Withholding Tax Reports for Italy

This topic includes details about the withholding tax reports for Italy.

The withholding tax reports for Italy provide specific withholding tax information on supplier invoices as required by the tax authorities in Italy. You can use these reports to produce withholding tax letters you send to suppliers, reconcile the withholding tax letters sent to suppliers with the yearly amounts withheld for tax and social security, and prepare the yearly declarations for the tax authorities.

The following reports support withholding tax handling for Italy:

Withholding Tax Letters for Italy: Creates letters sent to suppliers in Italy that confirm the tax and social security amounts withheld on purchase invoices that are partially or fully paid within a calendar year. Prints for a specific supplier or for all suppliers.
Yearly Withholding Tax Report for Italy: Shows the annual taxes withheld by first-party legal entities for a supplier during a specified year, ordered by supplier name, supplier taxpayer ID or supplier tax registration number. Prints the yearly summary of tax and social security amounts withheld for the legal entity. For each supplier and supplier site:

Key Insights

Before running the reports, ensure that you:

Set up the following entities:
- Data Security
- Geographies
- Enterprise Structure
- Suppliers
- Tax Authorities
- Bank accounts
- Procurement Business Function
- Common Options for Payables
Complete the implementation project before entering transactions and using the transaction tax reports.

Create a new Withholding Tax Regime

Here’s how you can create a new withholding tax regime:

From the Setup and Maintenance area navigate to the Manage Tax Regimes task.
Open the Manage Tax Regimes UI and switch to the Withholding Tax option.
Under the Withholding Tax Regimes section, create a new withholding tax regime.
Enter the required details for the new tax regime and save.

Create new Withholding Taxes

The Withholding Tax reporting feature for Italy enables you to report on both withholding tax and social security amounts. To achieve this you need to set up separate taxes for both the withholding and the social security.

Setting Up Withholding Tax

Here are the steps to establish a new withholding tax:

Navigate to the Manage Taxes task.
Select the Withholding Tax option and create a new tax.
Enter the details for the withholding tax.
Save and create the tax rule defaults.
- Note: Unless you specify different rules to use a different jurisdiction, status, or rate, the default values will apply whenever the tax is applicable.
Select the Tax Jurisdiction row in the Indirect Defaults area and click the Create Default button to activate the Tax Jurisdiction type.
In the Create Withholding Tax Jurisdiction UI, enter the tax jurisdiction details, save, and close.
Activate the Tax Status line and click on the Create Default button.
- The Create Withholding Tax Status UI opens. Configure the tax status details, save, and close.
Activate the Tax Rate type and click on the Create Default button.
- The Create Withholding Tax Rate UI opens. Configure the tax rate details. Assign the ledger and account information, then save, and close.
- Now you have your tax defaults defined.
Click on the Tax Reporting Codes tab. Assign the predefined ORA_IT SOCIAL SECURITY tax reporting type to the withholding tax with the tax reporting code set to N(No).
- This tax reporting type is used to identify which tax to use for the Italian withholding tax reporting. Transactions that have this tax applied are reported on the Italian withholding tax reports.
Click on the Tax Authorities tab and assign the tax authority and site to the withholding tax. Save the tax and enable it for transaction entry by selecting the Enable tax for transactions option. Save and close.

Establishing Social Security Tax

Here are the steps to establish a new withholding tax:

Navigate to the Manage Taxes UI and define the social security tax.
- Note that even when the social security tax is not used, you have to create it with a default 0% rate for the Withholding Tax Letter for Italy to work as expected.
- Save and create the tax rule defaults.
- Note: Unless you specify different rules to apply a specific jurisdiction, status, or rate, the default values will apply whenever the social security tax is applicable.
Activate the Tax Jurisdiction type record and click on the Create Default button. The Create Withholding Tax Jurisdiction UI opens. Enter the details for the tax jurisdiction. Save and close.
Activate the Tax Status type and click on the Create Default button.
- The Create Withholding Tax Status UI opens. Enter details for the tax status. Save and close.
Activate the Tax Rate type and click on the Create Default button.
- The Create Withholding Tax Rate UI opens. Enter details for the tax rate.
Assign the ledger and account information for the rate. Save and close.
- Now you have your tax defaults defined.
Click on the Tax Reporting Codes tab and assign the ORA_IT SOCIAL SECURITY tax reporting type for IT SS tax with tax reporting code Y(Yes).
- This reporting type code identifies the tax for Italian withholding tax reporting. Setting the tax reporting code to yes means that withholding tax amounts created for this tax with be reported as social security amounts on the Italian withholding tax reports.
Move to the Tax Authorities tab and enter the tax authority and site for the social security tax. Tax Authorities are entered as suppliers with the supplier type set as Tax Authority. This information is used if Tax Invoice Creation is enabled on the Controls and Defaults tab.
Save and enable the social security tax by selecting the Enable tax for transactions. Save again.

Create a New Tax Rule

The example below is only for demonstration purposes to show you one possible way how you can set up the tax rules for withholding tax and social security. For customers, the tax rules and tax determinants have to be based on the current legislation.

Create a new user-defined fiscal classification code

Go to the Manage Transaction-Based Fiscal Classifications task.
In the Manage Transaction-Based Fiscal Classifications UI change the value to User-Defined Fiscal Classification Codes in the top left corner. Click on the Create icon.
On the Create User-Defined Fiscal Classification Code UI enter a new code that you can use as a tax determinant for the withholding tax rules. Save and close the window.

