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Extended Withholding tax configuration (1)

Extended Withholding tax configuration (1) - 2005-2006...

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www.sapficoconsultant.com Page 2 of 57 © 2005 -2006 sapficoconsultant.com. All rights reserved. No part of this e-book should be reproduced or transmitted in any form, or by any means, electronic or mechanical including photocopying, recording or by any information storage retrieval system without permission in writing from www.sapficoconsultant.com “SAP” is a trademark of SAP AG, Neurottstrasse 16, 69190 Walldorf, Germany. SAP AG is not the publisher of this e-book and is not responsible for it under any aspect.
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www.sapficoconsultant.com Page 3 of 57 TABLE OF CONTENTS INTRODUCTION ......................................................................................................... 4 1. Basic Settings ............................................................................................... 6 1.1 Check Withholding Tax Countries ............................................................. 6 1.2 Define Official Withholding Tax Codes ..................................................... 7 1.3 Define Reasons for Exemption ............................................................... 10 1.4 Check Recipient Types ............................................................................ 11 1.5 Define Business Places ............................................................................ 12 2. Calculation .................................................................................................. 16 2.1 Withholding Tax Type ............................................................................... 16 2.1.1 Define Withholding Tax Type for Invoice Posting ....................... 16 2.1.2 Define Withholding Tax Type for Payment Posting .................... 19 2.1.3 Define Exchange Rate Type for Withholding Tax Type ............. 20 2.1.4 Define Rounding Rule for Withholding Tax Type ........................ 22 2.2 Withholding Tax Codes ............................................................................ 23 2.2.1 Define Withholding Tax Codes ....................................................... 23 2.2.2 Define Formulas for Calculating Withholding Tax ....................... 29 2.3 Withholding Tax Base Amount ................................................................ 31 2.3.1 Define Processing Key for Modified Net Amount ........................ 31 2.3.2 Define Processing Key for Modified Tax Amount ........................ 32 2.2.3 Portray Dependencies between Withholding Tax Types ............... 33 2.4 Minimum and Maximum Amounts .......................................................... 35 2.4.1 Define Min/Max Amounts for Withholding Tax Types ................ 35 2.2.2 Define Min/Max Amounts for Withholding Tax Codes ................ 36 3. Company Code .......................................................................................... 38 3.1 Assign Withholding Tax Types to Company Codes ............................ 38 3.2 Activate Extended Withholding Tax ........................................................ 40 4. Postings ...................................................................................................... 41 4.1 Define Accounts for Withholding Tax to be Paid Over ........................ 41 5. Generic Withholding Tax Reporting ....................................................... 43 5.1 Define Output Groups ............................................................................... 43 5.2 Define Forms for Withholding Tax Reporting ........................................ 44 5.3 Define Certificate Numbering for Extended Withholding Tax ............. 46 6. Vendor Master Data Maintenance .......................................................... 48 6.1 Update withholding tax codes in the vendor master ............................ 48 6.2 Change Field Status used in the down payment account .................. 51 7. Go live checks when uploading Vendor Master Data and Vendor open items .................................................................................................. 57
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www.sapficoconsultant.com Page 4 of 57 INTRODUCTION Withholding tax is applicable in few countries. Some of the countries which have withholding tax are United Kingdom, Slovakia, Turkey, Argentina, Brazil, Chile, Colombia, Mexico, India, Philippines, Thailand and South Korea. SAP has given an excellent solution to map the withholding tax scenario. What is a withholding tax? 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 ded