(ITA) Setting Up Functionality for Italy

This chapter provides an overview of Italian withholding taxes and discusses how to set up:

• User-defined codes (UDCs).

• Automatic accounting instructions (AAIs).

• Data dictionary for withholding.

• 30/60/90 end-of-month invoice date.

• Payment formats.

• Draft remittance formats.

• Supplier withhold tax information.

• Withholding tax codes.

Understanding Italian Withholding Tax

In Italy, businesses must withhold taxes from payments to certain types of suppliers, such as self-employed and contract suppliers. These withholding taxes are remitted directly to the government. Each year, businesses must submit the Model 770 (Modello 770) form to the tax authorities. The Modello 770 form contains information about the suppliers from whom withholding tax has been collected.

In some cases, businesses can defer the recognition of accounts payable value-added tax (VAT) receivable (input) on vouchers for suppliers who are subject to withholding tax until the voucher is paid. The document used to defer the VAT is called notula.

Businesses must also give a certification of all of the amounts that are paid for their services, including detail of the tax withheld, to all their suppliers who are subject to withholding tax.

To track withholding tax records through the withholding tax process, refer to the Withholding Tax Status field. The system automatically updates this field for each tax record, based on the status of the record in the withholding tax process.

1. Voucher Entry

This table describes the first step in the withholding process for Italy:

Status Code: 0

AP Trade Amount: 119-

Expense Amount: 100

VAT Amount: 19-

2. Voucher Payment

This table describes the second step in the withholding process for Italy:

Payment Date: 01/10/05

Status Code: 1

AP Trade Amount: 119

Expense Amount: 109-

VAT Amount: 10-

3. Payment to Fiscal Authorities

This table describes the third step in the withholding process for Italy:

Withholding Paid Date: 15/10/05

Payment Number: 1031

Status Code: 2

Cash Amount: 10-

Withholding Payable Amount: 10

4. Fiscal Reports

The system generates these reports for withholding:

• Annual Declaration of Withholding Tax Information by Supplier.

• File Generated to Interface to Official 770 Form.

INPS Withholding Tax

In addition to the standard withholding tax, payment to certain types of contractors is subject to a social security (Istituto Nazionale Previdenza Sociale [INPS]) withholding tax. The INPS withholding tax is paid to the Italian social security office.

The company must withhold two-thirds of the withholding tax amount that is due to the contractor and pay this amount by the 20th day of every month. The supplier is liable for the remaining one third of the ten percent.

The base amount for the calculation of INPS withholdings can be 95 percent or 100 percent, depending on the type of contractor.

The company is liable for the debt to INPS from the time of payment to the contractor.

Notula

Notula is the document that is used by a company to defer VAT recognition until payment of a voucher is made. Notula is used for suppliers who are subject to withholding tax. You should use the prepayment process in the base software to process notula.

Setting Up UDCs for Italy

Setting up Italian-specific UDCs enables you to use Italian-specific functionality. You also set up some base software UDCs with Italian-specific values.

Setting Up UDCs for Tax Processing for Italy

Before you set up the system to process taxes for Italy, set up these UDCs.

VAT Codes for Year-End Proc. (00/IV)

Set up VAT codes to associate a tax rate to a transaction. For example, you might set up codes for:

• VAT rate 0 percent

• Excluded

• Nonrecoverable 50 percent

• Nonrecoverable 100 percent

• VAT 4 percent

• VAT 20 percent

VAT Register Class (74/01)

Set up register class codes to track and report VAT in a summarized format. For example, you might set up codes for these register classes:

• Purchases

• Correspondent

• No deduction

• Sales

VAT Register Type (74/02)

Set up register type codes to track and report VAT in a summarized format. For example, you might set up codes for these register types:

• Purchases (Tax Italy)

• Purchases (Tax CEE)

• Purchases (Tax extra CEE)

• Tax not deductible

• Sales (Tax Italy)

• Sales (Tax CEE)

• Sales (Tax extra CEE)

• Suspended VAT

Suspended VAT Document Types (74/DT)

Use UDC (74/DT) to set up a cross-reference between the document type for suspended VAT and the document type for suspended VAT-recognized. For example, to cross-reference document type Q9 (suspended VAT) with document type Q7 (suspended VAT - recognized), enter Q9 in the Code field and Q7 in the Description 01 field.

The system uses the document type that you enter in the Code field (Q9 in this example) when you generate suspended VAT amounts. When you receive payment for the invoice for which VAT was suspended and run the Suspended IVA - Receipts/Rebate Control Reports program (R74076C), the system uses the document type that you enter in the Description 01 field (Q7 in this example) to record the VAT that is recognized when full or partial payment is received for the original suspended VAT (Q9) document.

You must also set up the codes for both the suspended VAT and the suspended VAT-recognized document types on user-defined codes (00/DT) and (00/DI).

