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withholding tax

Former Member

What is with holding tax, would anyboby explain it detail? ..please

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Former Member
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withholding tax-->any person or entity paying income such as interest, dividends, salaries, retirement income, business (freelance occupation) income or other income to individuals is required to withhold a certain amount of tax at source when the income is paid. The tax withheld must then be paid to the government on or before the tenth day of the next month following the month of payment and withholding.

When paying certain domestic source income to foreign corporations with no permanent establishment in Korea, the person or entity must withhold a certain portion of the income at the time of payment and pay the withheld tax to the government by the due date.

In most cases, 100% of the income is used as the tax base. In some cases, only a portion of the income, for example 20% or 25%, is the tax base. The withholding tax rate varies from 1% to 90% according to the type of income and income earner.

In addition to this withheld income tax, a surcharge called inhabitant tax is withheld. This inhabitant tax amount must be reported and paid separately by the withholding company. Generally, the companies maintain two accounts to record the withholding of income tax and inhabitant tax separately, but this practice is not legally binding.

The recipient of a payment due to withholding tax receives a withholding tax receipt, which states the amount of tax withheld and the data of the withholding companies.

Former Member
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HI

To enable withholding tax to be posted and the amounts to be reported to the vendor and the tax authorities, you must enter certain information in the system.

You must specify a withholding tax code to enable the system to calculate the tax amount. This code is defaulted from the vendor master record when you enter a line item if the vendor is subject to withholding tax.

If a vendor is exempt from withholding tax, you must specify this in the master record. The basis of the withholding tax exemption is an exemption certificate, possibly temporary. In the master record of the vendor, you enter the number of this certificate and the date up to which the exemption is valid. If an exemption exists, the system either posts no withholding tax or the reduced tax rate.

Withholding tax is only relevant for specific posting transactions in certain countries and even there, only for some groups of vendors. You therefore determine, depending on your company code, business partner, and the business transaction, the cases in which the fields for withholding tax become ready for input .

http://help.sap.com/saphelp_erp2005/helpdata/en/e5/07809e4acd11d182b90000e829fbfe/content.htm

<a href="http://www.sap-img.com/financial/difference-between-withholding-taxes-and-extended-taxes.htm">Difference between Withholding Taxes and Extended Taxes</a>

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.

If a particular transaction requires more than one kind of withholding tax, this is covered in the SAP System by defining more than one withholding tax type.

When entering a line item, you can enter withholding tax data for each of these withholding tax types

<b>

Configure Withholding Tax</b>

Steps for extended withholding tax :

1. Check withholding tax countries

2. Define Ex. Withholding tax types for invoice postings

3. Define Ex. Withholding tax codes

4. Formula for Ex. Withholding tax calculation

5. Assign Ex. Withholding tax types to Company code

6. Activate Ex. Withholding tax

8. Create a G/L a/C for Ex. Withholding tax

9. Define A/C for Ex. Withholding tax (DBWW)

10. Make changes in Vendor master (XK02)

11. Maintain Company Code Settings:

Path: IMG -> Logistic -> General -> Taxes on goods movement -> India -> Maintain company code settings

12. Activate country version for specific fiscal year position

Path: IMG -> FA -> -> FAGS -> Taxes on sales purchases -> Basic Setting -> India -> Activate country specific for fiscal year position