Classic Withholding Tax
In some countries, the law provides that invoice recipients must withhold a certain portion of the payment amount and pay this to the tax authorities as withholding tax on behalf of the vendor. This requirement exists in the United Kingdom, for example. In other countries, withholding tax need only be reported to the tax authorities for certain vendors, such as self-employed people. Withholding tax is not posted in these countries. This is the case in France, for example.
Withholding tax amounts are reported to the tax authorities at regular intervals and a statement is also sent to the vendor periodically. These reporting periods vary from country to country.
The way in which withholding tax is calculated depends on the type of service. Transactions may:
Make the required system settings for classic withholding tax in the Implementation Guide for Financial Accounting. For more information, seeSpecifications for Withholding Tax
For more information about the functions of classic (in comparison to extended withholding tax), seeWithholding Tax