Chapter 16 Extended Withholding Taxes-1 PDF

CHAPTER 16 EXTENDED WITHHOLDING TAX
Table of Contents
1. INTRODUCTION TO EXTENDED WITHHOLDING TAX ........................................................................................................ 2
2. CONFIGURATION ............................................................................................................................................................. 4
2.1 CHECK WITHHOLDING TAX COUNTRIES ......................................................................................................................... 4
2.2 DEFINE WITHHOLDING TAX KEYS ................................................................................................................................... 4
2.3 DEFINE WITHHOLDING TAX TYPE FOR INVOICE POSTING ............................................................................................... 5
2.4 DEFINE WITHHOLDING TAX TYPE FOR PAYMENT POSTING ............................................................................................ 6
2.5 CHECK RECIPIENT TYPE .................................................................................................................................................. 7
2.6 CHECK INCOME TYPES .................................................................................................................................................... 7
2.7 DEFINE BUSINESS PLACES ............................................................................................................................................... 8
2.8 DEFINE SECTION CODES BUSINESS PLACES ..................................................................................................................... 9
2.9 ASSIGN FACTORY CALENDAR TO BUSINESS PLACES ..................................................................................................... 10
2.10 MAINTAIN TAX DUE DATES .......................................................................................................................................... 10
2.11 DEFINE WITHHOLDING TAX CODES .............................................................................................................................. 11
2.12 DEFINE MIN/MAX AMOUNTS FOR WITHHOLDING TAX CODES ..................................................................................... 12
2.13 ASSIGN WITHHOLDING TAX TYPES TO COMPANY CODES ............................................................................................. 13
2.14 ACTIVATE EXTENDED WITHHOLDING TAX ................................................................................................................... 14
2.15 CREATE GL ACCOUNT FOR WITHHOLDING TAX ........................................................................................................... 14
2.16 ACCOUNTS FOR WITHHOLDING TAX TO BE PAID OVER.................................................................................................. 15
2.17 SPECIFY DOCUMENT TYPE (ACCOUNTS PAYABLE) ........................................................................................................ 16
2.18 MAINTAIN NUMBER GROUPS ........................................................................................................................................ 17
2.19 ASSIGN NUMBER RANGES TO NUMBER GROUPS ........................................................................................................... 17
2.20 MAINTAIN NUMBER RANGES ...................................................................................................................................... 18
2.21 MAINTAIN NUMBER GRPS AND SAP SCRIPTS FOR WHT CERTIFICATE ......................................................................... 20
2.22 ASSIGN NUMBER RANGES TO NUMBER GROUPS............................................................................................................ 20
2.23 MAINTAIN NUMBER RANGES ......................................................................................................................................... 21
2.24 MAINTAIN COMPANY CODE SETTINGS –EXCISE REGISTRATION ................................................................................... 22
3 ASSIGN WITHHOLDING TAX CODE TO VENDOR MASTER .............................................................................................. 23
4 TRANSACTIONS POSTING............................................................................................................................................... 24
4.1 POST VENDOR INVOICE ................................................................................................................................................. 24
4.2 CREATE REMITTANCE CHALLAN ................................................................................................................................... 25
4.3 ENTER BANK CHALLAN ................................................................................................................................................ 28
4.4 PRINTING WITHHOLDING TAX CERTIFICATE ................................................................................................................. 29
1 venkat.emani@yahoo.com
1. Introduction to Extended Withholding Tax

