Example of Withholding Calculations Based on Invoices for a 12-Month Period

You might have a supplier who is registered as a small contributor whose paid and unpaid invoices for a 12-month period exceed the limits. The 12-month period is often slightly less than a full 12 months because the regulation requires that the sum of the invoices for the previous 11 full months be added to the total of invoices in the current month to determine whether a small contributor exceeded the limits.

Suppose that you have a supplier set up in your system as a small contributor who supplies services and who has not had VAT and profit withholding applied to previous transactions. Suppose further that the limit for exempting invoices for services is ARS 72,000 over a 12-month period. The regulations require that the system use the invoice date for determining the 12-month period.

If you run the Create Payment Group program (R04570) to pay an invoice from a small contributor that has an invoice date of June 15, the system will sum the paid and unpaid invoices from July 1 of the previous year through June 15 of the current year. The system then subtracts from the sum the amounts for lines that are exempted. You set up tax rate areas and document types in UDC tables to identify exempt transactions. If the remaining sum is 72,000 or higher, the system applies VAT and profit withholding as set up for the supplier.

If the total invoiced amount for a supplier exceeds the limits at any time that you process withholding, then the system flags the supplier as one who needs to have withholding calculated for all transactions in the future. The system uses the VAT and profit withholding that is set up in your system to determine the withholding rates to use. After a supplier exceeds the limits, you must always calculate the withholdings for the supplier.

The system also performs the validations for small contributors when you process manual payments and have the processing option in the Manual Payment – Withholding Registration - ARG program set to run the validations.