Invoices in Foreign Currency 

Use

When you enter an invoice denominated in foreign currency, no matter which exchange rate you use to convert the invoice to Japanese Yen, you must calculate the amount of tax to withhold using the TTB bank selling rate (and not the average rate, for example).

Activities

Customizing

In order to have the system automatically use the correct exchange rate, make the following settings in Customizing:

       1.      Define a new exchange rate type specifically for this purpose.

       2.      For this exchange rate type, define the translation ratios for each currency pair. To do so, in Customizing for General Settings, choose Currencies ® Define Translation Ratios for Currency Translation.

       3.      Assign the exchange rate type to each withholding tax type. To do so, in Customizing for Financial Accounting (FI), choose Financial Accounting Global Settings ® Withholding Tax ® Extended Withholding Tax ® Calculation ® Withholding Tax Type ® Define Exchange Rate Type for Withholding Tax Type.

Day-to-Day Activities

Whenever you enter a document that includes a withholding tax item for an item in foreign currency, the system automatically converts it into Japanese Yen using the appropriate exchange rate.

Example

A vendor in the United States sends you an invoice for services rendered for USD 1,520.30. When you enter this invoice in the system, the exchange rate is JPY 118.5: USD 1. The following postings are made:

When you pay the invoice, the exchange rate has changed to JPY 114.5: USD 1 and you are now also required to withhold tax at 15% on this payment using the TTB rate of JPY 112.5: USD 1. The following postings are made:

The amounts are rounded off according to the rounding rule defined for Japan.