taxes on the contracts you process in Oracle FLEXCUBE You can further obtain information specific to a particular field by placing the cursor on the relevant field and striking lt F1 gt on the keyboard 1 2 Audience This manual is intended for the officers at your bank who set up tax components 1 3 Documentation Accessibility For information about Oracle s commitment to accessibility visit the Oracle Accessibility Program website at http www oracle com pls topic lookup ctx acc amp id docacc 1 4 Organization This manual is organiz
25. cifying System Data Elements 2 11 2 5 2 Specifying Expression Builder sse 2 12 2 6 Viewing FATCA Withholding 2 13 2 7 Processing FATCA Tax for Referred Transactions 2 14 2 8 Maintaining Tax Components as 2 16 2 8 1 Defining Transaction Level Taxes as 2 17 2 8 2 Defining Issuer Taxes as 9900 99 2 20 2 8 8 Defining the Events and the Basis Amount sss 2 21 2 8 44 Maintaining Rate Codes and their 2 21 2 8 5 Furnishing the Rate Values for a Code 2 22 2 8 0 Associating a Rate Code with an Issuer 5 2 24 2 9 Grouping Tax Components into a Scheme 12 2 24 2 9 1 Defining Securities and Derivative Taxation 2 24 2 9 2 Defining a Money Taxation scheme 2 26 2 9 8 Features of Tax Scheme Maintenance Screen 2 28 2 10 Linking a Tax Scheme to a 2 28 2 10 1 Pro
26. d to the Government due to the transactions that you enter into with your customers This type of tax is processed as an Expense type of tax whereby you book the tax component into a Tax Expense account to be paid to the Government You can also process tax as a Withholding type of tax where you debit the customer account and credit the tax component into a Tax Payable account to be paid to the Government on the customer s behalf Depending on the laws in your country you can define tax as an expense type of tax ora withholding type of tax Steps Involved in Processing Tax The following steps are involved in processing tax e Defining Tax Rules lt XREF gt e Defining Tax Classes lt XREF gt e Defining Tax Schemes lt XREF gt e Associating a Product with a tax scheme lt XREF gt Maintaining Tax Category You need to maintain valid Tax Categories in the system in order to apply tax on products or contracts You can invoke the Tax Category Maintenance screen by typing TADCATG in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button New Enter Query Tax Category Description Aggregation Required Consolidated Certificate Required Individual Certificate Required Input By Authorized By Modification Date Time Date Time Number W Authorized Open a1 ORACLE Tax Category Tax category needs to be m
27. e code with an issuer tax class the rates corresponding to Effective Dates will be picked up and applied 2 23 ORACLE 2 8 6 2 9 2 9 1 Associating Rate Code with an Issuer Class The tax that applies on a coupon would be calculated at a specific rate When building an issuer tax component you have to specify the rate at which tax should be computed for a coupon When you associate a rate code that you have maintained with a component the rates corresponding to the component will be picked up A rate code identifies the rate that applies on a tax A rate code is built with attributes such as the following e The tax currency basis amount currency e Effective Date e Exchange Rate Type and Category Tax for the component to which you link a rate code will be computed by default on the basis of these properties When maintaining a security however you can choose to waive the rate code altogether Grouping Tax Components into a Scheme A Tax Scheme consists of a set of Tax Rules that will be made applicable on a product Tax schemes can be two types e Schemes which cater to Money Taxation These tax schemes involve a combination of tax rules only In Oracle FLEXCUBE money taxation schemes are made applicable on deposit funds transfer foreign exchange money market and trade finance transactions e Schemes which cater to Securities and Derivative taxation These tax schemes inv
28. e event and the Individual Tax Certificate is required for the Customer The tax certificate will be generated only if the Individual Certificate Required option is checked at the Customer and Branch levels and maintained in Tax Category For income other than through interest on customer accounts the advice format can be maintained This advice format can be mapped to the products For income through interest on customer accounts there is a pre shipped advice format from the system The format of the advice can be modified However the name of the advice format is pre shipped and cannot be modified The following tags will be available for advice generation for individual transactions Tag Name Description Data Type TXNNUMBER The contract reference number Alphanumeric 16 char acters CALCDATE The tax calculation date Date COMPCCY The interest component currency Alphanumeric 3 char acters TAXCCY The tax currency Alphanumeric 3 char acters TAXAMTIN The tax amount in tax currency Number TAXCCY INTERESTAMT The interest amount basis amount on Number which the tax has been calculated Defining Tax Rules A tax rule identifies the method in which a tax component a Stock Exchange tax a Local tax etc is calculated You can build tax rules in the Tax Rule Maintenance screen You can invoke this screen by typing TADRULEM in the field at the top right corner of the Application tool bar a
29. e same would be verified at the Customer level If the Tax Free Allowance is available the same would be reduced from the taxable amount Basis Amount to arrive at the Net Taxable Amount If the contract currency and the tax free allowance currency are different the Basis Amount would be converted to the Tax free Amount currency The Net Taxable Amount arrived at here would again be rounded up using the Currency Rounding Parameters The taxable amount Basis Amount would then be converted into the Calculation Currency Basis Amount Currency in case the Calculation Currency defined in the Tax Rule is different from the contract currency The Taxable Amount Basis Amount thus computed would be rounded using the rounding parameters defined for the Calculation Currency Even if the taxable amount is in the same currency as Calculation Currency rounding would be done using the Calculation Currency rounding parameters defined in the Tax Rule The appropriate Tax Rate would be picked up based on the slabs defined in the Tax Rule and the tax would be computed on the rounded taxable amount The tax amount thus computed would then be converted into Tax Currency if the tax currency is different from the Calculation Currency The converted amount would then be rounded using the Tax Currency Rounding parameters The Basis Percentage defined in the Tax Rule would be applied again to the tax amount to compute the actual tax amount The inverse of Ba
