Using Period-Based Withholding
This section discusses how to set up period-based withholding, calculate period-based withholding, and compare credit notes for period-based and voucher withholding.
To set up period-based withholding calculations, you set up a calendar that determines a period for your withholding rule by using the Calendar Builder page. You join that calendar to the withholding rule (which you set up using the Withhold Rule page) by using the Withholding Entity page.
For example, assume you withhold at 10% if the total accumulated monthly basis amount is less than 10,000 EUR, and you withhold at 12% if the total monthly basis amount is equal to or over 10,000 EUR:
Set up a withholding rule with a line for each percentage withholding and basis amount range:
From Basis Amount
To Basis Amount
Percent Withheld
Additional Amount
0
9,999.99
10%
0
10,000
99999999999.99
12%
1000
Define a calendar with monthly periods.
Define withholding categories on the Withholding Entity page that join the withholding rule to the monthly calendar.
Now when you pay less than 10,000 EUR in a month to a supplier, you withhold at 10% and when you pay more, you withhold at 12%.
Note: You can also set up your withholding categories on the Withholding Entity page to set a minimum basis or withholding amount below which no withholding occurs; if the withholding category is associated with a calendar, this minimum amount will be applied by calendar period (that is, by month for a monthly calendar).
As with tiered withholding, period-based withholding calculations are not based on one transaction but rather on all transactions that have occurred during a certain period of time (a month, a week, a year, and so on). However, these calculations occur at payment time and must be calculated for each individual transaction.
Example: Calculating Period-Based Withholding
Consider the example from section Using Tiered-Based Withholding. Assume you've paid 55,000 EUR to a supplier this month and withheld 3,600 EUR. Now you receive a second transaction in the amount of 50,000 EUR. Here is how the withholding on the second payment would be calculated:
50,000 EUR + 55,000 EUR (balance from first transaction) = 105,000 EUR.
105,000 EUR − 100,000 EUR (from basis amount) = 5000 EUR.
5000 EUR × 9% = 450 EUR.
450 EUR + 7200 EUR (additional amount at the 9% bracket) = 7,650 EUR.
7650 EUR − 3,600 EUR (amount already withheld) = 4,050 EUR.
In this case, the withholding on the second transaction of 50,000 EUR would amount to 4,050 EUR. The same methodology would then apply to all subsequent payments to this supplier.
Credit notes for period-based withholding are accounted for during withholding and payment calculations and therefore reduce the amount of the withholding for a given payment. Here are some incremental examples using the following constants:
Period balance for basis amount is 600.00 EUR.
Withholding rate is 10%.
Period balance for withholding amount is 60.00 EUR (600.00 × .10).
Payments are made within the same period, June 2006.
Payment #1:
Payment #1 pay cycle is dated June 1, 2006.
|
Voucher # |
Applicable? |
Basis Amount |
Withholding |
|---|---|---|---|
|
00000100 |
Y |
250.00 |
25.00 |
|
00000101 |
Y |
–50.00 |
–5.00 |
Result: Payment is for 180.00 EUR to the supplier and the withholding is 20.00 EUR.
Payment #2:
Payment #2 pay cycle is dated June 8, 2006.
|
Voucher # |
Applicable? |
Basis Amount |
Withholding |
|---|---|---|---|
|
00000102 |
Y |
100.00 |
10.00 |
Result: Payment is for 90.00 EUR to the supplier and the withholding is 10.00 EUR.
If you add the basis amounts for the first two payments (250.00 EUR + 100.00 EUR = 350.00 EUR) you are less than or equal to the period balance of 600.00 EUR. The system does not include the credit amount when calculating the basis amount totals. The 10% withholding rate still applies (350.00 EUR × .10 = 35.00 EUR). The withholding is 10.00 EUR (35.00 EUR − 25.00 EUR [withholding taken for the first voucher] = 10.00 EUR). The system does not include the credit withholding amount when calculating the withholding amount totals.
Payment #3:
Payment #3 pay cycle is dated June 15, 2006.
|
Voucher # |
Applicable? |
Basis Amount |
Withholding |
|---|---|---|---|
|
00000103 |
Y |
250.00 |
25.00 |
|
00000104 |
N |
−50.00 |
0.00 |
Result: Payment is for 175.00 EUR to the supplier and the withholding is 25.00 EUR.
If you add the basis amounts for the three payments (250.00 EUR + 100.00 EUR + 250.00 EUR = 600.00 EUR) you are less than or equal to the period balance of 600.00 EUR. The system does not include the credit amount when calculating the basis amount totals. The 10% withholding rate still applies (600.00 EUR × .10 = 60.00 EUR). The withholding is 25.00 EUR (60.00 EUR − 25.00 EUR [withholding taken in the first payment] − 10.00 EUR [withholding taken in the second payment] = 25.00 EUR). The system does not include the credit withholding amount when calculating the withholding amount totals. Because the period balance for the withholding amount is 60.00 EUR and the withholding amount taken is 60.00 EUR, no additional withholding is calculated on the credit voucher 00000104.