In Colombia, there are two ways to deal with withholding taxes in accounts receivable, depending on whether you are a self-withholding agent or not.
If your company is not a self-withholding agent, your customers may be required to withhold tax from payments that they make to you. So when you enter a customer invoice, the system automatically calculates the withholding tax that the customer is expected to withhold from you.
In the example below, you enter an invoice for goods or services totaling COP 1,200, including COP 200 VAT. The system automatically creates a withholding tax item for the amount of withholding tax expected (COP 30); this customer item is therefore COP 1,170.
The system makes these tax postings if your company is not a self-withholding agent, but the taxes are withheld by your customers on your behalf. In this case, the withholding tax types S1, S2, or S3 are stored in the customer master and the invoice.
If your company is a self-withholding agent, that means that your customers do not withhold tax on payments to you. Instead, you have to handle this tax yourself.
Assume, for example, that you enter a customer invoice for COP 1,200, including VAT – this is the amount that the customer will pay you. The system automatically creates two additional line items, one for the withholding tax expense and one for the withholding tax payable.
The system makes the tax postings automatically, using the information from the withholding tax type for self-withholding taxes (AT), which is stored in the customer master and the invoice.
In Customizing, define withholding tax types and codes for accounts receivable, using withholding tax types S1, S2, and S3 as examples for withholding tax, and withholding tax type AT as an example for self-withholding tax.
Define the appropriate fiscal regional codes, official withholding tax keys, and income types, and assign them to the withholding tax codes.
When you activate the withholding tax types for your company codes, select Self-Withholding Agent if applicable. For more information, refer toDefining Liability to Tax and Authorization to Deduct Tax.
Enter the withholding tax types and withholding tax codes in the customer master records.
When you come to enter customer invoices, the system automatically calculates the withholding tax as described above.