30. ed as follows About this Manual gives information on the intended audience It Chapter 1 also lists the various chapters covered in this User Manual Building Tax Components explains the process of maintaining the Chapter 2 tax details which arise due to the transactions handled with custom ers Reports provides a list of reports that can be generated in this mod Chapter 3 ule and also explains their contents Function ID Glossary has alphabetical listing of Function Screen ID s used the module with page references for quick navigation 1 5 Organization This manual is organized as follows About this Manual gives information on the intended audience It also lists Chapter 1 the various chapters covered in this User Manual Chapter 2 Building Tax Components explains how tax rules tax classes and tax P schemes are defined in Oracle FLEXCUBE 1 ORACLE 1 6 1 7 Glossary of Icons This User Manual may refer to all or some of the following icons Icons Function bd Exit Add row FS Delete row Fasl Option List Related Documents For further information on procedures discussed in the manual refer to the Oracle FLEXCUBE manuals on e Common Procedures e Products 1 2 ORACLE 2 1 2 2 2 3 2 Building Tax Components Introduction This chapter explains the processing of tax to be pai
31. es the exemption certificate and again beyond the validity of the exemption certificate Therefore it is possible for a customer account or deposit to keep moving in and out of DIRT exempt status Such movements are tracked by Oracle FLEXCUBE s audit trail Note DIRT exemption is always with prospective and not retrospective effect For example The Sisters of Charity a customer belonging to the DIRT exempt category opens a three year term deposit on 01 Jan 2003 but does not produce the exemption certificate immediately At the time of yearly capitalization on 31 Dec 2003 DIRT is deducted from the interest on the deposit and the net amount Principal Accrued Interest DIRT is capitalized The Sisters of Charity produces the exemption certificate on 15 Jan 2004 the certificate being valid from 01 Jul 2003 The DIRT deducted for the year ended 31 Dec 2003 is not rolled back DIRT exemption applies for the period starting 15 Jan 2004 The exemption certificate produced by The Sisters of Charity is valid up to 15 Aug 2004 DIRT becomes applicable once again from 16 Aug 2004 So the amount rolled over during yearly capitalization on 31 Dec 2004 is zu ORACLE 2 12 2 2 12 3 Rolled over amount as 31 Dec 2003 Interest for the year 2004 DIRT for the period 01 Jan 2004 to 14 Jan 2004 DIRT for the period 16 Aug 2004 to 31 Dec 2004 Exempting DIRT on Interest for Current Savings Accounts CASA
32. hile for another product the same rule could be used to apply tax on the principal if the method of tax calculation is the same for both the components A Tax Scheme is applicable on a product by linking the two rates mentioned above Once the Tax Scheme is specified for linkage you should indicate the component on which the two rules are applicable the event when the tax should be liquidated and the type of tax withholding or expense To specify the linkage of a tax scheme to a product you have to invoke the Product Tax Linkage Definition screen from the LD MM Product Definition screen Click Tax button in the respective Product Definition screen Corporate Deposits Product Tax Details Scheme Details Product Description Product Code Scheme Description Tax Scheme Default Frorn Schema Tax Details 1 Of 1 Tax Rule Tax Component Basis Amount Tag Event Tax Type Currency Details 1 1 Currency Maximum Interest Period for Tax Period Unit Minimum Interest Amount for Tax 2 10 0 1 Features of the Product Tax Linkage Definition screen The following are the features of the Product Tax Linkage definition screen Tax Component and Basis Component Tax can be applied on the basis of any component that is taxable according to the laws in your country This component is called the Basis Component The method of tax application defined for the Tax Rule will be appl
33. ied on this component Event You should specify the event for which the tax is applicable For example if you specify that the tax is to be applied upon initiation of the contract then the liquidation entries for tax will be passed when the contract is initiated If you specify the event as the Maturity of the contract the tax will be liquidated upon Maturity of the contract 2729 ORACLE 2 10 0 2 Similarly if you specify that the tax be to be applied at the time the commissions are collected from the customer then the entries for tax will be passed when the commission is paid Tax Type The type of tax decides the bearer the tax It could be the bank or the customer A customer bears withholding type of tax and the tax component is debited to the customer s account The bank bears an expense type of tax and the tax component is booked to a tax expense account Note The tax details specified for a product will be automatically applied on all contracts involv ing the product However while processing a contract you can waive the application of all or specific tax rules for the contract Minimum Interest Rate Code for Tax This field is appears only for LD and MM product maintenance You need to specify the rate code that will be used to determine the minimum interest rate for the tax to be applicable If the rate code is not defined then the minimum interest rate will be taken as 0 Specifying Currency Details Cur
34. ing the net value of a contract choose the Net Consideration option If you choose to include the tax component in the net value of the contract you should also indicate if the tax component is to be added or subtracted while calculating the net consideration amount Assume you buy securities from a counterparty The different components of the deal are e value of the securities USD 50 000 e The applicable tax USD 1 000 e The accrued interest USD 1 500 e The applicable charge USD 50 If you choose to include the tax component when calculating the value of the deal choose the Net Consideration option Indicate if the component is to be Added or Subtracted Result If you choose the Net Consideration option and decide to add the tax component to the value of the deal the net value of the deal would be USD 52 550 If you choose the Net Consideration option and decide to subtract the tax component from the value of the deal the net value of the deal would be USD 50 550 If you do not choose the Net Consideration option the net value of the deal would be USD 51 550 Defining the Events and the Basis Amount Each contract that your bank enters into goes through different stages each of which is referred to as an Event in Oracle FLEXCUBE A securities deal for instance goes through different stages in its life cycle such as e Deal Booking e Money Settlement of Securities Deal e Settlement of Securities Deal e Reversal of Sec
