Calculating Withholding on Prepayments

Prepayments enable you to pay for goods or services before an invoice is received. You can choose to withhold on the prepaid voucher, or postpone withholding until you process the final invoice. If you postpone withholding, the withholding is not calculated when the prepaid voucher is paid. It is calculated when the system applies the regular voucher to the prepaid voucher during the Voucher Posting process.

You can postpone withholding for prepayments by selecting the Postpone Withholding check box on either the Withholding Information page or on the Voucher - Voucher Attributes page.

Here are some examples of withholding on prepayments. If your supplier asked you for a prepayment of 1000.00 EUR on merchandise worth 10,000.00 EUR, you would have the following two options given a 5% withholding:

Note: In all of these examples, the prepaid voucher is voucher ID 00000001 and the applied regular voucher is voucher ID 00000002.

Note: Calculation of Withholding on Prepayments, where the withholding is calculated during voucher posting is applicable only for India Business Unit.

Example 1: Apply Withholding on the Prepayment (Withholding Is Not Postponed)

This option would mean that withholding would occur on the prepayment and the following PYMNT_VCHR_XREF rows would have been generated—assuming backup withholding—after this prepayment is paid:

Voucher ID	Payment Type	Payment Gross Amount	Prepaid Status	Prepaid Applied BU	Prepaid Applied Voucher	Prepaid Applied Payment	Reason
00000001	Regular	950.00 EUR	P			0
00000001	Withholding	50.00 EUR	P			0

When the prepayment is applied to the regular voucher, the following rows get written to the PYMNT_VCHR_XREF table.

Voucher ID	Payment Type	Payment Gross Amount	Prepaid Status	Prepaid Applied BU	Prepaid Applied Voucher	Prepaid Applied Payment	Reason
00000001	Regular	950.00 EUR	P			0	Nothing changes
00000001	Withholding	50.00 EUR	P			0	Nothing changes
00000002	Regular	9000.00 EUR	U			0	Adjusted original entry after prepaid applied.
00000002	Regular	1000.00 EUR	A	US001	00000001	1	New entry after prepaid applied.

After the regular voucher is paid, the entries look like this (the withholding calculations are performed during pay cycle):

Voucher ID	Payment Type	Payment Gross Amount	Prepaid Status	Prepaid Applied BU	Prepaid Applied Voucher	Prepaid Applied Payment	Reason
00000001	Regular	950.00 EUR	P			0	Nothing changes from original entries.
00000001	Withholding	50.00 EUR	P			0	Nothing changes from original entries.
00000002	Regular	8550.00 EUR	U			0	Modified row from withholding calculations.
00000002	Withholding	450.00 EUR					Newly created row from withholding calculations 5% of 9,000.00 EUR.
00000002	Regular	1000.00 EUR	A	US001	00000001	1

Example 2: Postpone Withholding on a Prepayment

This option means that withholding is not calculated for a prepayment and that, instead, withholdings are calculated on the full EUR 10,000 when the regular voucher is paid. When the prepayment is paid, the PYMNT_VCHR_XREF entries for the prepayment would look like this (no withholding at this point):

This is what PYMNT_VCHR_XREF looks like after the prepayment is paid:

Voucher ID	Payment Type	Payment Gross Amount	Prepaid Status	Prepaid Applied BU	Prepaid Applied Voucher	Prepaid Applied Payment	Reason
00000001	Regular	1000.00 EUR	P

This is what PYMNT_VCHR_XREF looks like after the prepayment has been applied:

Voucher ID	Payment Type	Payment Gross Amount	Prepaid Status	Prepaid Applied BU	Prepaid Applied Voucher	Prepaid Applied Pymnt	Reason
00000001	Regular	1000.00 EUR	P			0	This does not change.
00000002	Regular	9000.00 EUR	U			0	Original from voucher save readjusted by prepayment application.
00000002	Regular	1000.00 EUR	A	US001	00000001	1	Prepaid adjustment.

This is what PYMNT_VCHR_XREF looks like after the regular voucher has been paid:

Voucher ID	Payment Type	Payment Gross Amount	Prepaid Status	Prepaid Applied BU	Prepaid Applied Voucher	Prepaid Applied Pymnt	Reason
00000001	Regular	1000.00 EUR	P			0	This does not change.
00000002	Withholding	500.00 EUR	U			0	Newly created row from withholding calculations 5% of 10,000.00 EUR.
00000002	Regular	1000.00 EUR	A	US001	00000001	1	Does not changed from above.
00000002	Regular	8500.00 EUR	U			0	Adjusted regular payment − withholding (withholding actually generates this row not prepayment)