If you record partially recoverable and nonrecoverable taxes in Payables or Purchasing, the system calculates the recovery rate for tax codes (including tax codes in tax groups) you use for invoices and purchases order distributions. In the Tax Codes window you specify the recovery rate by entering either a fixed percentage rate or a tax recovery rule. Use a tax recovery rule if the recovery rate varies, depending on the following distribution attributes:

• Distribution account
• Invoice date
• Condition (for example, supplier type)

In the Tax Recovery Rules window you can define tax recovery rules. Each tax recovery rule can have multiple rates. Each active rate must have a unique combination of account range, effective dates, and condition. For example, you set up a recovery rule with different recovery rates for January and February. When the system calculates the recovery rate for a January invoice distribution, it uses the January rate and for a February distribution it uses the February rate.
The degree of tax recovery can be influenced by factors such as:

1. the nature of the business or the organization
2. the nature of the goods or services purchased
3. the intended usage for the items purchased

The account for a purchased item provides information about its recovery rate. For example, the account records information that might influence the recovery rate such as the division or cost center purchasing the item, and the natural account of the item. You can set up recovery rules to assign recovery rates based on the rate you assign to an account range.

When you define a recovery rule, you can specify the recovery rate with either a percentage rate or a PL*SQL function name. Specify a PL*SQL function name when you need to use a complex tax rule.