Suspended VAT Rates (74/SP)

Set up codes to identify the tax rate at which the system calculates suspended VAT amounts and to cross-reference the tax rate for suspended VAT with the VAT payable tax rate. For example, to cross-reference the tax rate SOSP20 (for suspended VAT) with the tax rate IVA20 (for VAT payable), enter SOSP20 in the Code field and IVA20 in the Description 01 field.

The system uses the GL Offset for the tax rate that you enter in the Code field (SOSP20 in this example) to post suspended VAT amounts to a suspense account. When you receive payment for the invoice for which VAT was suspended and run the Suspended IVA - Receipts/Rebate Control Reports program (R74076C), the system uses the offset for the tax rate that you enter in the Description 01 field (IVA20 in this example) to reclassify the recognized portion of the suspended VAT to a VAT payable account.

Setting Up UDCs for Withholding Taxes for Italy

Before you process withholding taxes for Italy, set up these UDCs.

Section of 770 Form (74/RA)

Set up codes to identify the information to use when you create your Model 770 form sections. For example, you might set up codes for this information:

• INPS withholding

• Self-employment revenues

• Sales commissions

Form 770 Information (74/70)

Set up codes to identify information for the 770 form. This code indicates whether the supplier is a resident of Italy and whether the supplier's revenue is partially, totally, or not subject to INPS withholding tax.

Set up these codes:

• 0: Resident

• 0A: Resident whose income is all subject to INPS.

• 0B: Resident whose income is partially subject to INPS.

• 0C: Resident whose income is not subject to INPS.

• 1: Nonresident whose income is all subject to INPS.

• 1A: Nonresident whose income is partially subject to INPS.

• 1: Nonresident whose income is not subject to INPS.

• 1C: Nonresident.

Country Codes for 770 Form (74/CN)

Set up the numeric country codes that have been defined by the fiscal authority for use on the 770 form. The Codes field must contain the same country codes as UDC 00/CN. The Description 01 field must contain the corresponding numeric code as defined by the fiscal authority. The system uses UDC 74/CN with UDC 00/CN to convert country codes to the proper numeric format for the 770 form.

Withholding Tax Government (74/IM)

Set up codes to further define withholding tax information for your suppliers. You specify the government withholding tax information for each code in the Special Handling Code field. The codes that you specify are for internal use to link the government information to withholding tax types (UDC 74/WT).

Valid values for the Special Handling Code field include:

• 1: Self-employed

• 2: Sales commissions

Withholding Tax Fiscal Code (74/WF)

Set up codes to identify the withholding taxes that you process for your suppliers. For example, you might set up withholding tax fiscal codes as follows:

• 103: Fiscal Code 1038

• 1040: Fiscal Code 1040

Specify a special handling code to indicate the conditions of the withholding tax. Values for the Special Handling Code field are:

• A: Code applies to persons in receipt of sums that are subject to withholding tax as advanced payment.

• B: Code applies to persons in receipt of sums that are subject to withholding tax by way of tax advance.

Withholding Type (74/WT)

In Italy, suppliers can be eligible for different types of withholding tax. For reporting and processing purposes, set up codes to identify the types of withholding tax that apply to your suppliers.

Set up these codes:

• E: Sales commissions withholding (ENASARCO)

• I: Social security withholding (INPS)

• R: Standard withholding tax

Withholding type codes are linked to an internal withholding tax code, which you set up in the Withholding Tax Codes - Italy program (P740405).

Setting Up AAIs for Italy

This section discusses how to set up AAIs to work with:

• The annual close process in Italy.

• Supplier withholding taxes.

Setting Up AAIs for the Annual Close Process

In addition to the standard AAI items, these AAI items must be set up in preparation for the annual close in Italy:

See Understanding Setup Requirements and Common Tasks.

Setting Up AAIs for Withholding

To identify the Withholding Tax account in your chart of accounts, set up the PKD (Discounts Available) and PKL (Discounts Lost) AAIs with the same object account.

Setting Up the Data Dictionary for Withholding in Italy

When you process withholding tax, the system uses the data item IRSA (Withholding Tax Status) to track the status of the tax.

These values are hard-coded for the data item IRSA:

• 0: Voucher entered with withholding tax information.

• 1: Payment for voucher entered (debt to fiscal authority).

• 2: Withholding tax paid to fiscal authority.

• 9: Withholding tax canceled.

In addition, you can set up another user-defined value to indicate that a Withholding Tax Certification report has been generated for the tax.

Setting Up the 30/60/90 End-of-Month Invoice Date for Italy

In this example, a payment is split into three installments. The first installment is due 30 days after the end of the month of the invoice date. The second installment is due after 60 days, and the third installment is due after 90 days. No matter what the day of the month when the invoice was created, the due dates are always calculated from the end of that month.

