Release 4.0A includes a number of new developments in the area of withholding tax processing, that together represent a considerable improvement in performance and flexibility over previous Releases.
These new functions are together known as "Extended Withholding Tax" as distinct from the withholding tax functions that have previously existed and which will continue to exist alongside Release 4.0.
For each of your company codes, you need to decide whether you implement the previous withholding tax functionality or Extended Withholding Tax. Note that Extended Withholding Tax is an alternative and not a complement to the withholding tax functions that have previously existed.
The new functions include the facility to:
In addition to the above, you can also create withholding certificates numbered consecutively and in ascending order for each payment transaction/withholding tax type in the relevant payment.
For each company code, you need to decide whether you wish continue using the previous withholding tax functions or whether it would be advisable to change to using Extended Withholding Tax.
Depending on the country in which the company code is defined, it may be necessary to implement Extended Withholding Tax on legal grounds.
The key concept in Extended Withholding Tax is the distinction between withholding tax type and withholding tax code. Whilst withholding tax types represent basic calculation rules, certain aspects of these rules - in particular percentage rates - are defined under withholding tax code. You can define any number of withholding tax codes for a given withholding tax type.
If a particular transaction attracts more than one kind of withholding tax, this eventuality is handled in the SAP System by defining more than one withholding tax type. When entering a line item, withholding tax data can then be entered for each of these withholding tax types.
Extended Withholding Tax allows you to process withholding tax in both Accounts Receivable and Accounts Payable. In Accounts Payable, the vendor is the person subject to tax, and the company code is obligated to deduct withholding tax and pay this over to the tax authorities on their (the vendor's) behalf. In Accounts Receivable, the company code itself is subject to tax, and the customers that do business with this company code deduct withholding tax and pay this over to the tax authorities on its (the company's) behalf. The basic principle in both cases is that it is the business partner of the person or entity subject to tax that deducts the tax. Withholding tax is calculated and posted to the appropriate withholding tax accounts at different stages, depending on the legal regulations that pertain. 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, for example Brazil, The Philippines and Spain, withholding tax 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 allows you to post and process withholding tax at either of these time points.
Example: Withholding Tax in Accounts Payable
When you change documents, the withholding tax data for a line item can also be changed, provided no withholding tax has actually been posted. If the withholding tax code is changed, the withholding tax base amount is recalculated.
For the withholding tax type Posting at time of payment, withholding tax is calculated using the data in the open items (withholding tax type, code, and base amounts). This is the case whether payment is made manually or automatically. The payment amounts are reduced by the withholding tax amounts. Where outgoing payments are made manually or when processing payment proposals created by the payment program, the withholding tax amounts calculated can be displayed in detail per open item. If you change your open item selection or edit the payment proposal, the withholding tax is recalculated automatically if necessary. If the payments are posted, the withholding tax amounts can be displayed in detail in the clearing line items in the payment document. If you have made the appropriate settings in Customizing, a withholding tax certificate number is assigned when payment is made.
Withholding tax is also calculated and posted for payments that are not cleared, such as down payments and partial payments. However, withholding tax is not calculated where two amounts are offset against each other (invoice against credit memo).
In certain countries like Argentina and Italy, other kinds of posting are required for certain business transactions. Instead of the payment amount being reduced by the withholding tax amount, the tax is posted as an offsetting entry to an expenses account. This kind of processing is also supported by R/3.
Where cleared items are reset, the clearing document is automatically reversed, in so far as it contains withholding tax data. For withholding tax types with accumulation, the accumulation base amount is corrected if the payment document is reversed.
The withholding tax type/withholding tax code concepts is the basis on which Extended Withholding Tax functions.
To be able to work with Extended Withholding Tax, the following steps are necessary in Customizing.
The first stept is to activate Extended Withholding Tax for the company code in question ( -> Financial Accounting -> Financial Accounting Global Settings -> Company code -> Activate extended withholding tax ).
Now define the withholding tax types you require (-> Financial Accounting -> Financial Accounting Global Settings -> Extended Withholding Tax -> Calculation -> Withholding Tax Type ).
Withholding tax type
You can define any number of withholding tax codes per withholding tax type. Note however that a withholding tax type should have at least one (... -> Calculation -> Withholding tax code).
Withholding tax code
You can define certain characteristics for calculating the withholding tax base amount, depending on the withholding tax type. (... -> Calculation -> Withholding tax base amount ).
Withholding tax base amount
You can also define threshold values and tax exempt amounts (... -> Calculation -> Minimum and Maximum Amounts ).
Minimum and Maximum Amounts
For each of your company codes, you need to define the withholding tax types for which they are entitled to withhold tax, or whether they are subject to self-withholding tax. -> Extended Withholding Tax -> Company Code().
To be able to post withholding tax, you need to define withholding tax accounts (... -> Extended Withholding Tax -> Postings -> Define Accounts for Withholding Tax).
Define Accounts for Withholding Tax
If you wish, you can make settings for withholding tax certifates (... -> Posting -> Certificate Numbering for Withholding Tax ).
If required by the withholding tax authorities, certain other basic settings can also be made (... -> Extended Withholding Tax -> Basic Settings).
At the time of writing, the programs RFBIBL00, RFBIKR00, RFBIDE00 that transfer data from foreign or old systems do not support the transfer of withholding tax data from these systems.
Release 4.0A does not allow you to activate Extended Withholding Tax for a given company code, and to continue processing withholding tax data in this company code if the withholding tax data in question was created using "standard" withholding tax functionality. It follows that Extended Withholding Tax should really only be impelemented by customers going live for the first time. SAP is working to resolve these two problems - the solutions to which are planned for inclusion in future Releases. The same applies to further developments in the area of withholding tax reporting.