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Function documentationNetting of Foreign Withholding Tax Locate this document in the navigation structure

 

The financial institution directly offsets foreign withholding tax as part of the flat withholding tax. Revenue from foreign investments is not cleared after taxes have been calculated. This means that all netting based on gross revenue needs to have taken place already.

A separate netting total is available for foreign withholding tax. This netting total is created if the foreign withholding tax is larger than the domestic withholding tax. This amount is then offset with the taxes owed by the account holder.

Prerequisites

  • You have defined the settings for foreign withholding tax in Customizing for AddOns by iBS – innovative Banking Solutions under   Settings for Capital Yield Tax   Settings for Flat Withholding Tax   Settings for Foreign Withholding Tax   Define Processing of Foreign Withholding Tax  .

  • You have defined the item in the partner dialog in which the withholding tax total is displayed in Customizing for AddOns by iBS – innovative Banking Solutions under   Settings for Capital Yield Tax   Settings for Flat Withholding Tax   Settings for Foreign Withholding Tax   Assign YES Fields the Display in Dialog Mode  .

  • In Customizing for foreign withholding tax, you have selected the checkboxes of all tax types that you want to offset with the withholding tax.

  • You have entered the business partner data relevant for calculating foreign withholding tax on the CYT FWT Loss Totals tab page in the Foreign Withholding Tax group box. For more information about the management of business partner data, see Business Partner Data for Flat Withholding Tax.

Features

The system checks whether the required Customizing settings have been made and the business partner data is available and then calculates the foreign withholding tax. The system offsets the withholding tax for foreign investments with the taxes owed by the account holder. The following processing cases are available:

  • Foreign withholding tax enters the system as revenue.

    The following cases can occur after you have calculated the tax due:

    • The tax amount is larger than the amount of the foreign withholding tax.

      The system creates a negative tax amount for each tax type for the cleared amount for each tax record that is offset with foreign withholding tax. In this way the actual tax burden is totaled. The annual tax amounts are adjusted. If additional netting amounts exist, use the procedure described under 2. for the remaining tax amounts.

    • The tax amount is smaller than the amount of the foreign withholding tax.

      The total of all tax records is zero. The system creates negative turnovers for the tax amounts when it clears foreign withholding tax. The system puts a netting amount for the account holder and for the remaining amount into the netting total defined in Customizing. The business transaction does not influence the annual tax totals.

  • Foreign withholding tax enters the system as revenue and a netting amount for foreign withholding tax already exists.

    The system offsets the calculated due taxes with the amounts with the netting totals and creates negative turnovers for the relevant tax types for the amounts that arise.