1. Using Financials for the Americas
  2. Withholding Tax Calculation with Calculation Point as Invoice

Withholding Tax Calculation with Calculation Point as Invoice

You can process withholding tax at invoice validation with Oracle ERP Cloud.

Here is an example. A supplier provides services to an organization based in Sao Paulo (SP) and issues invoices to that company. The payables clerk enters an invoice with this transaction line in Payables and validates the invoice.

Payables Transaction Line

The transaction line in Payables:
Line Type Product Type Amount
1 Item Service 2000 BRL

Tax Determination Processes

At invoice validation, these tax determination processes run for all the withholding taxes with a tax calculation point of Invoice.
Process Name Activities Included Components Used Result
Determine Applicable Tax Regimes Identify the applicable tax regimes Configuration options for the withholding tax regime

Applicable regime =

<User-defined withholding tax regime>

Determine Place

of Supply and Tax Jurisdiction

Identify the

jurisdiction and place of supply

 Based on the location (Country) of the transaction Tax jurisdiction = Brazil
Determine Tax Applicability Consider the taxes based on the tax applicability rule for each tax

Tax Applicability Rules Tax conditions –

  1. Bill-From Party’s Registration Status = Registered
  2. Product Type =Services
  3. Party Fiscal Classification Supplier = Person
 Applicable tax = INSS_PF
Determine Tax Registration

Determine the party type to derive the tax registration for each

applicable tax

 INSS_PF Definition > Tax Rule Defaults > Tax Registration Bill-from party
Determine Tax Status Consider the tax statuses of applicable taxes

User-defined tax status = Standard

INSS_PF rule defaults > Indirect defaults > Tax Status= Standard

 Standard
Determine Tax Rate

Consider the tax rates of each applicable tax status

of each applicable tax

 Tax Rate Rules

Applicable tax rate=11%
Determine Taxable Basis

Determine the taxable basis on which the tax rate for

each tax is applied

 Standard Taxable Basis Formula = STANDARD_TB Taxable basis = Line amount of 2000 BRL
Calculate Taxes Identify the tax calculation formula and calculate the taxes Standard Tax Calculation Formula = STANDARD_TC

Taxable basis * tax rate = 2000 *11%=220 BRL

Withholding Tax Line

After the tax determination process completes, Oracle ERP Cloud inserts invoice lines for the Tax type, for example one line for each applicable withholding tax. In this example, there is one tax line for INSS_PF Tax.
Tax Line Tax Regime Tax Name Tax Status Tax Jurisdiction Tax Rate Tax Amount
1 <User-defined withholding tax regime> INSS_PF Standard Brazil 11% -220 BRL

After the withholding tax line is added, Oracle ERP Cloud generates the distributions for transaction and withholding tax lines.

Line Account Class Distribution Type Amount
1 Item Expense Item 2000.00
2 Withholding Tax Withholding Tax -220.00
Total 1780.00 BRL

After the accounting successfully completes, Oracle ERP Cloud generates these accounting lines for the invoice:

Account Class Account Type Debit Credit
Item Expense Expense 2000.00
Liability Liability 220.00
Liability Liability 2000.00
Withholding Tax Liability 220.00
Total 2220.00 2220.00