Withholding tax is applicable in few countries. Some of the countries which have
withholding tax are United Kingdom, Slovakia, Turkey, Argentina, Brazil, Chile,
Colombia, Mexico, India, Philippines, Thailand and South Korea. SAP has given an
excellent solution to map the withholding tax scenario.
What is a withholding tax?
Withholding tax is an Income tax which is deducted at the source of the revenue. The
party that is subject to tax does not remit the withholding tax to the tax authorities
himself.
In any business transaction there are 2 parties involved. One is the customer and
another is the vendor. A customer is authorized to deduct withholding tax for services
rendered by the vendor. When the vendor raises the invoice on the customer, the
customer deducts the withholding tax as per the rates specified by the tax authorities
and pays the balance money to the vendor.
The tax deducted by the customer is remitted to the tax authorities on specified due
dates. The customer gives a Withholding tax certificate to the vendor for the withholding
tax deducted.
The vendor can claim this withholding tax (as advance income tax paid) in his annual
returns to Income tax authorities.
In some countries (like India) the withholding tax is deducted on Invoice or payment
whichever is earlier. Thus when an advance is paid to the vendor the customer is
required to deduct withholding tax o n the advance payment.
When the Vendor submits an Invoice the customer is now required to deduct tax on the
Invoice amount reduced by the advance amount.
To calculate, pay and report the withholding tax, the SAP system provides two
functions:-
 Classic Withholding tax
 Extended Withholding tax
Extended Withholding tax includes all the functions of classic withholding tax with
additional functionalities; SAP therefore recommends the use of extended withholding
tax. We will cover the Extended withholding tax functionality here in this chapter.
We will try to cover the broad configuration aspects of extended withholding tax, without
getting into each country specifics. Since each country has its own forms and different
reporting requirements.
With Extended Withholding tax, we can process withholding tax from both the vendor
and customer view.
From the Accounts Payable perspective, the vendor is the person subject to tax and the
company code is obligated to deduct withholding tax and pay to tax authorities.
From the Accounts Receivable perspective the company code itself is subject to tax and
the customers that do business with the company deduct withholding tax and pay to the
tax authorities.
Generally the Accounts Payable perspective is used by majority of the implementing
companies.
Classic and Extended Withholding Tax functions
Sl. No. Functionality Classic WHT Extended WHT

1 Withholding Tax on Outgoing payment Yes Yes
2 TDS on Incoming payment No Yes
3 TDS at the time of invoice No Yes
4 TDS on partial payment No Yes
5 No. of withholding tax from each document Max1 Several
6 TDS basis
- Net amount Yes Yes
-Gross amount Yes Yes
-Tax amount No Yes
7 Rounding rules No Yes
8 Cash discount consideration No Yes
9 Accumulation No Yes
10 Minimum/Maximum amt and exemption No Yes
11 Certification Numbering No Yes
12 Calculation Formula Yes Yes
Country-Specific Requirements
Due to legal requirements, the following countries use extended withholding tax:
America Europe and Africa Asia/Pacific

Argentina United Kingdom India
Brazil Slovakia The Philippines
Chile Turkey South Korea
Colombia Thailand
Mexico
Peru
Venezuela
2. CONFIGURATION
2.1 Check Withholding Tax Countries
Via Menus IMG Financial Accounting (New)  Financial Accounting Global

Settings(New)  Withholding tax Extended withholding Tax Basic
settings Check Withholding Tax Countries
Via Transaction SPRO
Code
2.2 Define Withholding Tax keys

Settings(New)  Withholding tax Extended withholding Tax Basic
settings Define Withholding Tax keys
Via Transaction Code SPRO
On prompting input country key
Click on
Click on
2.3 Define Withholding Tax Type for Invoice Posting
Via Menus IMG Financial Accounting (New)  Financial Accounting global

Settings(New)  Withholding tax  Calculation Define Withholding
Tax Type for Invoice Posting
Code
Click on
Click on
2.4 Define Withholding Tax Type for Payment Posting
Via Menus IMG Financial Accounting (New)  Financial Accounting global

Settings(New)  Withholding tax  Calculation Define Withholding
Tax Type for Payment Posting
Code
Click on
2.5 Check Recipient Type

Settings(New)  Withholding tax Extended withholding Tax
Basic settings Check Recipient Types
Provide country on prompting and Click on
Click on
2.6 Check Income Types

Basic settings Check Income Types
Click on
2.7 Define Business places

Via Menus IMG Cross Application Components  General Application
Functions  Nota Fiscal  CNPJ Business Places 
Define Business Places
Click on
Click on then enter address in the pop up box
Click on
2.8 Define Section codes Business places

