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What is the purpose of With Holding tax code?

Former Member
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What is the purpose of With Holding tax code?can we use either with holding tax type or with holding tax code?(any one of them only)

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Answers (2)

Answers (2)

Former Member
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Hi,

<b>WHT Code</b>

The withholding tax code determines the withholding tax percentage.

All calculations for extended withholding tax are made in the first local currency in the respective company code. This means that you have to maintain amounts in the company code country currency.

<b>WHT Type</b>

In the system you use withholding tax types to represent the various withholding taxes in a country. You define withholding tax types in the following activities.

The withholding tax type controls the essential calculation options for extended withholding tax, whilst the withholding tax code only controls the percentage rate of the withholding tax.

You must enter the withholding tax type in the customer/vendor withholding tax master data and in the company code master data.

The system recognizes two categories of withholding tax type depending on when the withholding tax amounts are posted ie Posting with invoice / Posting with payment

Regards

Balaji

former_member793926
Discoverer
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Useful information for beginners

Former Member
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hi Kischow,

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 vendor is remitted to the tax authorities on specified

due dates. The vendor gives a Withholding tax certificate to the customer fo r

the withholding tax deducted.

The customer 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; SAP therefore recommends the use of extended withholding tax.

Withholding tax is calculated and posted to the appropriate withholding tax accounts at different stages, depending on the legal requirements in each country. As a rule, withholding tax is posted at the same time that the payment is posted, in other words the outgoing payment (Accounts Payable) or incoming payment (Accounts Receivable), is reduced by the withholding tax amount.

In certain countries, such as Brazil, the Philippines, and Spain, withholding tax can or must be posted when the invoice is posted. This means that the amount receivable or payable is reduced by the withholding tax amount.

Extended withholding tax supports both concepts.

The key concept in extended withholding tax is the distinction between withholding tax type and withholding tax code. While withholding tax types represent basic calculation rules, specific features of these rules - in particular the percentage rate -

are represented by the withholding tax code. You can define any number of withholding tax codes for a given withholding tax type.

REgards

Ranjit

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former_member793926
Discoverer
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Nice information thanks