Create tax applicability rules

Here are the steps to create a new tax applicability rule:

On the Manage Tax Rules UI choose the Withholding Tax radio button and Tax Rule Type Tax Applicability Rules in the top left corner. Click on the Create icon.
Enter details for the new tax rule.
Click on Create on the list of values for the Tax Determining Factor Set. This opens the Create Tax Determining Factor Set UI. Define a new tax determining factor set based on a user-defined fiscal classification code.
Click on OK. This saves the new record and automatically selects it as the tax determining factor set for the tax rule.
Click on the next button.
Select Create from the list of values for the Tax Condition Set field. This opens the Create Condition Set UI. Enter a new condition set that uses the new user-defined fiscal classification value created in the previous setup step.
Click on OK and the new condition set is automatically saved and selected as the tax condition set for the tax rule.
Click on the Save and Next button.
Enable the new tax rule by selecting Enabled and clicking on the Submit button. This completes the creation of the tax applicability rule for the withholding tax. The next step is to create a very similar tax rule for the social security tax.
On the same UI enter details for a new tax applicability rule for the social security tax.
For the Tax Determining Factor Set field choose the Create option from the list of values. This opens the Create Tax Determining Factor Set UI. Define a new tax determining factor set based on a user-defined fiscal classification code.
Click on OK. This saves the new record and automatically selects it as the tax determining factor set for the tax rule.
Click on the Next button.
Select the Create option for the Tax Condition Set field. This opens the Create Condition Set UI. Enter a new condition set that uses the new user-defined fiscal classification value created earlier. The same is used in the withholding tax rule so when this attribute is entered on the invoice both the withholding tax and social security tax will be applicable for the invoice line.
Click on OK and the new condition set is automatically saved and selected as the tax condition set for the tax rule.
Click on the Save and Next button.
Enable the new tax rule by selecting Enabled and clicking on the Submit button. This completes the creation of the tax applicability rule for the social security tax.

Create Configuration Owner Tax Options

Go to the Manage Configuration Owner Tax Options UI and select the Withholding Tax option. Click on the Create icon to enter a new record.
Select the first party legal entity as the configuration owner. Enter processing controls for standard invoice and prepayment invoice event class. In Italy the withholding tax has to be created at the time the payment is sent to the supplier so set the tax calculation point as Payment for both event classes. Save and close.

Update the Business Unit Tax Profile

Open the Manage Party Tax Profiles UI and change the search option to Business Unit Tax Profile. Search for the Business Unit by name.
Click on the edit icon to open the Edit Business Unit Tax Profile UI.
Enable the use of legal entity withholding tax subscription on the Controls and Defaults tab. Save and close.

This completes the necessary minimum setup for withholding tax for Italy.

Supplier Setup

For withholding tax suppliers who are individuals you can add their date of birth and place of birth in the regional information section of the Supplier UI. Choose Withholding Tax for Italy from the list of values in the Regional Information field for these additional attributes to appear. The information entered is used on the Withholding Tax Letters for Italy report.

Entering Transaction Details

Invoice creation

Go to Navigator, click on Payables, select Invoices, and choose Create Invoice.
Enter the invoice header and line information.
For the User-Defined Fiscal Classification field enter the value created in the setup. In our setup, this attribute is used as the tax determinant for withholding tax.
Validate and account the invoice.

Payment creation

Go to Navigator, click on Payables, select Payments, and choose Create Payment.
Note that the payment amount is less than the full invoice amount. The difference is the withholding amount. Account the payment.

Review the withholding tax lines

Re-query the invoice and review the withholding tax lines created.

Reporting

You can access all the reports from the Scheduled Processes Reporting and Scheduled Processes in the Tools section of the Navigator menu.

Here are the reports:

Withholding Tax Letters for Italy

Run the Withholding Tax Letters for Italy report to create and print letters to your suppliers about all the withholding tax transactions that were partially or fully paid during the reporting year.

The report has the following parameters:

Select the Legal Entity and the tax year for which you want to run the report.
You can also select just one specific supplier, or a range of suppliers for the report. Alternatively, you can leave the last two parameters blank and report on all withholding transactions for the year.

Yearly Withholding Tax Report for Italy

The Yearly Withholding Tax Report for Italy is used to list all withholding transactions for a tax year.

The report has the following parameters:

Select the Legal Entity and the tax year for which you want to run the report.
The information can be ordered by the supplier name, supplier taxpayer ID, or tax registration number.
- The report output displays summary information for each tax rate by supplier and also for the entire report.

Report Parameters

The following table describes selected process parameters:

Name	Description
Legal Entity	Specify the legal entity for reporting.
Year	Specify the calendar year to be included for reporting withholding tax.

Frequently Asked Questions

The following table lists frequently asked questions about the withholding tax reports for Italy.

FAQ	Answer
How do I find these reports?	Schedule and run these reports from the Scheduled Processes work area on the Navigator menu.
Who uses these reports?	Tax Manager Tax Accountant Payables Manager Payables Specialist
When do I use these reports?	Use these reports to: Create letters for your suppliers in Italy to confirm withheld tax amounts. Reconcile the withholding tax letters sent to your suppliers. Review withheld taxes for each invoice or supplier. Review withheld taxes by calendar year for your first-party legal entities.
What type of reports are these?	Oracle Analytics Publisher.