24 Process Withholding Amounts for Subcontractors

This chapter contains the topic:

24.1 Processing Withholding Amounts for Subcontractors

To process withholding amounts for subcontractors, you must first determine whether or not withholding tax applies to your subcontractor's vouchers and then create the journal entries for the amount that is to be withheld from the total payment to the subcontractor. You can use J.D. Edwards software to track and maintain withholding tax amounts for subcontractors.

The system determines whether withholding tax is applicable based on the country-specific rules that are associated with a subcontractor's tax certificate. After invoices are evaluated for withholding tax eligibility, the system calculates the actual withholding tax amounts for each invoice.

When you are finished processing the withholding amounts for your subcontractors, you can run the create payment groups process to process checks as usual.

When you process withholding amounts for subcontractors in the United Kingdom, you run the following programs:

  • UK Calculate Withholding program (P740401)

  • Calculate Withholding program (P04580)

24.1.1 About Evaluating Vouchers for Withholding

The UK Calculate Withholding program (P740401) performs the evaluation of each voucher. The program:

  • Validates the effective date of the subcontractor's tax certificate prior to payment processing. If a tax certificate does not have a valid effective date, the labor items are subject to full withholding.

  • Confirms that voucher receipts have been returned to the contractor in the time specified by the Inland Revenue Service, based on the number of days specified in the special handling code for the user defined certificate type code (system 74,type CT). If the voucher receipts have not been returned in the specified number of days, the payment is subject to the full withholding.

  • Marks each pay item with a labor or non-labor status.

  • Evaluates any tax exempt restrictions for S-type subcontractors. If payment will cause an S-type subcontractor to exceed the tax exempt amount for a given week, the program splits the labor pay item into a taxable and non-taxable pay items. These new items will then be evaluated by the base withholding tax calculation program for actual tax withholding.

  • Evaluates tax exempt restrictions and voucher receipts based on the parent and child relationships that you set up in the Supplier master record for the subcontractor. If a parent and child relationship exists for the subcontractor, the program searches the parent level information first. If no restriction information is available at the parent level, the program searches the child level information.

You can use processing options for the UK Calculate Withholding program to:

  • Process transactions in proof or final mode

  • Process certificate information based on a user defined "as of" date

  • Change all withholding records to a user defined pay status

  • Process subcontractor information based on any supplemental data type that you set up in Address Book

  • Specify the number of days past the last check run that a subcontractor has to return his voucher receipt

24.1.2 About Calculating Withholding Amounts for Vouchers

After invoices are evaluated for withholding tax eligibility, the Calculate Withholding program (P04580) performs the actual calculation of applicable withholding tax amounts. This program:

  • Retrieves the withholding tax percentage from the subcontractor's record in the Supplier Master file (F0401)

  • Creates a new pay item for the withholding amount using the tax authority that is associated with the subcontractor in the Supplier Master file. The program marks this pay items as a withholding tax record for reporting purposes.

  • Creates a negative pay item for each withholding tax amount with the same payee, pay status, and due date as the original pay item.

  • Changes the pay status of the pay items to approved, or any other user defined pay status, based on the processing options for the program.

  • Prints the Calculate Withholding Status Report that lists the new pay items and pay status.

  • Prints the Calculate Withholding Error Report that lists any errors that occurred during the processing.