35. intained at the ELSE part This will be the default return value for the rule Condition Specify the condition for the rule For instance If module is MM and the amount tag is MMCRINT_LIQD and transaction code is INT and currency code is USD then FATCA withholding is required then the condition should be as follows IF MODULE_CODE MM AND AMOUNT_TAG MMCRINT_LIQD AND CCY_CODE USD and TXN_CODE INT and DRCR_IND D Return Value Select the return value from the drop down list Following are the options available in the drop down list Withhold Withhold e Refer System Data Elements Select the SDEs from the drop down list you can select one or more SDEs to be used in the rule Each system data element must appear only once in the list Operators Select the type of operator from the drop down list The rule would use the following elements e Customer Type The customer type for beneficiary customer This will return values Individual C Corporate or B Bank The system data element will be FATCA_CUST_TYPE which will be returned from the customer type in the entity FATCA classification record e Recalcitrant Status The recalcitrant status of the beneficiary customer The value will be returned from the Customer FATCA classification record The system data element will be FATCA RECALCITRANT e US Sourced Status This will be the US Sourced status of the obligation This
36. inted on a Year to Date basis The Certificate would include tax due on transactions for LD MM and IC products Following elements will be available for advice generation for tax summary Element Name Description Data Type CUSTOMERNO The customer number for which the Alphanumeric tax summary certificate is printed CUSTOMER The customer name Alphanumeric NAME FROMDATE The from date for which the certifi Date cate is generated TODATE The to date for which the certificate Date is generated TXNNUMBER The contract reference number Alphanumeric 16 charac ters CALCDATE The tax calculation date Date TAXCCY The tax currency Alphanumeric 3 charac ters TAXAMTIN The tax amount in tax currency Number TAXCCY 2 2 ORACLE 2 4 INTERESTAMT The interest amount basis amount Number on which the tax has been calcu lated Individual Certificate Required You need to indicate whether or not Individual Tax Certificate is required for individual transactions This option would work in conjunction with a similar option in the Customer Information Maintenance screen and the Tax Details screen accessed from the Branch Parameters Details screen The message type for individual tax certificate would be IND_TAX_CERT For contracts that have tax defined on interest liquidation an individual tax certificate will be generated by the system if the Tax Certificate is mapped as an advice for th
37. ious tier limit will be displayed This need not be specified for the first limit in the tier This amount is used to calculate the tax along with the Floor Charge Floor Charge The Floor Charge is applicable only if the Amount Basis is a tier This is the tax amount to be considered for the previous tier limit This amount is used along with the Floor Amount that you specify to arrive at the tax ap ORACLE The floor charge need not be specified for the first limit in the tier This amount may not always be the same as the amount calculated using the Basis Amount To and the Rate for the previous slab However if not specified the Floor charge is calculated based on the rate for the previous tier and the Floor amount for the current tier An example for the calculation of tax based on a tier structure Tax is applied on the deal amount of a deal based on the following structure e gt 0 lt 10 000 0 05 gt 10 000 lt 20 000 0 06 gt 20 000 0 08 The following will be the specifications the Tax Rule Maintenance screen Basis Amount e Floor Amount Floor Charge 0 10 000 upper limit of the first 0 05 0 0 tier 20 000 0 06 10 000 upper X tax amount that will be limit of the first considered for the first tier tier 999999999 a big amount 0 08 20 000 upper Y tax amount that will be since there is no upper limit for limit of the sec considered for the earlier the third slab
38. is to specify whether the Basis Amount should be in local currency or account currency Tax Payable Currency Whether to Book Tax to Expense Account or not e tax amount on the credit interest for the account would be calculated based on the Rule Maintenance e Tax would be waived in the following cases Ifthe interest rate is less than 1 Ifthe interest period is more than one year Ifthe amount is less than 10 EUR To achieve the above defined waivers UDE s would have to be created and used in the conditional clause for Tax Formula For the Waiver Rule where the Interest Period should be more than one year the liquidation frequency would have to be set to one year Also the Rule attached to the Product Tax Formula should not be defined For the other two options the UDEs would have to be created For example consider if an IC Rule RUL1 is defined with two formulas FORMULA1 with normal book formula that calculates the credit interest and 2 the tax formula In such a case the following UDE s would have to be defined for this Rule RATE The credit interest rate TAX RATE Tax rate TAX RATE CAP Value of this can be 1 For checking the interest rate TAX AMT Value of this can be 10 EUR For checking the amount The Tax Formula FORMULA2 would be defined as follows Condition Result RATE gt TAX RATE AND FORMULA1 gt TAX FORMULA1 TAX RATE _ This
39. ithholding Rule Maintenance Summary screen You can invoke this screen by typing TASFATTX in the field at the top right corner of the Application tool bar and clicking on the adjoining arrow button FATCA Rule Summary search Ct Advanced Search Reset 3 Clear All Case Sensitive Authorization Status Record Status z Withholding Rule Code Withholding Rule Description Records per page Authorization Status Record Status Withholding Rule Code Withholding Rule Description In the above screen you can base your queries on any or all of the following parameters and fetch records e Authorization Status e Record Status e Withholding Rule Code e Withholding Rule Description ORACLE 2 7 Select or all of the above parameters for a query click Search button The records meeting the selected criteria are displayed The system displays the following details pertaining to the fetched records e Authorization Status e Record Status e Withholding Rule Code e Withholding Rule Description Processing FATCA Tax for Referred Transactions The system will evaluate the tax rule applicable at the product level The rule evaluation process is as follows The FATCA evaluation will be triggered by the transaction to which the tax rule ID is linked While evaluating the tax rule its FATCA flag will be checked If the tax rule has a FATCA flag then the associated FATCA rule will be e
