You may be required to withhold taxes from your employee expense reports and supplier invoices. Once you set up Payables to automatically withhold tax, you can withhold tax either during Invoice Validation or during payment processing. You can control all withholding tax options in the Withholding Tax region of the Payables Options window.
To perform automatic withholding, assign a withholding tax group to an invoice or invoice distribution. Accept the default withholding tax group from the supplier site or select another from a list of values. To withhold tax, Payables creates one or more Withholding Tax type invoice distributions. These distribution amounts are not included in the Distribution Total field. For each invoice, Payables automatically updates the Withheld Amount field, and updates scheduled payments to reflect the withholding. For example, for a Standard type invoice with an amount of 100 and a withholding tax amount of 20, Payables creates Withholding Tax type invoice distributions that total -20. The Distribution Total remains 100, and Payables updates the Withheld Amount field to 20. Payables also updates the scheduled payments.
The withheld amount is calculated based on how you set the Apply Withholding Tax Payables Option. If Apply Withholding Tax is set to At Invoice Validation Time, then the withheld amount will be based on the invoice amount. However, if it is set to At Payment Time, then the withheld amount will be based on the payment amount.
For example, assume that withholding tax is calculated at Invoice Validation and the withholding tax rate is 20%. If you have a Prepayment Invoice for $250 with no withholding tax, an Invoice for $1555, and a Payment Amount of $1305. Then the calculated withholding tax is $311 (1555 * 20%). However, if the withholding tax is calculated at Payment Time, then the calculated withholding tax is $261 ($1305 * 20%).
Review withheld amounts online or submit standard reports. For foreign currency invoices, the withheld amount is calculated based on the functional currency amount of the invoice, and is then converted back into the foreign currency. Therefore, due to rounding, it may be different from the foreign currency invoice amount multiplied by the withholding tax rate.
Payables creates an invoice number for the tax authority's invoice by concatenating the following: "Withholding Tax-" (the system's internal identifier number of the invoice) - (first Withholding Tax distribution included on that invoice), The description of that invoice will be: "Withholding Tax" - (supplier name) - (invoice number) / (first Withholding Tax distribution included on that invoice). For example, ABC Company's invoice number 22-MAY-2004 has an invoice ID of 10239, and the first Withholding Tax distribution number is 3. The tax authority's invoice number will be: Withholding Tax - 10239 - 3. The description for that invoice will be Withholding Tax - ABC Company - 22-MAY-2004 / 3.
This discussion includes the following topics:
Other Sources
ADJUSTMENTS TO INVOICES. If an invoice is paid or partially paid, then you cannot reverse a withholding distribution.
FOREIGN CURRENCY: Payables will not create a payment for a foreign currency invoice if the following conditions are true: the invoice has a withholding tax group assigned that is set up with either a period limit or more than one amount range.
The logic for default description in invoice distribution is:
Item - Represents the invoice Lines
AWT - Represemts Tax code description that is used in the Withholding tax group assigned to the invoice.
Tax - The Description on system generated Tax lines default from Invoice Header.
If Description is left blank on invoice header, then the value derived by concatenating Tax Regime and Tax Name are used. However, if the Description on Tax line or distribution is updated, the Description retains the updated value at invoice validation time.
Date. The system date of the current projected Withholding Tax type invoice distribution.
Group. The originating withholding tax group for the current Withholding Tax type invoice distribution.
Code. The originating Withholding Tax type tax code for the current Withholding Tax type invoice distribution.
Rate. The tax rate defined for the originating Withholding Tax type tax code for the current Withholding Tax type invoice distribution.
Attention: A Withholding Tax type tax code may have multiple rates due to different rates that apply to different effective date ranges or amount ranges. Note that this rate could be an exception or certificate rate.
Gross Amount. The sum of all the invoice distributions with the same withholding tax group, tax code, and tax rate for the current invoice.
Withheld Amount. The total amount of projected tax withheld for this tax group, tax code and tax rate for the current invoice.
Account. The GL account associated with the originating Withholding Tax type tax code for the current Withholding Tax type invoice distribution.
Description. The description for the GL account associated with the originating Withholding Tax type tax code for the current Withholding Tax type invoice distribution.
Tax Code. The withholding tax type tax code from the special calendar.
Period Name. The withholding tax type period name.
Supplier Name/Number. The supplier name/number for which you are viewing period-to-date withheld amounts.
Currency Code. Payables displays the invoice currency of the withholding tax invoices.
Amount Subject to Withholding. The total amount of the invoice distributions that have the selected Withholding Tax type tax code assigned to it for the selected period and supplier.
Payables displays the amount subject to withholding so that you can explain any variance between the amount subject to withholding and the amount withheld. If the amount subject to withholding is larger than the amount withheld, you may have reached a period limit for this Withholding Tax type tax code.
Amount Withheld. The amount-to-date withheld for the selected Withholding Tax type tax code.