To pay the invoice in this example, you must set up an installment payment term that is based on three equal payments. To determine the due dates of the payments, you must first set up the date range to calculate the end of the month of the invoice date. You then set up the first installment to be due 30 days after the calculated end of the month, the second installment to be due 30 days after the first installment, and the third installment to be due 30 days after that installment.

You set up due date rules for the 30/60/90 end-of-month invoice date as shown in the examples:

End of Month Rule Part 1

End of Month Rule Part 1 calculates the invoice date.

From the Due Date Rules Revision form:

Date Range for End of Month Rule Part 1

The system calculates the end of the month for the invoice date from the date range.

From the Date Range Revision form:

End of Month Rule Part 2

End of Month Rule Part 2 calculates a due date 30 days after the previous due date.

Example: Advanced Payment Terms

This example shows how to set up the end-of-month payment term:

Example: Installments

This example shows how to set up the installment payments for the end-of-month payment term:

Setting Up Payment Formats for Italy

This section provides an overview of payment formats for Italy and discusses how to set up processing options for:

• Create A/P Bank Tape - Italy (R04572I1).

• Print Automatic Payment - Check - Italy (R04572I2).

Understanding Payment Formats for Italy

JD Edwards EnterpriseOne software provides these payment formats for Italy:

Setting Processing Options for Create A/P Bank Tape - Italy (R04572I1)

Processing options enable you to specify the default processing for programs and reports.

Date

Tape

Tape (more)

Currency

Setting Processing Options for Print Automatic Payments - Check - Italy (R04572I2)

Processing options enable you to specify the default processing for programs and reports.

Translation

Address

Print

Setting Up Draft Remittance Formats for Italy

This section provides an overview of draft remittance for Italy and discusses how to:

• Set processing options for A/R Magnetic RIBA Draft Remittance Tape Format (R03B672IT).

• Set processing options for A/R Magnetic RID Draft Remittance Tape Format (R03B672IR).

Understanding Italian Draft Remittance Formats

The JD Edwards EnterpriseOne system provides several country-specific formats for electronic accounts receivable drafts remittance. You specify the country-specific format that you want to use on the Paper/Tape tab of the processing options for the Draft Remittance program (R03B672).

Specify one of these formats for electronic accounts receivable drafts remittance for Italy:

When you use the magnetic RIBA and RID remittance formats, the system creates text file processor batches that contain the remittance information.

Setting Processing Options for A/R Magnetic RIBA Draft Remittance Tape Format (R03B672IT)

Processing options enable you to specify the default processing for programs and reports.

Bank

Italian Tape

Create

Setting Processing Options for A/R Magnetic RID Draft Remittance Tape Format (R03B672IR)

Processing options enable you to specify the default processing for programs and reports.

Tape

Create

Setting Up Supplier Withholding Tax Information for Italy

This section provides an overview of supplier withholding tax information for Italy and discusses how to set up supplier withholding tax information for Italy.

Understanding Supplier Withholding Tax Information for Italy

Businesses in Italy are required to set up this information about any suppliers who are subject to withholding tax:

• Fiscal group code

• Withholding tax code

• Individual tax identification number

• Country

You are required to include this information in your withholding tax reports.

When you set up withholding tax information for your suppliers, you associate suppliers with specific withholding tax rates. When you enter vouchers for your suppliers, the system uses this default rate to calculate the withholding tax amounts. You can override default supplier information, if necessary.

The system displays the individual tax identification number and country of the supplier, based on the supplier's record in the F0101 table.

Forms Used to Set Up Supplier Withholding Tax Information

Setting Up Supplier Withholding Tax Information

Access the Supplier Master Additional Information - Italy form.

Setting Up Withholding Tax Codes

This section provides an overview of withholding tax codes for Italy, lists a prerequisite, and discusses how to set up withholding tax codes for Italy.

Understanding Withholding Tax Codes

If your suppliers are subject to withholding tax, define withholding tax rates so that the system can calculate the withholding tax when you enter supplier vouchers. To do this task, you set up withholding tax codes.

When you set up codes for withholding tax, you specify, among other parameters, the withholding tax type, the percentage, and the base of computation for the tax. For example, the type of withholding tax to which a supplier is subject is Ritenuta d'acconto imposta. Based on this type of withholding tax, vouchers for the supplier are subject to a withholding tax rate that is 20 percent of the total taxable amount.

You can also establish links between different withholding taxes and the codes that you set up for Model 770 reporting.

Prerequisite

Set up the codes for Model 770 reporting in the Section of 770 Form (74/RA) UDC table.

Forms Used to Set Up Withholding Tax Codes

Setting Up Withholding Tax Codes

Access the Withholding Tax Codes Revision - Italy form.