40. its for Rounding for Calculation Currency This field is enabled only if the calculation currency rounding option is selected as Specific You need to specify the unit up to which the amount needs to be rounded The unit defined here should be a multiple of the unit defined in Currency Maintenance Rounding Option for Tax Currency You need to specify the rounding option for conversion of the amount to tax currency It could either be Currency Default or Specific Currency Default indicates that the rounding details would be taken from the rounding parameters defined in Currency Maintenance Specific indicates that the rounding parameter would be defined picked up from the Tax Rule Rounding Method for Tax Currency This field is enabled only if the Calculation Currency Rounding Option is selected as Specific You need to specify the rounding method to be used for the defining the tax amount The available methods are e Truncate e Round Up e Round Down e Round Near i ORACLE 2 4 4 2 4 5 Truncate indicates that the amount should be truncated to the number of decimals specified for the currency Round Up indicates that the amount should be rounded up based on the number of decimals and the nearest rounding unit for the currency Round Down indicates that the amount is rounded down based on the number of decimals and the nearest rounding unit Round Near indicates that the amount will rounded either up or down t
41. n Defining the Events and the Basis Amount A security goes through different stages in its life cycle such as e Booking e Interest Accrual e Liquidation etc Each stage is referred to as an Event in Oracle FLEXCUBE When defining an Issuer Tax class you should specify the following e The Association Event e Basis Amount The event at which you would like to associate a tax component to a security is referred to as the Association Event The basis on which interest charge or tax is calculated or levied is referred to as the Basis Amount An Issuer Tax can be on the basis of the coupon paid or on a cash dividend The different basis amounts available in the Securities module are associated with a unique tag When building a tax component you have to specify the tag associated with the Basis Amount When tax is calculated for a security the basis amount corresponding to the tag will be picked up automatically Maintaining Rate Codes and their Values A Tax Rate Code identifies the rate that applies on an issuer tax For instance you can create a rate code and specify the rate values for different Effective Dates in the Rate Maintenance screen When building an Issuer Tax component say Issuer 01 in the Tax Class Maintenance screen you only need to specify the Rate Code that should apply For all Securities associated with Issuer 01 the rates corresponding to the code will be picked up 4521 ORACL
42. n invoked from the Application Browser You can invoke this di ORACLE screen by typing TADFATRF in the field at the top right corner the Application tool bar and clicking the adjoining arrow button Referral Processing deus B Enter Query Processing Branch Code Referral Number Beneficiary Customer ID Referral Date Beneficiary A C Branch Closure Date Beneficiary Account Referral Status Pending Module Code Escrow GL Obligation Reference Tax Payable GL Event Tax Amount Tag Basis Amount Tag Tax Currency Basis Amount Txn Code Tax Amount Basis Amount Currency Transfer Reference Basis Amount Decision ESCROW Justification Maker Date Time Checker Date Time Authorization Status You can perform the following actions from the above screen Fetch and Decide You can fetch a referral record which is in ESCROW and P PENDING status to make a decision for withholding or not withholding Once the decision is made the record will be saved At the time of saving only the referral record will be saved in an un authorized mode the system will not pass any actual accounting entries The following fields will be editable while saving the record e Decision You can select any of the values from the drop down list namely Y WITHHOLD NO WITHHOLD or CANCELLED e You can use CANCELLED to cancel a referral before any further processing In this case there will be no FT contract booked The con
43. n define the attributes of a transaction level tax under the corresponding section of the Tax Class Maintenance screen You can invoke this screen by typing TADTAXCL in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button Tax Class Maintenance Enter Query Class Code Class Description Module Description Transaction Level Tax Issuer Withholding Net Consideration Borne Bank Add Subtract Cash Outflow SWIFT Qualifier Event For Association Basis Component Event for Application z Default Rule Event For Liquidation 1 Default Waiver Allow Rule Amendment Allow Amount Amendment Amend After Association Amend After application Input By Authorized By Modification Date Time Date Time Number Wi Authorized Open Before defining the attributes of a Transaction Tax Class assign the class a unique identifier called the Class Code and briefly describe the class A description would help easily identify a class Module A tax class is built for use in a specific module This is because the basis amounts on which the tax is applied could vary with the modules In the Foreign Exchange module for instance you might want to levy tax on the brokerage paid I
44. n the Securities module you might have to pay a tax on the value of a security that you purchase The basis on which the tax component is calculated is different in these two cases Note The Basis Amount Tags available in this screen would depend on the module for which you build the class Tax The type of tax indicates who bears the tax whether the bank or the customer 4 17 ORACLE Withholding Withholding type tax is borne by the beneficiary on an income either the bank or the customer For example the tax on the brokerage paid would be borne by the broker You withhold this component in a Tax Payable account by debiting the customer account since brokers are defined as Customers in Oracle FLEXCUBE and later paying the tax to the government on behalf of the broker Expense Type If you choose to bear the tax that is payable on brokerage you would define it as an expense type of tax The tax entries in this case would be posted to an Expense account If you bear the tax there could either be an immediate cash Outflow or payment or a mere crediting of it to a Tax Payable account In the latter case there would not be an immediate Outflow The tax would be paid at a later date from the Tax Payable account The Net Consideration The sum of the different components of a contract determines the net value of the contract To indicate that a transaction level tax component should be taken into account when determin
