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Use this window to define withholding tax codes for your company.

To open the window, choose   Administration   Setup   Financials   Tax   Withholding Tax  .

Withholding Tax Codes - Setup Fields
WT Code

Specify a code for the withholding tax.

Inactive

Select to indicate the withholding tax is inactive. Once the withholding tax is set as inactive, you cannot select it in any new or draft document. By default, the checkbox is not selected.

WT Name

Enter a description for the withholding tax code.

Category

Choose one of the following from the dropdown list:

  • Invoice – the withholding tax calculation appears in the invoice and is recorded in the journal entry when the invoice is added.

  • Payment – the withholding tax calculation appears in the invoice, but is recorded in the journal entry when it is created by the incoming payment based on that invoice.

Effective From

Enter the date from which a tax group rate (%) is effective.

Rate

Enter the rate of tax to be calculated from the date defined in the Effective From field.

Base Type

Choose either Gross (includes VAT) or Net from the drop-down list to determine from which amount the withholding tax will be calculated.

% Base Amount

Specify the percentage of the base amount that is subject to withholding tax. The default value is 100%.

Official Code

Specify the official code to be reported in the withholding tax report.

Account

Choose the G/L account code to be recorded in journal entries relevant for this withholding tax code.

Tax Definition

Choose this button to open the Tax Definition - <XXX> window, in which you can define the Effective From date and the tax percentage for the selected withholding tax code.

Minimum Taxable Amount

Specify the minimum taxable amount for the withholding tax to take effect.

Country-Specific Fields: Australia & New Zealand
Rounding Type

Choose the relevant rounding type from the drop-down menu:

  • Truncated AU – this option is relevant for a penalty withholding tax. The tax amount calculated is truncated, and appears without decimals, for example, a tax amount of 72.25 is truncated to 72.

    Example Example

    If the withholding tax is posted when payment occurs, the calculation is done as follows:

    You create a payment for an invoice whose total value is 11.6 (=net value 10 + 16% vat), and the withholding tax is 18%.

    The total of 11.6 is truncated to 11.

    The WT is calculated as: 11*18% = 1.98

    The WT amount is truncated to 1.

    Result: The posted value of withholding tax is 1, and the bank account is credited for 10.6

    End of the example.
  • Commercial Values – this option is relevant for voluntary withholding tax. In this case the rounding calculation is done as follows:

    • 1 to 49 cents is rounded down to the nearest dollar, for example, 34.27 becomes 34.

    • 50 to 99 cents is rounded up to the nearest dollar, for example, 50.68 becomes 51.

Example Example

The following explains the calculations when creating the payment for the invoice mentioned above, but according to commercial rounding:

The invoice total is 11.6.

Withholding tax = 11.6*18% = 2.088. This amount is rounded to 2.

A value of 2 is posted for withholding tax while the bank account is credited for 9.6.

End of the example.
Country-Specific Fields: Brazil
Type

Specify the appropriate withholding tax type.

Nature of Calculation Base

Specify on what the tax is levied.

Country-Specific Field: China, Japan, Singapore and Korea
Progressive Tax

Regards the withholding tax as a progressive tax.

Country-Specific Fields: India
Section

Select a section code from the drop down list.

Threshold

Specify a value of threshold for TDS.

Surcharge

Specify the value of surcharge for TDS.

Concessional

Select the checkbox if the concession is applicable.

Assessee Code

Select a assessee code from the drop down list.

A/P TDS Account

In this field , you can assign an account for A/P TDS. To do so, in the field, press TAB and choose an account in the List of G/L Accounts window.

A/P Surcharge Account

In this field , you can assign an account for A/P Surcharge. To do so, in the field, press TAB and choose an account in the List of G/L Accounts window.

A/P Cess Account

In this field , you can assign an account for A/P Cess. To do so, in the field, press TAB and choose an account in the List of G/L Accounts window.

A/P HSC Account

In this field , you can assign an account for A/P HSC. To do so, in the field, press TAB and choose an account in the List of G/L Accounts window.

A/R TDS Account

In this field , you can assign an account for A/R TDS. To do so, in the field, press TAB and choose an account in the List of G/L Accounts window.

A/R Surcharge Account

In this field , you can assign an account for A/R surcharge. To do so, in the field, press TAB and choose an account in the List of G/L Accounts window.

A/R Cess Account

In this field , you can assign an account for A/R Cess. To do so, in the field, press TAB and choose an account in the List of G/L Accounts window.

A/R HSC Account

In this field , you can assign an account for A/R HSC. To do so, in the field, press TAB and choose an account in the List of G/L Accounts window.

Location

From the drop down list, select a location for which the category code was created.

Return Type

From the drop down list, select a return type for the tax category.

Country-Specific Fields: Mexico & Chile
Withholding Type

Choose one of the following:

  • VAT Withholding – identifies the withholding tax code as a withholding related to the VAT Code.

  • Income Tax Withholding – identifies the income tax withholding code related to indirect withholding taxes.

Base Type

Choose one of the following:

  • Net – identifies the base amount for tax calculation as the amount before VAT.

  • VAT – identifies the base amount for tax calculation as the VAT amount.