Basic settings South KoreaDefine Section Codes
Press Enter or click on
Click on
2.9 Assign Factory Calendar to Business places

Basic settings IndiaDefine Business Places
Click on
2.10 Maintain Tax Due dates

Basic settings IndiaMaintain Tax Due Dates
Click on
Click on
2.11 Define Withholding Tax Codes

Settings(New)  Withholding tax  Extended Withholding tax
Calculation WHT code Define Withholding Tax code
Click on and provide below details:
Click on select and then Click on
Click on
2.12 Define Min/Max Amounts for Withholding Tax Codes

Settings(New) Withholding tax EWT CalculationMin/Max Amounts
 Min/Max Amounts for WHT codes
Click on and update details for both tax codes one by one.
Click on
2.13 Assign Withholding Tax Types to Company Codes

Settings(New) Withholding tax EWT Company code Assign
withholding Tax Types to company codes
Click on and click on and provide below details
Click on
2.14 Activate Extended Withholding Tax

Settings(New)  Withholding tax  Extended Withholding Tax Company
code  Activate Withholding Tax
Click on Click on
2.15 Create GL Account for Withholding Tax
Create GL required for Withholding tax postings
2.16 Accounts for Withholding Tax to be paid over

Settings(New)  Withholding tax  Extended Withholding Tax
PostingAccounts for Withholding Tax to be Paid over
Click on
Click on
2.17 Specify Document type (Accounts Payable)

Settings(New)  Withholding tax  Extended Withholding Tax
PostingIndiaRemittance ChallansDocument TypesSpecify
Document types.
Click on
Click on
2.18 Maintain Number Groups
Via Menus IMG Financial Accounting (New)  Financial Accounting Global Settings
(New)  Withholding tax  Extended Withholding Tax
PostingIndiaRemittance ChallansMaintain Number Groups
Click on
Click on
2.19 Assign Number Ranges to Number Groups

Settings (New)  Withholding tax  Extended Withholding Tax
PostingIndiaRemittance ChallansAssign Number Ranges to
Number Groups
Click on
Click on
2.20 Maintain Number Ranges
Click on and select GroupInsert from the menu
Provide company code on pop up
Click on Click on
Check number range and double click on number group.

Then click on
Number group is assigned to Number ranges as below
Click on
2.21 Maintain Number Grps and SAP Scripts for WHT Certificate

PostingIndiaWithholding Tax Certificates for Vendors and
CustomersMaintain Number Groups and SAP Script Forms
Click on
Click on
2.22 Assign Number ranges to Number Groups

CustomersAssign Number Ranges to Number Groups
Click on
Click on
2.23 Maintain Number ranges

CustomersMaintain Number Ranges
Select Group from menu  select insert
Update below details
Click on
2.24 Maintain Company code Settings –Excise Registration
Via Menus IMG Logistics-General  Tax on Goods Movement  India Basic

SettingsMaintain Company code Settings
Click on
3 Assign Withholding Tax code to Vendor Master

Go to FK02 (Change Vendor Master) and select Withholding tax Check box
Press Enter and provide below details
Click on
4 Transactions Posting
Here, let us post some transactions and see how withholding tax is calculated and how
TDS Certificate is printed.
4.1 Post Vendor Invoice

Via Menus Accounting  Financial Accounting  Accounts Payable Document
Entry  Invoice
Via Transaction Code FB60
Enter all the details required as below
Observe message
Select document SimulateSave
Note: You must enter business place and Section complete print withholding tax challan
and certificate, otherwise you would get errors
Select Document  Display
4.2 Create Remittance Challan
Via Menus Accounting  Financial Accounting  Accounts Payable Withholding