45. ncy Default indicates that the rounding details should be taken from the rounding parameters defined in Currency Maintenance Specific indicates that the rounding parameter should be defined picked up from the Tax Rule Rounding Method for Calculation Currency You need to specify the rounding method to be used for conversion of the amount to calculation currency This field would be enabled only if the calculation currency rounding option is Specific Select one of the following options e Truncate e Round Up e Round Down e Round Near Truncate indicates that the amount should be truncated to the number of decimals specified for the currency Round Up indicates that the amount should be rounded up based on the number of decimals and the nearest rounding unit for the currency Round Down indicates that the amount should be rounded down based on the number of decimals and the nearest rounding unit Round Near indicates that the amount will rounded either up or down to the specified number of decimal places amd units depending on whether the next decimal place exceeds or is less than 5 Decimals for Rounding for Calculation Currency This field is enabled only if the calculation currency rounding option is selected as Specific You need to specify the decimal up to which the rounding truncation needs to be done The rounding decimal defined here should be less that or equal to the decimal defined in Currency Maintenance Un
46. nd clicking the adjoining arrow button 258 ORACLE Tax Rule Maintenance Rule Cade Description Country Code Customer Category Effective Date Tax Category Description FATCA Rule LJFATCA Tax Rule Rounding Details Additional Slab urrency Details Exchange Rate Currency Rate Code Reference Currency Rate Code Calculation CCY Basis Basis Percent Tax CCY Basis Maker Date Time Checker Date Time Mod No Record Status Authorization Status Rule Code This is the code by which the tax rule is identified If you are defining a new tax rule enter its code in this field You can specify the attributes for this tax rule in the rest of the fields If you select an existing tax rule from the Tax Rule Summary View table the code is displayed in this field You can select an existing tax rule if you want to perform any of the following operations Modify All the details of the selected tax rule are displayed Except for the Tax Rule Code you can modify the input in any of the fields Delete All the details of the selected tax rule are displayed You can delete the record only if its addition has not been authorized Copy Except for the Tax Rule Code the other details related to the tax rule are displayed which can be changed Enter the Code for the new rule before you save the tax rule Close All the details of the selected tax rule a
47. number and the decision status and referral status are WITHHOLD NO WITHHOLD and CLOSED respectively then a check will be made to see that the associated FT will be raised and record cannot be saved fthe associated FT contract is reversed then it will be possible to save the referral record in a cancelled state Thereferral record will be in an un authorized state Maintaining Tax Components as Classes A class is a specific type of component that you can build with certain attributes For instance you can build a tax class with the attributes of a specific type of tax component such as an Issuer Tax Similarly you can build a charge class with the attributes of a specific type of charge such as Charges for provision of services When building a tax class certain attributes such as the following can be defined The module in which you would use the class The tax type whether a withholding or an expense type of tax The association event The application event The liquidation event The default tax rule 2 16 ORACLE 2 8 1 Tax classes can be categorized into e Transaction Level Tax classes e Issuer Tax classes Transaction level taxes are those that would be levied on the portfolios you maintain and the contracts that you enter into Issuer taxes are those that are withheld by the Issuer of a security when disbursing cash dividends and coupons Defining Transaction Level Taxes as Classes You ca
48. o the specified number of decimal places and units depending on whether the next decimal place exceeds or is less than 5 Decimals for Rounding Tax Currency This field is enabled only if the Calculation Currency Rounding Option is selected as Specific You need to specify the decimal up to which the rounding truncation needs to be done The rounding decimals defined here should be less that or equal to the decimals defined in Currency Maintenance Units for Rounding Tax Currency This field is enabled only if the Calculation Currency Rounding Option is selected as Specific You need to specify the unit up to which the amount should be rounded The unit defined here should be a multiple of the unit defined in Currency Maintenance Tax Application Method A tax can be a percentage of the component that is to be taxed such as the principal brokerage etc or a flat amount If you opt to calculate tax as a flat amount choose the Flat option If instead you opt to calculate tax as a percentage of the transaction amount choose the Rate option If tax is to be calculated as a flat amount specify the flat amount Amount Limits for a Tax Rate If you have specified a percentage of tax for the rule you should also specify the maximum and minimum amounts in the local currency within which the amount calculated using the tax rate should fall If you have specified a flat amount for the tax rule then you need not specify the
49. ol bar and click the adjoining arrow button FATCA Rule Maintenance X H Save Withholding Rule Code Default REFER Withholding Rule Description System Data Elements Expression Builder 10f1 7 System Data Elements Maker Checker Mod No Date Time Date Time Record Status Authorization Status Withholding Rule Code Specify the withholding rule code Withholding Rule Description Specify the description for the selected withholding rule code Default Select the default value to be returned if no expression is satisfied from the drop down list Following are the options available in the drop down list e Refer e Withhold e NoWithhold Specifying System Data Elements System Data Elements Specify the system data elements You can also select the valid SDE from the adjoining option list ORACLE 2 5 2 Specifying Expression Builder Expr No Specify the expression number An expression is built up using the SDEs operations gt lt lt gt and logical operators AND OR The expressions will be evaluated in increasing order of expression number Thus the system will evaluate the expression number 1 first if it is not satisfied then expression number 2 will be evaluated If expression number 1 is satisfied then the system will not evaluate expression 2 If none of the expressions are satisfied then the rule will return the result ma
