You define withholding tax codes in system configuration. You thereby make specifications (such as withholding tax base amount and withholding tax-exempt amount) which the system uses to calculate the withholding tax amount and the tax account, and to assign line items to tax rates.

If you have already entered a withholding tax code in the vendor master record, the system automatically proposes the appropriate code and you do not need to make further entries in the document. If you do not want to use the automatic calculation feature, simply enter a withholding tax base amount and exempt amount. The system will then use these amounts as the basis for its calculations.