Withholding tax

[Former Member]

Hi,

How withholding tax is calculated? While doing MIRO, how do we check the calculation? also explain concept of withholding tax

sanjay

[Former Member]

Hello Sanjay,

Concept of W/tax -

Withholding tax is an amount withheld by the party making payment to another (payee) and paid to the taxation authorities. The amount the payer deducts may vary, depending on the nature of the product or service being paid for. The payee is assessed on the gross amount, and the tax to be withheld (the withholding tax) is computed in that assessment. The purpose of withholding tax is to facilitate or accelerate collection, by collecting tax from payers rather than a much greater number of payees, and by collecting tax from payers within the jurisdiction rather than payees who may be outside the jurisdiction. It may also be used to counteract tax evasion and tax avoidance.

Config -

W/tax is customized at the below node.

Financial Accounting Global Settings

Withholding Tax

Extended Withholding Tax

Calculation -

W/tax type and W/tax code is defaulted in Vendor Master. Based on the rule of calculation i.e. Invoice Entry or Payment, the system withholds and posts the tax amount to the tax accounts.

Periodically the tax is paid to the Govt. Authorities.

Warm Regards,

Sumit Sonawane

[Former Member]

chk this link for differences:

http://www.sap-img.com/financial/difference-between-withholding-taxes-and-extended-taxes.htm

You can maintain the Combination of Withholding Tax types & With holding tax codes in Customizing.

Financial Accounting (New) -> Financial Accounting Global Settings (New) -> Withholding Tax -> Calculation -> Withholding Tax Code -> Define Withholding Tax Codes.

and also maitain the same for your Vendor

So, the maintained tax codes in the Vendor, based on the Tax type will be displayed in MIRO