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).
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:
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).
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
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 |
The Philippines |
Brazil |
Turkey |
Thailand |
Chile |
||
Colombia |
||
Mexico |
||
Peru |
||
Venezuela |