Extended Withholding Tax 

Use

In South Korea, you are required to withhold tax on any interest, dividends, and professional fees that you pay (termed “business income” by the National Tax Service). You are also required to withhold taxes on payments of lottery wins, prize money, and insurance payouts (“other income”).

In SAP ECC, you use the Extended Withholding Tax solution to withhold such taxes automatically.

Activities

Customizing

In addition to the generic Customizing settings, you make settings specific to South Korea (see Customizing).

Master Data

Maintain the vendor master data as described.

Day-to-Day Activities

Enter invoices as described in Entering Vendor Invoices.

On most payments, you have to withhold two different types of taxes, income tax and inhabitant tax. Inhabitant tax is calculated as a percentage of the income tax (usually 10%). When you post a payment, the system creates a separate withholding tax item for each tax, as shown in the following example:

Every withholding tax item contains a section code, which specifies which tax offices you have to remit the tax to.

Reporting

To prepare electronic tax returns and print tax certificates for business income and other income, you use the Generic Withholding Tax Reporting program.

You file the tax returns with the appropriate district tax office and remit the taxes to them. The district tax office then transfers the inhabitant tax to the local tax offices under its jurisdiction.