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Oracle Financials for Asia/Pacific User Guide
Release 12.1
Part Number E13419-03
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Korea

Oracle Payables

Withholding Tax in Korea

In Korea, companies are required to withhold tax on certain types of income payments to their suppliers. Korean companies pay the supplier invoice net the withheld amount, issue a withholding certificate for the withheld amount to the supplier, and remit the withheld tax to the proper tax authority.

There are two types of withholding under Korean tax law: Income withholding and Resident withholding. Income withholding is comprised of Business withholding and General withholding.

Normal operating expenses, such as purchase transactions between companies, are not subject to withholding tax.

See Setting Up Oracle Payables for Withholding Tax for a list of the prerequisite setup steps that you must complete before you can withhold tax using Oracle Financials for Korea. You must use Korean Won as the ledger currency.

Legal reporting for withholding tax

Oracle Financials for Korea provides you with the Korean Withholding Tax report which you can use to review your company's withholding tax history. This report provides complete details of the withholdings that were applied to your company's income payments to suppliers. For more information, see Korean Withholding Tax report.

Setting Up Oracle Payables for Withholding Tax

This section describes the steps for setting up Oracle Payables to calculate withholding tax in Korea. Use this checklist to help you complete the appropriate setup tasks in the correct order.

Step Setup task
1 Define Locations
2 Enable Withholding Tax
3 Define Income Category Codes
4 Define Withholding Tax Codes
5 Define Withholding Tax Groups

Related Topics

Setting Up Withholding Tax, Oracle Payables User Guide

1. Define Locations

Use the Legal Entity Configurator to set up and maintain the first party legal entities and establishments for each company site that is responsible for reporting withholding taxes to the tax authority. You can modify the Release 11i migrated location and organization information, and you can enter new definitions according to your requirements

Related Topics

Defining Legal Entities Using the Legal Entity Configurator, Oracle Financials Implementation Guide

Setting Up Locations, Oracle HRMS Enterprise and Workforce Management Guide

2. Enable Withholding Tax

Use the Payables Options window to set control options and defaults to enable automatic withholding tax for your supplier invoices.

To define Payables Options for tax withholdings:

  1. Navigate to the Payables Options window.

  2. Navigate to the Withholding Tax tabbed region.

  3. Check the Use Withholding Tax check box.

  4. In the Apply Withholding Tax region, you should select At Payment Time.

    If you choose At Approval Time, withholding calculations may be inaccurately reported if invoices are canceled prior to payments.

    Note: After you select an option, you should not switch from one method of withholding to another method.

  5. Navigate to the Withholding Amount Basis region.

  6. In the Create Withholding Invoice region, select the time at which you would like Payables to automatically create withholding tax invoices to remit withheld taxes to tax authorities. You should choose At Payment Time.

    If you select At Payment Time, Payables creates unapproved withholding tax invoices during the Confirm program of payment batch processing, or during processing of a Quick payment. Payables does not automatically withhold taxes if you pay with a manual payment.

    If you select At Approval Time, Payables creates unapproved withholding tax invoices when you approve supplier invoices.

Related Topics

Payables Options, Oracle Payables Implementation Guide

3. Define Income Category Codes

Use the Lookups window to define lookup codes for income category codes. You can select lookup codes from the lists of values after you define them. Income category codes are listed on the Korean Withholding Tax report.

In the Lookups window, enter Asia Pacific Localizations in the Application field and a description of the lookup codes in the Description field, if not already displayed. In the Code and Meaning fields, enter a code and description for each income category that your company requires.

Note: The code that you enter in the Code field should match the numeric code for each income category as defined by the Korean tax authority.

Define lookup codes for:

Related Topics

Lookups, Oracle Payables Implementation Guide

4. Define Withholding Tax Codes

Use the Tax Codes window to define withholding tax codes for each income category that you set up in Step 4. Define Income Category Codes. For each company location this is responsible for withholding taxes, you should define separate withholding tax codes for each tax rate and income category that you need.

Use the global descriptive flexfield in the Tax Codes window to associate one of two withholding tax types with each tax code that you define:

After you define a tax code, use the Withholding Tax Details window to define and maintain withholding information for tax rates related to tax codes. If you check the Create Tax Group check box in the Withholding Tax Details window, Oracle Payables automatically creates a withholding tax group that includes the single tax code. See Step 6. Define Withholding Tax Groups for more information about withholding tax groups.