Tax  IndiaExtended Withholding Tax Remittance of Withholding
Tax  Create Remittance Challan
Via Transaction Code J1INCHLN
Update below details:
Double click on amount to select and select back arrow
In the below screen double click on amount and delete amount and put *
Select Document simulate  Save
Message: Document posted in company code 1112
Select Document Display to view the document posted
Error: If you get the error “Number group not maintained for CO code 1112
section IEQ1112 and business place 194C”
Go to transaction code SM30
Click on
4.3 Enter Bank Challan

Tax  IndiaExtended Withholding Tax Remittance of Withholding
Tax  Enter Bank Challan
Via Transaction Code J1INBANK
Click on
Click on
4.4 Printing Withholding Tax Certificate

Tax  IndiaExtended Withholding Tax Certificates  Enter Bank
Challan
Via Transaction Code J1INCERT
Provide below details:
Give printer name in the below screen
Click on to preview TDS Certificate

Click on to print TDS Certificate
Select SystemOwn Spool Request (SP01) to see the WHT Certificate

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CHAPTER 16 EXTENDED WITHHOLDING TAX

1. Introduction to Extended Withholding Tax

What is a withholding tax?

Classic and Extended Withholding Tax functions

Sl. No. Functionality Classic WHT Extended WHT

America Europe and Africa Asia/Pacific

2.1 Check Withholding Tax Countries

Via Menus IMG Financial Accounting (New)  Financial Accounting Global

2.2 Define Withholding Tax keys

Via Menus IMG Financial Accounting (New)  Financial Accounting Global

On prompting input country key

2.3 Define Withholding Tax Type for Invoice Posting

Via Menus IMG Financial Accounting (New)  Financial Accounting global

2.4 Define Withholding Tax Type for Payment Posting

Via Menus IMG Financial Accounting (New)  Financial Accounting global

2.5 Check Recipient Type

Via Menus IMG Financial Accounting (New)  Financial Accounting Global

Provide country on prompting and Click on

2.6 Check Income Types

Via Menus IMG Financial Accounting (New)  Financial Accounting Global

Provide country on prompting and Click on

2.7 Define Business places

Click on then enter address in the pop up box

2.8 Define Section codes Business places

Via Menus IMG Financial Accounting (New)  Financial Accounting Global

Press Enter or click on

2.9 Assign Factory Calendar to Business places

Via Menus IMG Financial Accounting (New)  Financial Accounting Global

Provide country on prompting and Click on

2.10 Maintain Tax Due dates

2.11 Define Withholding Tax Codes

Via Menus IMG Financial Accounting (New)  Financial Accounting Global

Click on and provide below details:

Click on select and then Click on

2.12 Define Min/Max Amounts for Withholding Tax Codes

Via Menus IMG Financial Accounting (New)  Financial Accounting Global

2.13 Assign Withholding Tax Types to Company Codes

Via Menus IMG Financial Accounting (New)  Financial Accounting Global

Click on and click on and provide below details

2.14 Activate Extended Withholding Tax

Via Menus IMG Financial Accounting (New)  Financial Accounting Global

2.15 Create GL Account for Withholding Tax

Create GL required for Withholding tax postings

2.16 Accounts for Withholding Tax to be paid over

Via Menus IMG Financial Accounting (New)  Financial Accounting Global

2.17 Specify Document type (Accounts Payable)

Via Menus IMG Financial Accounting (New)  Financial Accounting Global

2.18 Maintain Number Groups

2.19 Assign Number Ranges to Number Groups

Via Menus IMG Financial Accounting (New)  Financial Accounting Global

2.20 Maintain Number Ranges

Click on and select GroupInsert from the menu

Provide company code on pop up

Check number range and double click on number group.

Number group is assigned to Number ranges as below

Via Menus IMG Financial Accounting (New)  Financial Accounting Global

2.22 Assign Number ranges to Number Groups

Via Menus IMG Financial Accounting (New)  Financial Accounting Global

2.23 Maintain Number ranges

Via Menus IMG Financial Accounting (New)  Financial Accounting Global

Select Group from menu  select insert

Update below details

2.24 Maintain Company code Settings –Excise Registration