Calculating Withholding
You must withhold applicable tax amounts from payments to subcontractors and remit that amount to the Inland Revenue Service. After you validate vouchers for withholding tax eligibility, you use the CIS Calculate Withholding program (R74U04580) to calculate applicable withholding tax amounts. This program:
Selects any open AP vouchers that have a pay status of %.
Calculates the amount of tax to withhold, based on the withholding tax percentage in the Supplier Master table (F0401).
Calculates withholdings on a net basis (before value-added tax [VAT]) or on the gross amount, based on the processing options.
Updates the pay status of the original voucher pay item in the F0411 table from % to the value that you specify in the processing options.
Creates a negative pay item for the withholding amount with the same payee, pay status, and due date as the original voucher pay item.
Creates a positive pay item for the withholding amount with the tax authority that is associated with the subcontractor in the F0401 table as the alternative payee, with the same due date as the original voucher pay item.
The net effect of the two pay items is zero, but the subcontractor's payment is reduced by the amount of the negative pay item.
The CIS Calculate Withholding program produces a report that lists the new pay items and the pay status of each item. If applicable, the program also produces an error report that lists the vouchers that were not released for payment, and the error that is associated with each voucher or pay item.