50. olve a combination of tax classes For instance a security could consist of one or more issuer tax components a tax on coupons and a tax on redemption You can define these components as tax classes Since a Securities Derivatives tax scheme is composed of one or more tax classes by associating a tax scheme with a market you can compute all the tax components for the securities used from the market The manner in which you can maintain Money and Security Derivative scheme types has been discussed in detail in the subsequent sections Defining Securities and Derivative Taxation Schemes A contract that you enter into could consist of one or more tax components a Stock Exchange tax a Local tax etc You can define each of these components as a tax class and associate each with a tax rule A tax rule identifies the method in which a tax component is calculated A tax scheme is composed of one or more tax classes For instance a Transaction Level Tax Scheme would be composed of one or more transaction level tax classes By associating a Tax Scheme with a product you can calculate all the tax components for the contracts entered under the product at one stroke Tax schemes can be built in the Tax Scheme Maintenance screen You can invoke this screen by typing TADSCHEM in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button 4 24 ORACLE 2 9 1 1 Tax Scheme Maintenance
51. on the rounding parameters for the Tax Amount e Next the Inverse Basis would be applied on the Tax Amount e After computing this amount the system would apply the Customer Level Waiver This waiver would be maintained again as a separate maintenance in Oracle FLEXCUBE This is the Tax Amount to be waived First the Waiver Amount from the original amount would be calculated Then this would be subtracted from the original amount to arrive at the Tax Amount After applying the Customer Level Waiver the system would round the Tax Amount again based on the rounding parameters at the Tax Amount level This would be the final tax amount to be deducted from the Account For example Consider the following scenario A deposit account yields an interest of USD 152 Tax rate is 30 Basis Percentage is 5096 Available Tax Free Allowance Limit is USD 50 Calculation and Tax Currency are EUR and 1 EUR 7 1 13 USD Rounding Rule for both Calculation and Tax Currency is Truncate Customer Tax Group Waiver is defined as 2096 The tax computation would be as follows Total Interest Amount Basis Amount USD 152 After application of Basis Percentage the Basis Amount would be USD 152 50 100 USD 76 After application of the Tax Free Allowance the Basis Amount would be USD 76 50 USD 26 Now the Basis Amount would be converted into the Calculation Currency Thus the Basis Amount in EUR is USD 26 1 13 EUR 29 38 Since
52. owing type of products for MM module If the tax rule has tax category linked to it then the currency details will be mandatory A validation for this would be done during tax processing In case the tax rule does not contain the tax category and the currency details have not been defined then the maximum interest period would be ignored and minimum interest amount would be considered as 0 indicating that the tax would always be computed If the interest amount being liquidated is less than the minimum interest amount tax will be waived completely for that transaction Surcharge surcharge is to be applied on the final tax amount then the surcharge should be created as a separate rule in the Tax Rule maintenance screen This Rule should be included in the same Tax Scheme as the primary tax rule In the Product Tax Linkage screen the Basis Amount for the surcharge should be the tax component of the primary tax rule Processing Tax on a Contract The taxes that apply on a contract can be of two types Expense and Withholding The tax that your bank bears on a contract is referred to as an expense type of tax whereby you book the tax component to a Tax Expense account The tax that is borne by counter party of a contract is referred to as a withholding tax whereby you debit the counter party s account and credit the tax component into a Tax Payable account to be paid to the government on the counter party s behalf
53. product involving the contract e It should not have been waived for the original contract You have to indicate whether tax has to be applied on the rolled over contract also 2 11 0 2 Liquidating tax on principal upon rollover If tax is applied on the principal of a contract at the time of its initiation when you roll over the contract you have two choices in the treatment of tax e Apply tax on the principal outstanding principal outstanding interest or only the outstanding principal depends on your specifications of the new contract e Since the principal of the old contract has already been taxed you can choose to waive tax on the principal of the rolled over contract However if this principal has an outstanding interest from the old contract incorporated in it then only this portion the outstanding interest portion which is now a part of the principal will be taxed e This option applies only to tax on principal and not to tax on interest This field assumes importance only under the following circumstances e for principal as well as interest has not been waived on the old contract e has not been waived on the rolled over contract 2 11 0 3 Specifying rollover tax details for the contract While specifying rollover details for the contract you should indicate the following 2599 ORACLE 2 12 2 12 1 Whether tax has to be applied the contract You have specified for the product whether
54. r slab will be applied If you check this field the cumulative method of applying tax will be used if you leave this field blank the non cumulative type of tax will be used while calculating the tax By default non cumulative processing is done for tax Tax Slab You can define the tax that you would like to apply to a contract in terms of a tier or a slab structure Through this screen first specify if the Basis Amount on which tax is calculated should be taken as a slab or a tier Indicate Cumulative by checking the box if the Basis Amount structure is a Tier Leave it blank if the Basis Amount structure is a Slab Basis Amount To You should specify the upper limit of the slab or tier to which a particular rate or amount should be applied as tax Flat Amount and Rate If the tax is in the form of a flat amount you should specify the actual amount This amount will be applied on the corresponding Basis Amount To depending on whether you have specified the application basis as a slab or a tier If the tax rule computes tax on the basis of a rate you have to specify the actual rate value The rule uses the rate entered against each slab or tier to calculate tax for contracts on which the rule is applied Floor Amount The floor amount should be specified only if the Amount Basis Cumulative is a tier This will be the upper limit of the previous tier By default the amount specified as the Basis Amount To for the prev
