Posting Withholding Tax for Vendor Invoices
Vendor withholding tax is tax that you deduct when your company pays your business partners. You can post this tax already at the time you post the vendor invoice.
You made system settings for withholding tax processing in Customizing for Contract Accounts Receivable and Payable under.
In the standard system, the system posts vendor withholding tax at the time you make the payment to the vendor. The system designates the gross amount (including withholding tax) as a payable. At the time payment is made, the system reduces the payment amount by the amount of the withholding tax, and posts the withholding tax amount to an account for withholding tax to be paid.
If you post the vendor withholding tax already when you post the vendor invoice, then the following posting specifications arise.
In the simplest case, that is without withholding tax, the system posts the receivable as follows:
80.00 Liability to business partner (open item)
If you include 25% withholding tax, and post this immediately with the invoice, the following document results:
80.00 Liability to business partner, split into
... 60.00 open subitem
... 20.00 immediately cleared subitem
[ 20.00] Clearing item for withholding tax amount
20.00 Withholding tax to be paid
The system immediately makes a partial clearing of the liability item in the amount of the withholding tax received, and posts the offsetting entry for the withholding tax to be paid. In the subitem that is immediately cleared, the system enters the subitem's own document number, with the clearing reason Withholding Tax Deduction at Time of Invoicing.
The system also supports the posting of withholding tax with the invoice if you deduct several amounts by means of withholding tax supplements. This applies even if these supplements are variable, meaning that you entered amounts or percentages directly in the line item. In these cases, the document display shows the detail data for the withholding tax supplements next to the immediately cleared subitem.
To specify for a withholding tax indicator that posting should take place at the time of entering the invoice, in Customizing choose.
Note that the setting Posting at Time of Invoice for vendor withholding tax takes precedence over the general setting Posting with Payment that you can choose when defining the withholding tax code. The general setting Posting with Payment is then valid only for customer withholding tax, that is, the withholding tax that your customers can withhold when making payments to you.
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