Use the Withholding Tax Details window to define the tax names, or tax codes, you use for withholding taxes.

Withholding Tax type tax codes can have multiple rates, effective date ranges, tax amount limits, and taxable amount limits. You can also link a tax authority supplier to a Withholding Tax type tax code so you can create invoices to pay taxes you withheld from your suppliers.

After you define withholding tax codes, you can group them into withholding tax groups in the Withholding Tax Groups window. See: Withholding Tax Groups.

Payables provides flexibility in defining withholding tax rates with specific controls. When you define a withholding tax code, you indicate first whether you will have any amount or rate controls by selecting one of the following rate structures:

• Period Limit. After you pay a certain amount for withholding tax in a period, Payables stops withholding taxes. For example, for each special calendar period, Payables will withhold no more than $10,000.

• Flat Rate. The withholding tax has no amount or period limits.

• Amount Ranges. The tax rate depends on how much you have already paid during a time period. Base the paid amount on the gross amount of total paid invoice amounts, or on the total amount of tax withheld. The time period can be either per withholding tax calendar period or per invoice. For example, define a tax that for each year will withhold at a rate of 10% until you pay $100,000 in invoices, and then it withholds at a rate of 15% after you pay $100,000.

In addition to these controls, the same withholding tax code can have different rates depending on the effective date. For example, a withholding tax has a rate of 10% one year and 11% the following year.

Prerequisites

• (Optional) Define AWT Rate Types. See: Lookups.

  Attention: Payables uses only the Standard AWT Rate Type. If you want to use an AWT rate type other than Standard, such as Penalty, then you may want to customize Automatic Withholding Tax to perform special behavior based on the AWT rate type. See: Customizing Automatic Withholding Tax.

• Define accounts. See: Defining Accounts.

• Define your tax authorities as Tax Authority type suppliers. See: Classification Region of the Suppliers window.

• Define Withholding Tax Periods if you want to be able to review online period-to-date amounts for a Withholding Tax code. See: Special Calendar.

To define tax codes for withholding taxes:

1. In the Withholding Tax Details window, enter a tax code.

2. Enter the account to which you will charge this tax.

3. Specify the tax authority by entering either its supplier name or supplier number. Enter the tax authority supplier site.

   Attention: If your Create Withholding Invoice Payables option is set to Never, then you can create a Withholding type tax code without entering a tax authority. However, if you change your Create Withholding Tax Payables option to a value other than Never, you will then need to manually ensure that each Withholding type tax code has a tax authority associated with it.

4. Select one of the following values for Rate Structure, then complete the associated fields:

   • Period Limit: To limit the amount of tax withheld during a withholding tax calendar period select Period Limit. Then enter values for Calendar and Period Limit.

   • Flat Rate: If you do not want to control the tax based on amounts paid, then select this option.

   • Amount Ranges. To base the rate on the amount of the total invoices paid to date or the amount withheld to date, choose Amount Ranges. Then enter values for Amount Basis (Gross or Withheld Amount) and Period Basis (Invoice or Period). If you choose Period for Period Basis, also enter a value for Calendar. If you choose the Amount Basis option, you can enter values in the Amount Range fields below.

5. To review online period-to-date withheld amounts for this tax code, then enter a special calendar name, if you haven't already.

6. If you do not want Payables to create accounting entries for zero amount withholding tax distributions, enable the Don't Create Zero Amount Accounting or Invoices option. Also, when this option is enabled, Payables does not create tax authority invoices for zero amount distributions.

7. To automatically create a tax withholding group for this tax code, select the Create Withholding Tax Group check box.

   To use a Withholding Tax type tax, you must assign it to a withholding tax group. You can define a Withholding Tax Group with multiple Withholding Tax type tax codes in the Withholding Tax Groups window.

8. In the Tax Rates region, enter the withholding tax rate details. Enter the rate type, effective dates, and rate.

9. If you selected Amount Basis for the rate type, enter one or both Amount Range fields to set upper and/or lower amount limits for taxable amounts or tax amount.