55. re displayed If you confirm the clo sure the tax rule record will be closed A closed record will continue to exist in the system but cannot be used To use a closed record you should reo pen it Reopen All the details of the selected tax rule are displayed If you confirm the reo pening of the record it will become available for use again Print The details of the selected tax rule are displayed on the screen and then directed to the printer an ORACLE 2 4 1 2 4 1 1 Author The details of the tax rule will be displayed You can authorize the record if ize the following conditions are true The record has some activity unauthorized You have rights for authorization You did not initiate the activity that is pending authorization Customer Category Customer categories are maintained by your bank in the customer maintenance module These could be categories like banking corporate brokers financial institutions etc You can choose the customer category for which the tax rule is being defined You could also choose to define the tax rule for all categories of customers Country Code You can apply specific tax rules based on the country of residence of the customer Thus individual tax rules for each combination of customer category country code with an effective date can be maintained Select the country code for the customer from the option list Based on the country of residen
56. rency This field appears only for LD and MM product maintenance You need to specify the currency for which the tax waiver rules maximum interest period and minimum interest amount should be defined Maximum Interest Period for Tax This field appears only for LD and MM product maintenance You need to specify the interest period beyond which tax on the interest amount liquidated would be waived The maximum interest period would be applicable only for Deposit type of products for LD and Borrowing type of products for the MM module If the tax rule has a tax category linked to it then the currency details will be mandatory A validation for this would be done during tax processing In case the tax rule does not contain the tax category and the currency details have not been defined then the maximum interest period would be ignored and the minimum interest amount would be considered as 0 indicating that the tax would always be computed Period Unit This field appears only for LD and MM product maintenance You need to specify the unit for the interest period The available options are as follows e Days D e Months e Years Y Minimum Interest Amount for Tax This field appears only for LD and MM product maintenance 2500 ORACLE 2 10 0 3 2 10 0 4 You need to specify interest amount up to which tax will be waived The minimum interest amount would be applicable only for the Deposit type of products for LD and Borr
57. screen by typing TADSCHEM in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button Tax Scheme Maintenance Enter Query Scheme Code Description Input By Authorized By Modification Date Time Date Time Number Wi Authorized open Features of Tax Scheme Maintenance Screen Scheme Code Identify the Tax Scheme that you are maintaining with a unique code A scheme consists of Several tax components classes You can indicate the components that you would like to include in the scheme in the Component field Linking a Tax Scheme to a Product A tax scheme is linked to a product only if tax is applicable to the product This linkage is established through the tax screen of product definition The tax scheme thus linked will be applicable on a contract processed under the product by default However you have the option of waiving the application of tax for a specific contract 2 28 ORACLE Tax Rule represents the method which a specific tax has to be calculated The amount based on which the tax has to be applied is not specified for a Tax Rule This is specified only when the Tax Scheme is linked to a product The system thus offers you flexibility in terms of the method in which tax has to be calculated For example for one type of product you could use a Tax Rule to apply tax on interest earned w
58. sis Percentage would be applied to get the Actual Tax Amount Thus if the Basis Percentage is 50 and the tax computed by the system is USD 125 the actual tax amount would be USD 125 100 50 USD 250 The tax amount computed after application of the Basis Percentage would again be rounded using the Tax Currency rounding parameters Now the Customer group Tax Waiver Maintenance would be verified to check if some waiver has been maintained for the Customer Group Customer Tax Category Product combination If a Waiver Rule has been maintained then the waiver amount would be computed by applying the waiver percentage to the tax amount The waiver amount would be subtracted from the tax amount The net tax amount post waiver would again be rounded using the tax currency rounding parameters to arrive at the final tax amount to be charged to the customer account 2 10 2 Processing Tax on Customer Accounts e In order to process tax in customer accounts the tax formula has to be maintained in the IC Rule Maintenance screen The Periodicity in the Tax formula Formula2 should always be setto Periodic The tax rounding parameters would be maintained at the Rule 4 49 ORACLE level An IC Rule would also be maintained for a Tax Category The parameters maintained in the IC Rule Maintenance would be as follows Tax Category Rounding parameters for Basis Amount and Tax Amount Basis Amount Percentage Local Currency Bas
59. tax has to be applied on a rolled over contract If you have opted to apply tax on the rolled over contract through this screen you can waive it for the rolled over contract Liquidating Tax on Rollover If you have specified for the product that tax on the principal of rolled over contracts should be liquidated then this attribute applies to all the contracts involving the product But through this screen you can specify that tax on the entire principal should not be liquidated for a contract that you are processing If you have specified for the product that tax on the principal of rolled over contracts should not be liquidated then this attribute applies to all the contracts involving the product Through this screen you can make tax applicable on the principal of the rolled over contract Specifying Exemption of Tax on Interest Earned on ac counts deposits Features of Application of DIRT Deposit Interest Retention Tax DIRT is payable on interest earned on accounts and deposits This is deducted by the bank in the form of withholding tax Normally you will deduct DIRT for all customers However regulations may require you to waive DIRT for accounts or deposits held by certain customer categories Customers belonging to such categories will typically produce relevant exemption certificates from tax authorities DIRT is to be deducted by you for a customer account or deposit till such time as the customer produc
