Withholding Tax Classifications

Withholding tax classifications include one or more withholding tax codes. Define withholding tax classifications to associate one or more withholding tax codes to a single transaction.

For example, assign a withholding tax classification to an invoice line to withhold two taxes, each tax withheld at different rates and remitted to different tax authorities.

You can edit a withholding tax classification to add more tax codes if needed.

Compounding Withholding Tax Codes

Optionally, tax codes can be compounded in order of precedence within a withholding tax classification. When you enter an invoice with a withholding tax classification that consists of multiple compounded tax codes, taxes are calculated in order of precedence.

Lower precedence taxes are applied to the amount of the invoice less the previous withholding tax amounts. The highest precedence is 1. For example, define a withholding tax classification with two tax codes. Tax A for 10 percent has a precedence of 1, and tax B for 5 percent has a precedence of 2. Oracle Fusion Tax calculates the withholding tax for a 100 USD invoice as follows: tax A is 10 USD, tax B is 4.50 USD (.05(100 - (100 * .10))).

If compounding details aren't entered for a withholding tax classification, the gross invoice amount is used to calculate withholding amounts for each tax code. For example, define a tax classification with two codes that each have a rate of 10 percent, and don't define compounding details. On an invoice for 100 USD, two automatic withholding tax lines, each for 10 USD are generated. Two lines are generated because both automatic withholding tax codes of 10 percent are applied to 100 USD.

Applying Withholding Tax Classifications to an Invoice

For supplier sites that use withholding tax, the withholding tax classification that you define at the supplier site assignment level is used to populate the default tax classification on the invoice. You can override any default withholding tax classification.