Resident Withholding in Korea

Resident withholding is an additional 10% withholding surcharge on the amount withheld from General or Business income payments to a supplier. Resident withholding is applied only if the recipient is an individual; corporations are not subject to Resident withholding. In addition, if the recipient is a foreign individual, Resident withholding is applied only if this surcharge is included in the tax treaty that Korea has with that foreign country.

Resident withholding is paid to the Province Office, not to the Tax Authority.

Prerequisites

Before you can define withholding tax codes, you must:

To define a withholding tax code and rate:

  1. Navigate to the Tax Codes window.

  2. Navigate to the Rates tabbed region.

  3. In the Tax Code field, enter a unique name to describe the withholding tax code (maximum of 15 characters).

  4. In the Tax Type field, select Withholding Tax from the list of values.

  5. Navigate to the global descriptive flexfield.

  6. In the Location field, enter your company's location.

    The location that you enter must have a tax registration number assigned to it.

  7. In the Withholding Tax Type field, select Income Withholding Tax Type or Resident Withholding Tax Type from the list of values.

  8. In the Withholding Certificate Type field, select Business Withholding Certificate Type or General Withholding Certificate Type from the list of values.

  9. In the Domestic Income Category field, select an income category code for this tax code.

  10. In the Foreign Income Category field, select an income category code for this tax code.

    Note: You may enter either a domestic or a foreign income category, but not both at the same time.

  11. If a Recognized Expense is associated with this type of income payment, enter the expense rate in the Recognized Expense field.

    Recognized Expenses are automatically deducted from an income payment amount before any withholding tax is applied. Payables applies the withholding tax rate, defined by Korean law, after the Recognized Expense is deducted. In such cases, the taxable base is different from the supplier invoice amount; the nominal tax rate and effective tax rate differ as well.

    For example, for an invoice amount of 10,000 KRW, the Recognized Expense is 50% and the tax rate is 20%.

  12. If you entered a Recognized Expense rate, enter the nominal tax rate in the Nominal Tax Rate field.

    Only enter a nominal tax rate if you entered a Recognized Expense rate in the previous field.

  13. In the Minimum Withheld Amount field, enter the minimum amount that you want Payables to create a withholding tax invoice for.

    If a calculated withholding amount is less than the value that you enter here, no withholding occurs.

  14. Press the OK button.

  15. Navigate to the Withholding Tax Details window by pressing the Withholding Tax Details button.

  16. Navigate to the Tax Rates region.

  17. In the Effective Dates From and To fields, enter the start and end dates for this tax rate.

  18. In the Rate field, enter the tax rate that you want to associate with this withholding tax code.

    If you entered a Recognized Expense and nominal tax rate in the global descriptive flexfield, enter the effective tax rate for the withholding tax code here.

    Using the example from step 11, you would enter 10% in this field.

Related Topics

Tax Codes, Oracle Payables Implementation Guide

5. Define Withholding Tax Groups

Use the Withholding Tax Groups window to define withholding tax groups that include more than one tax code. A withholding tax group lets you apply multiple withholding taxes to one invoice or distribution line. A tax group tells Payables which taxes to apply and in which sequential order to apply them. Define withholding tax groups when you want to include the Resident withholding surcharge.

Typically, you rank the tax codes within a withholding tax group in the Withholding Tax Groups window. When you assign a withholding tax group to an invoice or distribution, Payables correctly calculates the taxes in the order that you specified. Lower ranked taxes are applied to the invoice or distribution amount less the previous withholding tax amounts.

In Korea, however, Resident withholding is a tax on the Business or General withholding amount, not on the invoice amount less the previous withholding tax amounts. Therefore, you must determine the effective Resident withholding tax by multiplying the Resident withholding tax by the Business or General Income withholding tax. You must also assign each tax code within a withholding tax group with a rank of 1 in order to correctly calculate Resident withholding.

For example, for an income payment of 1,000,000 KRW, the Business withholding is 30% and the Resident withholding is 10%.

Related Topics

Withholding Tax Groups, Oracle Payables Implementation Guide

Defining Suppliers

Use the Suppliers window to enter withholding and VAT information for your suppliers.

Use the global descriptive flexfield in the Supplier Sites window to assign withholding tax and VAT information to your supplier sites.

