Withholding on Transaction Tax

You can set up withholding tax on transaction tax using tax configuration and tax rules.

ISS is the tax on services and must be paid to the municipalities. This tax is withheld from the transaction tax on the supplier invoice.

To process transaction taxes for ISS withholding tax, perform these steps at the Configuration Owner Tax Options level

1. Configure transaction taxes for ISS withholding tax at the Configuration owner tax options level:
   1. Sign in as a Tax Manager.
   2. Click Navigator, Setup and Maintenance.
   3. Search for Manage Configuration Owner Tax Options.
   4. Search for Event Class Processing Controls.
   5. For the Prepayment Invoices and Standard Invoices event classes, enable Process Transaction Taxes.
2. Perform the following steps at the Tax level to configure the calculation point for ISS withholding tax.
   1. Sign in as a Tax Manager.
   2. Click Navigator, Setup and Maintenance.
   3. Search for Manage Taxes.
   4. Search for ISS Tax.
   5. Search for Controls and Defaults and select Calculation Point.
   6. Set the Calculation Point to Invoice.
3. The calculation point can be set to Invoice or Payment. As ISS tax calculation is based on invoice, select Invoice.
4. In the Direct Defaults section for the ISS tax, the Tax Applicability field defaults to Not Applicable.
5. As ISS withholding tax is based on transaction tax, the applicability rules for ISS withholding must be defined based on the transaction tax.
6. Create a tax determining factor set:
   1. Sign in as a Tax Manager.
   2. Click Navigator, Setup and Maintenance.
   3. Search for Tax Determining Factor Set.
   4. Click Add.
   5. Enter these values:

      Attributes	Values	Comments
      Tax Determining Factor Set Code	ISS_TDF	User Discretion
      Tax Regime Code	<User defined withholding tax regime>	Choose Brazil withholding tax regime
      Tax Determining Factor Class	Tax derived factor	This factor class allows you to use tax as a tax determining factor to create tax rules
      Tax Class Qualifier	<User defined transaction tax regime>	ISS transaction tax regime user defined is selected as a class qualifier.
      Tax Determining Factor Name	Tax	Transaction tax defined in above regime is used as a factor.

7. Create a tax condition set:
   1. Sign in as a Tax Manager.
   2. Click Navigator, Setup and Maintenance.
   3. Search for Tax Condition Set.
   4. Click Add.
   5. Enter these values:

      Attributes	Values	Comments
      Tax Condition Set Code	ISS_TCS	User Discretion
      Tax Determining Factor Set Code	ISS_TDF	Tax Determining Factor Set created above
      Tax Determining Factor Class	Tax derived factor	Defaulted based on Tax Determining Factor Set Code
      Tax Class Qualifier	<User defined transaction tax regime>	Defaulted based on Tax Determining Factor Set Code
      Tax Determining Factor Name	Tax	Defaulted based on Tax Determining Factor Set Code
      Operator	Equal to	Party Fiscal Classification value - equal to
      Value	<User defined ISS transaction tax>	ISS Transaction Tax is used as the basis

8. Create a tax applicability rule:
   1. Sign in as a Tax Manager.
   2. Click Navigator, Setup and Maintenance.
   3. Search for Manage Tax Rules.
   4. Select the Tax Applicability Rules rule type.
   5. Click Add.
   6. Enter these values:

      Attributes	Values	Comments
      Tax Applicability Rule
      Tax Regime	<User defined withholding tax regime>	User Discretion
      Tax	ISS	Choose Brazil withholding tax regime
      Rule Code	ISS_APP	User Discretion
      Tax Determining Factor Set Code	ISS_TDF	Tax Determining Factor Set created above
      Tax Conditions
      Tax Condition Set Code	ISS_TCS	Tax Condition Set created above
      Condition Set Result	Applicable	ISS Withholding tax applicable based on transaction tax