Withholding tax is not paid at a single standard rate. Instead, the amount of withholding tax due varies depending on the type of service provided and the tax jurisdiction.

You use Financials and GTM functionality to define both the withholding tax rates and the accounts that track the withholding tax liability.

Up to nine steps are required to set up withholding tax:

You enable withholding tax for a domain in the General tab of the Domain record.

Select the field to enable withholding tax for the domain.

When withholding tax is enabled for a domain, the system automatically enables the Withholding Tax field in the Taxes tab of the Entity record for all entities that belong to the domain. The Use Withholding Tax field is read only, and cannot be changed. You cannot disable withholding tax at entity level.

You must define the next withholding tax number in Record Number Maintain, and you must do this for every entity for which withholding tax is enabled.

The withholding tax number is an index for the withholding tax records, and its usage is country dependent. For example, the withholding tax number is required in Thailand and Argentina for withholding tax certificates. The withholding tax number is applied to each payment for which withholding tax applies, and certificates are printed for every payment.

In countries such as Italy, the withholding tax number is not required. Italian withholding tax certificates cover transactions for an entire year, and can involve many withholding tax numbers—one for each payment.

The system generates a withholding tax number within the entity for each payment that is liable to withholding tax. All withholding tax numbers after this number are consecutive within the entity.

To specify the next withholding tax number:

Use WHT Certificate Format Maintain to define one or more withholding tax certificate formats. The certificate formats you define are stored at system level.

Multiple withholding tax certificate formats are needed in countries such as Thailand. The format code is then used in customization to link to a specific form layout.

Use Tax Type Maintenance to create one or more tax types for use in withholding tax calculations. You then use these tax types when setting up tax rates for withholding tax calculations.

Use Tax Base Maintenance to create tax bases used to indicate the portion of the fees that is subject to withholding tax. The percentage is 100% if the whole transaction is subject to withholding tax.

See Setting Up Tax Bases for more information on Tax Base Maintenance.

In Tax Rate Maintenance, you must specify the tax account or accounts to use in the payment of invoices and credit notes when posting the withholding tax liability. Before proceeding to Tax Rate Maintenance, you must first define the tax accounts in GL Account Create. The accounts must have the GL type Tax Account.

Use Tax Rate Maintenance to define tax rates that use a withholding tax type.

Withholding tax is not paid at a single standard rate. Instead, the amount of withholding tax due varies, depending on the setup parameters of the tax rate.

In Tax Rate Maintenance, you must also specify the tax account or accounts to use for payment of invoices and credit notes when posting the withholding tax liability. The GL type for these accounts must be set to Tax Account.

When creating a tax rate record for a tax type for which the Withholding Tax field is selected, you can optionally enter additional values for withholding tax calculation and electronic tax declarations.

Add the withholding tax types you created to the relevant tax environments if you want GTM to automatically calculate withholding tax for POs, fiscal receiving, and supplier invoices.

If you want to use a manual flow for withholding tax calculation, do not add withholding tax types to the tax environment. You can manually add withholding tax to an invoice in the Withholding Tax tab of Supplier Invoice Create.

The Withholding Tax tab of the Supplier record lets you indicate the suppliers for which withholding tax applies, and specify withholding tax data for the supplier. You can only enable withholding tax for suppliers that belong to a domain for which withholding tax is enabled.

In the Withholding Tax tab, you can enter the fiscal code of the relevant supplier and specify if the supplier is an individual rather than a company. If the supplier is an individual, you can enter additional personal details that might be relevant, such as the person’s place of birth. These details are required for withholding tax legal reporting in Italy. However, the details are not required by other countries, such as Thailand.

Use the grid to specify default withholding tax codes for each domain that uses the shared set to which the supplier belongs and for which withholding tax is enabled.

When you click Save or Save and Create, the system validates that the withholding tax codes entered in the grid are valid for the associated domains and are linked to tax types designated for use with withholding tax, and that at least a single row exists in the grid, linked to the current domain.