To define withholding information for suppliers:

  1. Navigate to the Suppliers window.

  2. Query a supplier.

  3. If applicable, enter the supplier's taxpayer ID in the Taxpayer ID field.

  4. If applicable, enter the supplier's tax registration number in the Tax Registration Number field.

  5. Navigate to the Tax Reporting tabbed region.

  6. In the Organization Type field, select the supplier's organization type from the list of values.

    Select either Corporation or Individual.

  7. Navigate to the Supplier Sites window.

  8. Query or enter the supplier site that you want.

  9. In the Country field, specify the supplier's country location.

    If you enter Korea in this field, Payables identifies this supplier as a domestic supplier. If you enter anything other than Korea, Payables identifies this supplier as a foreign supplier.

  10. Navigate to the Withholding Tax tabbed region.

  11. Check the Allow Withholding Tax check box.

  12. In the Withholding Tax Group field, from the list of values, select the withholding tax group that you want to assign to this supplier.

  13. If this supplier site is an independent legal entity with its own tax registration number, navigate to the Tax Reporting tabbed region.

  14. In the Tax Registration Number field, enter the tax registration number for this supplier site.

  15. Navigate to the global descriptive flexfield.

  16. In the Business Income Subcategory field, from the list of values, select a Business income subcategory code.

    This field is required if:

To define VAT information for suppliers:

  1. Navigate to the Suppliers window.

  2. Query a supplier.

  3. If applicable, enter the supplier's taxpayer ID in the Taxpayer ID field.

  4. If applicable, enter the supplier's tax registration number in the Tax Registration Number field.

  5. Navigate to the Invoice Tax tabbed region.

  6. In the Invoice Tax Code field, from the list of values, select the default VAT code that you want to assign to this supplier.

    You can also assign a default VAT code at the supplier site level.

  7. Navigate to the Supplier Sites window.

  8. Query or enter the supplier site that you want.

  9. Navigate to the Invoice Tax tabbed region.

  10. In the Invoice Tax Code field, from the list of values, select the default VAT code that you want to assign to this supplier.

    You can also assign a default VAT code at the supplier level.

  11. If this supplier site is an independent site with its own tax registration number, navigate to the Tax Reporting tabbed region.

  12. In the Tax Registration Number field, enter the tax registration number for this supplier site.

Korean Withholding Tax Report

Use the Korean Withholding Tax report to review your company's tax withholding on income payments to suppliers. The Korean Withholding Tax report is not a statutory report; use this report for review purposes only.

The Korean Withholding Tax report is an RXi report. The default attribute set displays each payment to suppliers where taxes were withheld. The report provides the required information on the supplier, including the organization type and tax registration number, and shows all relevant withholding information, including the invoice amount, the withheld tax amounts, and the tax rate. The report also displays the withholding tax type and income category of each payment. You can copy this attribute set and customize the layout to suit your reporting needs.

Use the Standard Request Submission windows to submit the Korean Withholding Tax report.

Prerequisites

Before submitting the Korean Withholding Tax report, you must:

Report Parameters

GL Date From

Enter the earliest payment date that you want to report on.

The Korean Withholding Tax report selects all Withholding Tax tax type invoice distributions with General Ledger dates on or after the date that you enter.

GL Date To

Enter the latest payment date that you want to report on.

The Korean Withholding Tax report selects all Withholding Tax tax type invoice distributions with General Ledger dates on or before the date that you enter.

Supplier Name From

Enter the starting name of the supplier range that you want to report on. You can enter either a supplier range or a supplier tax registration number.

To report on all suppliers, leave the Supplier Name From, Supplier Name To, and Supplier Tax Registration Number fields blank.

Use this parameter for submitting withholding certificates only.

Supplier Name To

Enter the ending name of the supplier range that you want to report on.

Use this parameter for submitting withholding certificates only.

Supplier Tax Registration Number

Enter the tax registration number of the supplier that you want to report on. You can enter either a supplier range or a supplier tax registration number.

To report on all suppliers, leave the Supplier Name From, Supplier Name To, and Supplier Tax Registration Number fields blank.

Use this parameter for submitting withholding certificates only.

Invoice Number

Enter the supplier invoice number that you want to report on.

If you leave this field blank, all invoices for the suppliers that you selected are displayed.

Use this parameter for submitting withholding certificates only.

Legal Entity Name

Enter the legal entity that you want to report on.

Operating Unit

Enter the operating unit that you want to report on.

