Entering and Posting Withholding Tax 

Two transactions are to be distinguished for withholding tax:

When you enter the invoice, the system determines the base amount for withholding tax and stores it in the document. You can also enter the base amount directly.

When the invoice is paid, the tax amount is calculated from the base amount and your specifications for the tax code. If the tax amount is to be paid to the tax authorities, the system automatically posts the amount to the tax account. The system reduces the payment amount to the vendor by the withholding tax to be paid. If the amount is only to be reported to the tax authorities, no posting is made and the whole invoice amount is paid to the vendor.

Invoice entry

When you enter a document, the withholding tax code from the vendor master record is defaulted. You can overwrite this code. In addition, you can enter a withholding tax base amount and a tax-exempt amount. If you enter both amounts, the system checks whether the total of the amounts exceeds the invoice amount. If this is the case, a warning message is issued.

If you do not enter any amounts, the system determines them by means of the tax code. To do this, it determines the base amount. The withholding tax exempt amount results from the difference between the invoice amount and the withholding tax base amount.

All specifications for the withholding tax refer to the document currency.

Invoice payment

If the tax amount is to be paid to the tax authorities, the system automatically posts the amount when clearing the item to the tax account. The posting is made when using the payment program to make payment, or with manual payment settlement.

When using the general clearing function, you must select a clearing procedure. This transaction influences the posting of withholding tax. Withholding tax is posted for all transactions which are relevant for payment. For these transactions, at least one of the posting keys you specified for the transaction must be characterized as relevant for payment. Otherwise, no taxes are posted. See also Example: Posting Withholding Tax.