Object documentation Withholding Tax 

Definition

Tax that is charged at the beginning of the payment flow in some countries. Usually, the party that is subject to tax does not pay the withholding tax over to the tax authorities himself.

When a customer that is authorized to deduct withholding tax pays invoices from a vendor subject to withholding tax, the customer reduces the payment amount by the withholding tax proportion. The customer then pays the tax withheld directly to the appropriate tax authorities (see diagram).

Withholding Tax

This graphic is explained in the accompanying text

An exception to this rule is self-withholding. The vendor subject to tax then has the right to pay the tax to the authorities himself.

Use

To calculate, pay, and report the withholding tax, the SAP System provides two functions:

·  Classic Withholding Tax (all Releases)

·  Extended Withholding Tax (from Release 4.0)

For each company code, you can decide whether you want to use classic or extended withholding tax. Since the extended withholding tax option includes all the functions of classic withholding tax, SAP recommends the use of extended withholding tax (see below: Table of Classic and Extended Withholding Tax Functions).

Note

If you have previously used classic withholding tax, and now wish to change over to extended withholding tax, you must first convert the withholding tax data in all the company codes affected.

Do not activate extended withholding tax before you have converted the data.

SAP has developed a special tool to support the withholding tax changeover. For more information, see Withholding Tax Changeover

Classic and Extended Withholding Tax Functions

Individual Functions

Classic Withholding Tax

Extended Withholding Tax

Withholding tax on outgoing payment

X

X

Withholding tax on incoming payment

 

X

Withholding tax posting at time of payment

X

X

Withholding tax posting at time of invoice

 

X

Withholding tax posting on partial payment

 

X

Number of withholding taxes for each document item

Max. 1

Several

Withholding tax base:

Net amount

X

X

Modified net amount

 

X

Gross amount

X

X

Tax amount

 

X

Modified tax amount

 

X

Rounding rule

 

X

Cash discount considered

 

X

Accumulation

 

X

Minimum/maximum amounts and exemption limits

 

X

Number assignment on document posting (certificate numbering)

 

X

Calculation formulas

X

X

 

Country-Specific Requirements

Due to legal requirements, the following countries use extended withholding tax:

America

Europe and Africa

Asia/Pacific

Argentina

United Kingdom

India

Brazil

Slovakia

The Philippines

Chile

Turkey

South Korea

Colombia

 

Thailand

Mexico

 

 

Peru

 

 

Venezuela

 

 

 

 

Leaving content frame