Withholding Tax Setup

Its used to withhold taxes from your employee expense reports and supplier invoices.The withheld amount is paid to the taxation authorities.
Payables provides the following income tax forms and reports:

• Withholding Tax By Invoice Report
• Withholding Tax By Payment Report
• Withholding Tax By Tax Authority Report
• Withholding Tax By Supplier Report
• Withholding Tax Certificate Listing
• Withholding Tax Letter
• Withholding Tax Report

Steps

1. Navigate to Payables Super User/Payables Manager->Setup->Options->Payables Options 
Select the Withholding Tax tab and select the following options:

• Use Withholding Tax: If you enable this option, you have the option to allow your suppliers and supplier sites to be subject to withholding tax
• Allow Manual Withholding: Allows manual creation and adjustments of Withholding Tax type distributions for your invoices
• Withholding Amount Basis:

1. Include Discount Amount:Payables includes the invoice discount amount when it calculates withholding tax amounts for the invoice.
2. Include Tax Amount: Payables includes the invoice tax amount when it calculates withholding tax amounts for the invoice

• Apply Withholding Tax: Select ‘At Payment Time’

1. Never
2. At Invoice Validation Time:If Payables withholds tax at Invoice Validation, it calculates withholding only once. If you adjust an invoice after you submit Invoice Validation, then you need to manually adjust the withholding tax.
3. At Payment Time: When you create payments in a payment batch or with a Quick payment.
4. At Invoice Validation and At Payment Time: Indicates when the Withholding Tax is applied, that is at the time of both Invoice Validation and at the Payment.

• Create Withholding Invoice: Select ‘At Payment Time’

1. Never: You can create a withholding type tax code without entering a tax authority. However, if you change to an option other than Never, you will need to manually ensure that each withholding type tax code has an associated tax authority.
2. At Invoice Validation Time
3. At Payment Time 

2. Navigate to Payables Super User/Payables Manager->Setup->Invoice->Payment Terms and create a new Payment Terms

3. Navigate to Payables Super User/Payables Manager->Setup->Calendar->Special Calendar and create a new special Calendar of type “Withholding Tax”

4. Navigate to Purchasing Super User->Supplier Base->Supplier and create a supplier of type “Tax Authority”.Then create a site for the same supplier.
Supplier:

Supplier Site:

Supplier Site Payment Details:

Supplier Invoice Management:

5. Navigate to Payables Super User/Payables Manager->Setup->Tax->Withholding->Codes and create a Tax code as shown in below screen-shot

Rate Structure can be:

• Period Limit: It is used to limit the amount of tax withheld during a withholding tax calendar period. After you paid the amount of WHT specified,system stops creating WHT-Invoices. Payables will not withhold more than the specified amount for the specified period(s).

• Flat Rate: It is used when you have no amount or period limits.

• Amount Ranges: It is used when your WHT rate depends on what you already have paid during a time period. For the amount basis you can choose between Gross Amount and Withheld Amount. The time period basis is either per withholding tax calendar period or per invoice.

6. Navigate to Payables Super User/Payables Manager->Setup->Tax->Withholding->Groups and create a new Tax Group as shown in below screen-shot

7. Navigate to Purchasing Super User->Supplier Base->Supplier and search for any supplier used in invoice.Then under Tax Details section across supplier,select “Allow Withholding Tax” option.

Also enable “Allow Tax Withholding” and enter the newly created Tax Group under “Payment Withholding Tax Group” against the site.(Since we have set create Withholding Tax invoice at payment time).

8. Navigate to Payables Super User/Payables Manager->Invoices->Inquiry->Withheld Amounts and enter the OU,Tax code,supplier & Site and click on Find button.Note that the query caused no records to be retrieved as there are no invoices created for this supplier yet and there is no taxes calculated.
9. Navigate to Payables Super User/Payables Manager->Invoices-Entry->Invoices and create a new invoice using the withholding tax enabled supplier.Enter the header information and then while entering the line & distribution information,Withholding Tax Group defaults from the Supplier Site. (If required the default withholding tax group can be modified).
10. Then validate and pay the invoice.
During Payment it has reduced 50 USD as discount and withheld 100 USD (10% of 1000->We have enabled to include discount amount also for withholding tax amount calculation)
Amount Paid =1000-50(5%1000 as part of Terms Discount)-100(10% 1000, discount amount is also eligible for withholding since ‘Include Discount Amount’ is enabled)=850 USD


11. Navigate to Payables Super User/Payables Manager->Invoices->Inquiry->Withheld Amounts and enter the OU,Tax code,supplier & Site and click on Find button to see the withheld amount details.