Prepayments

According to Brazil tax legislation, any advance payment to a supplier for the services not yet rendered is subject to withholding tax. IRRF_PJ withholding tax is applicable on prepayments to suppliers as a company.

Withholding tax on a standard invoice considers the tax amount already withheld on respective prepayments to avoid double withholding taxes.

You can use Oracle ERP Cloud to withhold taxes on supplier prepayments. If a prepayment is applied to an invoice before invoice validation, Payables creates withholding tax distributions only for the unapplied invoice amount.

For example the supplier as a company, IRRF_PJ withholding tax is applicable on an advance payment. A clerk enters and validates a prepayment invoice with the transaction line in Payables.

Payables Prepayment Invoice Transaction Line

Invoice Date	Invoice Number	Product Type	Product Category	Amount
05/10/17	CA1009	Service	Security Services	5000.00
	Total			5000.00 BRL

Tax Determination Process

At prepayment invoice validation, the tax determination process calculates the withholding amount.

Here is the IRRF_PJ Tax Computation:

Tax invoice amount = 5000 BRL

IRRF_PJ tax amount = 5000*1.5% =75.00 BRL

Withholding Tax Line

After the tax determination process successfully completes, this tax line is created:

Tax Line	Tax Regime	Tax Name	Tax Status	Tax Jurisdiction	Tax Rate	Tax Amount
1	<User-defined withholding tax regime>	IRRF_PJ	Standard	Brazil	1.5%	-75.00 BRL

The clerk enters a standard invoice, applies the prepayment before validation, and validates the standard invoice in Payables.

Payables Standard Invoice with Prepayment Transaction Lines

Type	Invoice Date	Invoice Number	Product Type	Product Category	Amount
Item	05/11/17	CA1010	Service	Security Services	6000
Prepayment	05/10/17	CA1009	Service	Security Services	-5000
		Unapplied amount			1000.00 BRL

Tax Determination Process

At standard invoice validation, the tax determination process calculates the withholding tax amount on the invoice after deducting the tax amount already withheld on prepayment

Here is the IRRF_PJ Tax Computation:

Invoice unapplied amount = 1000 BRL
IRRF_PJ tax amount = 1000*1.5% =15.00 BRL

Withholding Tax Line

After the tax determination process successfully completes, this tax line is created:

Tax Line	Tax Regime	Tax Name	Tax Status	Tax Jurisdiction	Tax Rate	Tax Amount
1	<User-defined withholding tax regime>	IRRF_PJ	Standard	Brazil	1.5%	-15.00 BRL