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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 deducts the withholding tax as per the rates specified by the tax authorities and pays the balance money to the vendor.

The tax deducted by the vendor is remitted to the tax authorities on specified due dates. The vendor gives a Withholding tax certificate to the customer for the withholding tax deducted.

Let us proceed for the Withholding Tax configuration. (sapficoconsultant.com)

Download EXT-WHT Configuration Material