Accounting Flexfield From

Enter the first account that you want to report from. You must provide a full range of accounts.

Accounting Flexfield To

Enter the last account that you want to report to. You must provide a full range of accounts.

Organization Type

Select the organization type that you want to report on.

If you leave this parameter blank, all organization types are displayed.

Location

Select the company location whose tax withholding you want to report on.

If you leave this parameter blank, withholding information for all company locations is displayed.

Domestic Income Category

Select the domestic income category that you want to report on.

If you leave this parameter blank, withholding information for all domestic income categories is displayed.

Foreign Income Category

Select the foreign income category that you want to report on.

If you leave this parameter blank, withholding information for all foreign income categories is displayed.

Column Headings

This table shows the column headings.

In this column... Oracle Payables prints...
Organization Type The supplier's organization type.
Business Subcategory The supplier's business subcategory.
Supplier Name The supplier's name.
Tax Registration Number The supplier's tax registration number.
GL Date The transaction's General Ledger date.
Invoice Number The transaction's invoice number.
Invoice Amount The transaction's invoice amount.
Payment Amount The payment made on the invoice, after taxes.
Note: This column displays the payment amount of the invoice, after taxes, only when the Apply Withholding Tax option is set to At Payment Time in the Payables Options window. After you select an option, you should not switch from one method of withholding to another method. For more information, see Step 3. Enable Withholding Tax.
Tax Code The tax code that Payables applies to this invoice.
Income Taxable Basis The taxable base of this invoice, if you selected Income Withholding as the withholding tax type for the specified tax code.
Tax Rate The withholding tax rate that you associated with the specified tax code.
If Recognized Expense is applicable, the report displays the nominal withholding tax rate.
Income Tax The withholding tax amount that Payables calculates for this invoice.
Resident Tax The Resident withholding tax surcharge that Payables calculates on the withholding tax amount for this invoice.
Withholding Tax Type The withholding tax type associated with the specified tax code.
Domestic Income Category The domestic income category code associated with the specified tax code.
Foreign Income Category The foreign income category code associated with the specified tax code.

Related Topics

Working with Attribute Sets, Oracle Financials RXi Reports Administration Tool User Guide

Using the RXi Reports Concurrent Program, Oracle Financials RXi Reports Administration Tool User Guide

Running Reports and Programs, Oracle Applications User Guide

VAT in Korea

Setting Up for VAT

This section describes the steps for setting up Oracle Financials for Korea to maintain your company's tax registration numbers and report on your company's VAT transactions. Use this checklist to help you complete the appropriate tasks in the correct order.

Step Setup task
1 Define Locations
2 Set Up Tax Regimes and Taxes
3 Maintain Korean VAT Reporting Types

1. Define Locations

Use the Legal Entity Configurator to set up and maintain the first party legal entities and establishments for each company site that is responsible for reporting withholding taxes to the tax authority. You can modify the Release 11i migrated location and organization information, and you can enter new definitions according to your requirements

You can define business locations that are not legal addresses as HR Locations for reporting purposes. Once created, you must also use E-Business Tax to define these location names as reporting codes under a reporting type called Korean Business Location and associate them to Korean tax rates.

Related Topics

Defining Legal Entities Using the Legal Entity Configurator, Oracle Financials Implementation Guide

Setting Up Tax Reporting Types, Oracle E-Business Tax User Guide

2. Set Up Tax Regimes and Taxes

Use E-Business Tax to set up the VAT tax regime and taxes according to your requirements. The Korean VAT Tax Report extracts tax data from the E-Business Tax tax reporting repository.

Related Topics

Setting Up Taxes, Oracle E-Business Tax User Guide

3. Maintain Korean VAT Reporting Types

The upgrade process of Release 11i Korean VAT data performs these updates:

You can maintain your migrated reporting codes and create new reporting codes for the Korean Business Location reporting type and assign them to the new tax rates that you define in E-Business Tax.

Related Topics

Setting Up Tax Reporting Types, Oracle E-Business Tax User Guide

Korean VAT Tax Report

Use the Korean VAT report to report on your company's input and output VAT taxes to the proper tax authority on a regular basis.

The Korean VAT report is an RXi report. The default attribute set lists your company's transactions by tax registration number. The report displays other relevant VAT information, such as the supplier or customer's tax registration number, as well as the industry classifications and subclassifications of the reported transactions. The Korean VAT report displays all transactions in the ledger currency. You can copy this attribute set and customize the layout to suit your reporting needs.

