Why do we need to use the supplier exchange rate to record the tax correctly

If a domestic supplier issues you an invoice in a non-domestic currency then you must use the same exchange rate that they have used. If we take an example of a Supplier issuing an invoice where the tax is $1000 but they used an exchange rate of 1.7 USD to the GBP then the GBP amount recorded in their ledger and subsequent GBP amount they put on their return as tax collected is £588.

If we entered the invoice using our own corporate rate which was set to 1.5 USD to the GBP then the GBP amount and the amount we recover is £666. That means that total tax received and total tax paid out leaves the tax authorities short of £88! So that is why when the invoice is entered, the initial amount recorded in your GBP ledger has to be the exact same amount of that charged by your supplier.

This will then be the GBP amount recorded against the transaction and the amount that is used in the tax return. You can always revalue your currency as soon as it has been posted to the GL to bring it back in line with your corporate rate.

Andrew Bohnet
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Andrew Bohnet

Managing Director and Oracle Fusion Tax / eBTax expert at eBiz Answers Ltd
Andrew Bohnet is the current chair for the Oracle Tax Management SIG. He founded eBiz Answers to offer clients complete tax solutions making the most of the rich functionality of the R12 and Fusion tax modules. Whether it is analysis, design, configuration or support, eBiz Answers provide an unparalleled service when it comes to a complete tax solution. Having worked on one of the first Oracle R12 implementations in Europe, Andrew was exposed to the tax module early on and worked closely with Oracle to fix bugs, enhance functionality and present on numerous occasions on the subject of tax and Oracle. When it comes to presenting on eBTax, you wont find a more experienced consultant outside of Oracle.
Andrew Bohnet
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