Tax deducted at the beginning of the payment flow in some countries, and paid to the tax authorities on behalf of the person/company subject to tax. An exception to this is self-withholding tax.

If a withholding tax exemption exists, withholding tax is not withheld.

The SAP System distinguishes between

• Withholding tax
• Extended withholding tax

Extended withholding tax enables the assignment of more than one withholding tax type to a business partner. This is necessary in Argentina or Brazil, for example.

You define withholding tax codes in system configuration. You thereby make specifications (such as withholding tax base amount and withholding tax-exempt amount) which the system uses to calculate the withholding tax amount and the tax account, and to assign line items to tax rates.

If you have already entered a withholding tax code in the vendor master record, the system automatically proposes the appropriate code and you do not need to make further entries in the document. If you do not want to use the automatic calculation feature, simply enter a Withholding tax base amount and Exempt amount. The system will then use these amounts as the basis for its calculations.