Examples of Setting Up Rate Schedules for Withholding Taxes
Set up a rate schedule to control the tax rates applicable on a transaction based on each document or on accumulated tax amounts and taxable basis amounts in defined periods.
Define rate schedules at the following levels:
-
Withholding tax: Define rate schedules to be based on each document or on accumulated tax amounts and taxable basis amounts in defined periods. For period-based rate schedules, specify the withholding tax calendar to be used for defining the periods. You can also control whether a single rate should be applied to the total taxable basis or multiple rates.
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Withholding tax rate: Specify if the tax rate schedule is based on gross amount or withheld amount. Define the amount ranges and percentage rate for each range. You can have different amounts and rate percentages for a tax rate based on effective periods.
The following examples illustrate how withholding tax is calculated based on defined rate schedules.
Rate Schedule Based on a Document with a Tax Rate Type of Gross Amount
Define rate threshold setup as:
|
Schedule Basis |
Apply Single Rate |
Tax Rate Type |
From Amount |
To Amount |
Rate Percentage |
|---|---|---|---|---|---|
|
Document |
Blank |
Gross amount |
0 |
1000 |
5% |
|
1000 |
5000 |
10% |
|||
|
5000 |
15% |
The withholding tax on an invoice for 6000 is calculated as: (1000 * 5%) + (4000 * 10%) + (1000 * 15%) = 600.
If you define the apply single rate, the withholding tax is calculated as: 6000 * 15% = 900 because 6000 falls in the 15% range of over 5000.
Rate Schedule Based on Period with a Tax Rate Type of Withheld Amount
Define rate threshold setup as:
|
Schedule Basis |
Apply Single Rate |
Tax Rate Type |
From Amount |
To Amount |
Rate Percentage |
|---|---|---|---|---|---|
|
Period |
Blank |
Amount withheld |
0 |
50 |
5% |
|
50 |
500 |
10% |
|||
|
500 |
15% |
The withholding tax is calculated based on:
-
0 to 50 at 5% is equal to a gross amount of 0 to 1000. For example, a withheld amount of 50 at 5% is equal to 1000 * 5% .
-
50 to 500 at 10% is equal to a gross amount of 1000 to 5000. For example, a withheld amount of 500 at 10% is equal to 5000 * 10%.
The first invoice in a period for the amount of 4000 is calculated as: (1000 * 5%) + (3000 * 10%) = 350. The accumulated tax amount is 350 and the accumulated taxable basis is 4000.
The second invoice in a period for the amount of 3000 is calculated as: (1000 * 5%) + (4000 * 10%) + (2000 * 15%) = 750 less the current accumulated tax amount of 350 = 400. The accumulated tax amount becomes 750 and the accumulated taxable basis is 7000, which is the first and second invoice added together.