Define Tax Configuration Setup for Withholding Tax

Similar to setting up your transaction taxes, you use the Define Tax Configuration tasks to set up your withholding taxes. Many of the setup options are common between transaction tax and withholding tax setup.

However, there are some differences in setting up your withholding taxes. Some of those differences occur in the following tasks:

• Manage Tax Regimes

• Manage Taxes

• Manage Tax Rates and Tax Recovery Rates

• Manage Party Tax Profiles

• Manage Tax Rules

• Manage Tax Formulas

Note: To set up your withholding tax configuration, select Withholding Tax in the Manage pages for each task.

Manage Tax Regimes

When setting up your withholding tax regime, consider the following:

• You must define withholding tax regimes at the country level.

• The Withholding Buckets Level field is used for maintaining the period-based threshold amounts and period-based rate schedule amounts. The default value is Legal entity but you can change it to Business unit when you create a tax regime. Once you save the tax regime, you can't update this field.

• Service subscriptions are only applicable to transaction tax.

Manage Taxes

When setting up your withholding taxes, consider the following:

• You can only enable withholding tax for transactions, not simulation.

• The Calculation Point field is used to define when the withholding tax should be calculated. The options are Invoice or Payment.

• The Tax Invoice Creation Point field is used to define when the tax authority invoice should be created. The options are Invoice or Payment.

• For taxes that have rate schedule tax rates, define the controls, such as whether the schedule basis is document or period.

• Threshold controls are used to apply minimum, maximum, or both minimum and maximum limits to taxable amounts or tax amounts.

  You can also define threshold controls at the tax jurisdiction level. For example, if you had a state tax with different thresholds by state, define the thresholds at each state jurisdiction level instead of at the tax level.

• Tax authority details are used to associate the tax authority with the withholding tax. You can't enable the withholding tax for transactions unless there is an association.

Manage Tax Rates and Tax Recovery Rates

When setting up your withholding tax rates, consider the following:

• Tax recovery rates aren't applicable to withholding tax.

• Tax rate options include Gross amount rate schedule and Withheld amount rate schedule, in addition to Percentage. These options allow you to set up rate schedule details for your withholding tax rate.

Manage Party Tax Profiles

When setting up your parties for withholding tax, consider the following:

• For legal entities, service subscriptions are only applicable to transaction tax, not withholding tax.

• For legal reporting units, you can enter details for withholding tax registrations and withholding tax exemptions.

• For business units:

  • You can use the legal entity withholding tax subscription.

  • Service subscriptions and application tax options are only applicable to transaction tax, not withholding tax.

• For third parties and third-party sites, you can enter details for withholding tax registrations and withholding tax exemptions.

Manage Tax Rules

When setting up your withholding tax rules, consider the following:

• Tax determining factors include those factors applicable to withholding tax and don't include all of those factors applicable to transaction tax.

• Tax rule types include those types applicable to withholding tax and don't include all of those types applicable to transaction tax.

Manage Tax Formulas

When setting up your withholding tax rules, consider the following:

• Only taxable basis formulas are applicable to withholding tax. No Assessable Value exists as a taxable basis type option.

• There are less line amount options applicable to withholding tax than there are to transaction tax.