If you use automatic withholding tax, Payables creates the correct withholding tax distributions. If your Withholding Tax Payables option is set to Apply Withholding Tax at Invoice Validation Time, then you might want to time the entry of the prepayment application before the invoice is validated. If you apply the prepayment before the invoice is validated, Payables creates a withholding tax distribution net of the prepayment amount. If you validate the invoice first, Payables creates a withholding tax distribution based on the taxable invoice amount. When the prepayment is applied then you will have to manually adjust the withholding tax amount and the withholding invoice if your Withholding Tax Payables option is set to create withholding invoice at invoice validation time or at payment time.