In addition to Payables and Receivables transactions, the Korean VAT report includes any transactions entered directly into General Ledger. When you enter tax journals in General Ledger, you can automatically create additional tax journal lines using the same tax calculation rules that you defined in Payables and Receivables.

You can submit this report to display VAT information for a single operating unit, for all operating units within a legal entity, or for all legal entities associated with a ledger.

Use the Standard Request Submission windows to submit the Korean VAT report.

Prerequisites

Before you can submit the Korean VAT report, you must:

Report Parameters

Reporting Level

Specify the reporting level for this report.

The reporting level that you can select is restricted by the MO: Top Reporting Level profile option that you defined for your responsibility. The default is Operating Unit.

Reporting Context

Specify the reporting context for the chosen reporting level.

Depending on what you entered in the Reporting Level parameter, the Reporting Context list of values shows valid ledgers, legal entities, or operating units for your responsibility. The default is the organization that you defined for the MO: Operating Unit profile option.

Ledger Currency

Enter the ledger currency to use for this report.

Tax Class

Select the type of transactions that you want to report on. Possible values are:

Source

Select the source that you want to report on. Valid values are AP, AR, GL, and All.

GL Date From

Enter the earliest General Ledger date that you want to report on.

GL Date To

Enter the latest General Ledger date that you want to report on.

Transaction Date From

Enter the starting transaction date for the date range that you want to report on.

For invoices, credit memos, and adjustments, the transaction date is the date of the transaction. For receipt applications, the transaction date is the application date of the associated cash receipt. For miscellaneous cash transactions, the transaction date is the date of the receipt.

Transaction Date To

Enter the ending transaction date for the date range that you want to report on.

For invoices, credit memos, and adjustments, the transaction date is the date of the transaction. For receipt applications, the transaction date is the application date of the associated cash receipt. For miscellaneous cash transactions, the transaction date is the date of the receipt.

VAT Transaction Type From

Select the starting VAT transaction type that you want to report on.

The Korean VAT report displays all the tax rate codes that you associated with this VAT transaction type.

VAT Transaction Type To

Select the ending VAT transaction type that you want to report on.

The Korean VAT report displays all the tax rate codes that you associated with this VAT transaction type.

Tax Type From

Select the starting tax type that you want to report on.

The Korean VAT report displays all the tax rate codes that you associated with this tax type.

Tax Type To

Select the ending tax type that you want to report on.

The Korean VAT report displays all the tax rate codes that you associated with this tax type.

Tax Regime Code

Enter the tax regime code to report on.

Tax

Enter the tax to report on.

Tax Jurisdiction

Enter the tax jurisdiction to report on.

Tax Status Code

Enter the tax status code to report on.

Third Party Reporting Ledger

If you choose Supplier, Receivables extracts merchant information for expense-report invoices at the Transaction Line summary levels. If you choose Merchant, Receivables extracts merchant information for expense-report invoices at all summary levels.

Report Headings

This table shows the report headings.

In this heading... Oracle Financials prints...
Company Name Your company's name.
Company Tax Registration Number Your company's tax registration number.
Company Representative Your company's taxable person.
Company Address Your company's address.

Column Headings

This table shows the column headings.

In this column... Oracle Financials prints...
Tax Code The transaction's tax rate code.
Transaction Number The invoice number of the Payables or Receivables transaction, or the General Ledger journal entry number.
Name The supplier or customer's name where you entered the tax registration number (either at the site or header level).
Taxpayer ID The supplier or customer's taxpayer ID.
Tax Registration Number The supplier or customer's tax registration number.
Industry Classification The supplier or customer's industry classification.
Industry Subclassification The supplier or customer's industry subclassification.
Taxable Amount The transaction's taxable base.
Tax Amount The transaction's tax amount.
VAT Type The VAT transaction type associated with the specified tax code.
VAT Rate The VAT rate associated with the specified tax rate code.

Related Topics

Working with Attribute Sets, Oracle Financials RXi Reports Administration Tool User Guide

Using the RXi Reports Concurrent Program, Oracle Financials RXi Reports Administration Tool User Guide

Automatic Tax on Journal Entries, Oracle General Ledger User Guide

Running Reports and Programs, Oracle Applications User Guide