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We will now cover the steps required to automate the Withholding tax
processing.
Pre-Requisites:
1. Enable Withholding Tax option:
Navigation: Payables Responsibility > Setup > Options > Payables
Options > Withholding Tax tab
c.Under Apply Withholding Tax section, you will specify at what point of
time, the tax should be withheld.
The Tax Authority has to be setup as a supplier with a supplier type “Tax
Authority”. Atleast one supplier site for the Tax Authority needs to be
setup as well.
Site:
Under Tax details tab, enter the below:
a.Allow Withholding Tax: Check “Allow Withholding Tax” Check box. This
can set either at the supplier level or the supplier site level.
b.Invoice Withholding Tax Code: Enter the WTH tax code. If you have not
created yet, come back and enter once it has been created.
c.Payment Withholding Tax Code: Enter the WTH tax code. If you have
not created yet, come back and enter once it has been created.
e.Periods: Define your periods, their names , start date and end date for
a period.
b.Tax Authority and Site: Enter Tax Authority that you have created in
Step 2 and its supplier site.
f. Rate Structure:
Period Limit: Choose this option, if you want to have a limit on the
amount withheld during a withholding tax calendar period. Once withheld
amount exceeds this limit, Payables will not withhold anymore.Also it’s
mandatory to enter the Withholding Tax calendar and period limit fields if
you choose Period Limit option.
Amount Range: Choose this option, when your WHT rate depends on what
you already have paid during a time period. For the amount basis you can
choose between Gross Amount and Withheld Amount. The time period is
either per withholding tax calendar period or per invoice.
Query for the supplier that you want to withhold the amount and go to
Tax Details tab.
Check “Withholding Tax” Checkbox and enter the Withholding tax group
at Supplier and site level.
Now if you go back to the lines, you will notice an additional line with type
Withholding Tax. Rate defined in Tax Code screen will be withheld.
Now you can create accounting for the same and make the payment. You
will only have to pay $2240.90 because 20% will be paid to tax authority
and has been withheld from being paid to the supplier.
At the same time, a new invoice with type “Withholding Tax” will be
created with the same amount as the one it has withheld in the invoice
“w4”.
If you notice, the supplier will be a tax authority that we have created
above. Description will have the original invoice number.
You can validate , create accounting and make a payment for this invoice
as well.