Withholding tax code



IMG --> Financial Accounting --> Financial Accounting Global Settings --> Withholding Tax‡ Extended Withholding Tax --> Basic Settings --> Check Withholding Tax Countries


IMG --> Financial Accounting --> Financial Accounting Global Settings --> Withholding Tax‡ Extended Withholding Tax --> Basic Settings --> Define official Withholding tax codes



Make the following settings:
  • General data

Define the description of the withholding tax code, and where necessary, the official withholding tax key.
Official withholding tax keys are used on official forms when reporting taxes, You define the official withholding tax key in a separate section of the Implementation Guide for Financial Accounting:Financial Accounting Global Settings ® Withholding Tax ® Extended Withholding Tax ® Basic Settings ® Define Official Withholding Tax Keys.
  • Base amount
Define the portion to be taxed. This percentage rate is used to determine the final withholding tax base amount and is applied to the withholding tax base amount calculated as a result of the setting in the withholding tax type.
  • Posting
Define a posting indicator. This can have one of the following values:

Value
NameDescription

1
Normal postingThe withholding tax amount is deducted from the vendor line item amount (posting at invoice entry) or from the payment amount (posting at time of payment), and the system creates a line item for the withholding tax.

2
Offsetting entry to G/L account/No reduction in subledgerThe withholding tax amount is multiplied by the factor 1/(1-p), where p stands for the withholding tax rate of the withholding tax code. The system creates two withholding tax line items with opposing debit/credit signs.
This option is incompatible with withholding tax scales. (This function is only relevant for Argentina, when using the "grossing up" option).

3
Offsetting entry to G/L account:The system creates two withholding tax line items with opposing debit/credit signs.



We can create as many withholding tax codes for withholding tax types.


Update the withholding tax country. 


Here we configure the various tax keys  which are applicable in different scenarios. 
For example:-
Withholding tax code on Contractors,
Withholding tax code on Commission and brokerage
Withholding tax code on Professional & Technical service
Withholding tax is also called TDS (Tax deducted at source) in some countries.

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