Withholding Tax 

Use

In Japan, certain kinds of payments are subject to withholding taxes. If you are required to withhold tax, we recommend that you use the Extended Withholding Tax solution.

Activities

For generic information about customizing extended withholding tax, see Settings for Extended Withholding Tax: Overview.

When you create a company code using the template for Japan, the system sets up extended withholding tax according to Japanese requirements. The settings include:

·        Withholding tax type

·        Withholding tax code

Day-to-Day Activities

You are required to withhold tax on payments to vendors and to file tax returns with the Japanese authorities. The following features are specific to Japan:

·        Withholding tax is calculated when you post an invoice.

·        Withholding tax amounts are rounded down according to the Japanese rounding rule.

·        When you enter a vendor payment denominated in foreign currency, the system translates the withholding tax amount using the exchange rate published by TTB – no matter what exchange rate you use to translate the other line items.

·        You can prepare withholding tax returns using either the Withholding Tax Report to the Tax Authorities (Japan) report (RFKQST30) or the Withholding Tax Return report (RFKQST00).

Periodic Processing

You create withholding tax returns for the Japanese authorities using either the Withholding Tax to the Tax Authorities (Japan) report or the Withholding Tax Return report and SAP Smart Forms.

Reporting

At the end of each calendar year, you are required to file a separate withholding tax return report (Shiharai Chosho) for each partner (vendor or customer) with the tax authorities and to remit the tax that you have withheld.