60. tract that produced the referral record would not be check for reversal at this stage e Justification You need to enter the mandatory justification for the decision taken On saving the record the referral status will be updated to C CLOSED and the authorization status of the referral record will be updated to U Unauthorized The checker ID and Checker Date stamp will be null Fetch and Delete You can delete an un authorized referral record to the referral On deleting the un authorized referral record the system will not delete the actual referral record However it will go back to the original condition before the changes were done The Decision status will go back to E ESCROW the referral status will be P PENDING the justification field will be made null The system will change the authorization status to A Fetch and Authorize An un authorized referral record can be authorized by another user At the time of authorization the following changes will happen 2 19 ORACLE 2 8 If the decision status is WITHHOLD NO WITHHOLD contract will be booked using one of the FT product maintained at the bank parameter level The various parameters for the FT contract to be booked will b If the decision is N NO WITHHOLD the debit account will be the Escrow GL and Credit Account will be the Beneficiary Account Ifthe beneficiary account is within the bank then the Referral Internal FT product maintained
61. ure on which the tax is to be applied e currency restrictions etc The tax component to which you link a rule acquires ITS properties Tax for the contracts with which you associate a tax component will by default be calculated according to the rule linked to the component However when processing a contract you can choose to waive the rule When building a tax class you can choose to allow the amendment of the rule linked to it under the following conditions e can choose to allow amendment after the association event e You can choose to allow amendment after the application event e You can choose to allow amendment of the tax amount Including a Component in SWIFT Messages To report a component of a contract in the SWIFT messages that you generate identify the component with the appropriate SWIFT code You can identify a tax component with its SWIFT code when building the component For example You would like to report the details of a contract to a customer over SWIFT Assume you would like to report the tax component amongst others in the message that you generate Each component is identified in SWIFT by a unique code Even while building the tax component in the Tax Class Maintenance screen you can identify it with its SWIFT Code 219 ORACLE 2 8 2 In the SWIFT Qualifier field of the Tax Class Maintenance screen you enter the component identifier as follows
62. urities Deal e Cancellation of Securities Deal 2 18 ORACLE Each of these stages is referred to as an Event in Oracle FLEXCUBE The following are examples of the events for a portfolio that you maintain e Booking of Contingent Asset e Accrual of Discount Earned e Accrual of Interest Earned e Forward Profit and Loss Accrual At any of these events you can choose to apply a tax The event at which you would like to associate a tax component is referred to as the Association Event At this event no accounting entry for the tax component is passed The event at which the tax component is actually computed is referred to as the Application Event The tax is liquidated at the Liquidation Event The basis on which a tax is calculated is referred to as the Basis Amount A tax can be on the basis of the principal the brokerage paid and so on When building a tax class you have to specify the tag associated with the Basis Amount Choosing the Default Tax Rule A tax rule can be linked to the tax component that you are building When you link a rule to a component the attributes that you have defined for the rule will default to the component A tax rule identifies the method in which tax is to be calculated A rule is built with attributes such as the following e The tax currency e Whether the tax is to be a flat amount or calculated on a rate basis e The minimum and maximum tax that can be applied e The tier or slab struct
63. valuated before the tax is computed by the tax rule The system will evaluate the expression number 1 first if it is not satisfied then expression number 2 will be evaluated If expression number 1 is satisfied then the system will not evaluate expression 2 If none of the expressions are satisfied then the rule will return the result maintained at the ELSE part The result of the evaluation of FATCA Rule will be as follows e If Withhold option is returned then the tax will be withheld Thus the tax rule will proceed to calculate the tax and liquidate the tax during the linked event using the FATCA Tax Payable GL maintained in the role to head mapping of the product for credit The tax entries cannot be netted as the customer has to be aware that FATCA tax is being charged to him e If No Withhold option is returned then FATCA withhold is required The tax rule will not compute the tax and 0 zero should be returned as the tax While no accounting entry is posted for the tax In this case the tax amount will be zero and decision would have NO WITHHOLD e If Referral option is returned then the system will not be able to take decision on withholding The system will compute the tax amount but will be credited to the escrow GL maintained in the role to head mapping of the product instead of the tax payable GL You can process FATCA tax for referred Transactions using FATCA Tax Referred Transactions Processing scree
64. y or the currency of the contract When a rule for which the tax should be calculated in local currency is applied on a contract involving a foreign currency the local currency equivalent of the contract amount is considered Currency Details Calculation Currency Basis Calculation currency is the currency in which the Basis Amounts slabs are defined 28 ORACLE 2 4 2 2 4 3 You need to specify whether the calculation currency for the Basis Amount should be Specific or Deal Specific indicates that the Basis Amount will be defined as per the currency selected in the Currency field Deal indicates that the Basis Amount will be defined in the currency of the transaction Currency for Calculation Currency You need to specify the currency to be used for conversion of the taxable amount This option is enabled only if the Calculation Currency Basis is selected as Specific Tax Currency Basis You need to specify the currency in which the final tax should be computed by the tax subsystem This could either be Specific Deal or Local currency Specific indicates that the final tax would be reported in the currency defined in the Tax Currency field of Tax Rule Maintenance Deal indicates that the final tax reported by the tax subsystem would be in the currency of the transaction Local Currency indicates that the final tax would be computed in the local currency of the Branch Currency for Tax Currency This is enabled only if the

Tax User Manual - Oracle Documentation

Contents

Download Pdf Manuals

Related Search

Related Contents