Reporting-Only Taxes and Calculation Formulas in Withholding

Use reporting-only withholding taxes and withholding calculation formulas to develop complex tax scenarios and generate temporary tax results before calculating final withholding tax. For example, an enterprise can use this feature to determine the more appropriate withholding amount when legal rules allow the application of different options: using the new Brazilian income withholding tax (IRRF) simplified fixed deduction amount to reduce the taxable basis, or using a calculation based on legal discounts, such as social security tax, alimony, and dependents.

When you create a new withholding tax, enable the "Set tax for reporting purpose only" option to indicate that this withholding tax is for reporting purposes only. Enabling this option ensures that the tax is not accounted and doesn't affect the transaction totals.

Create Withholding Tax page

Create Withholding Tax page

Withholding Taxable Basis Formula

The taxable basis tax formulas are used in the tax calculation process. These formulas help determine the taxable basis amount to consider for a given transaction line.

The taxable basis type, defined in the taxable basis formula, decides the characteristics of the taxable basis amount. The various taxable basis types are:

  • Assessable value. Use Assessable value when the transaction line amount doesn't reflect the correct taxable basis from the tax calculation perspective. The assessable value given on the transaction line is considered as the taxable basis amount to calculate tax.
  • Line amount. Use Line amount when the transaction line amount is to be treated as the taxable basis to calculate tax.
  • Prior Tax. Use Prior tax when there are one or more taxable basis basis amounts, other than the taxes calculated on the transaction line. The option to compound the prior taxes that are calculated on the transaction line is also available.

The tax details specified in the compounding region can be used to define the final taxable basis. The compounding rules are as follows:

  • Minimum: Replaces the taxable basis by the minimum taxable basis amount of the compounding tax lines.
  • Maximum: Replaces the taxable basis by the maximum taxable basis amount of the compounding tax lines.
  • Add Minimum: Add the minimum taxable basis amount of the compounding tax lines to the taxable basis.
  • Add Maximum: Add the maximum taxable basis amount of the compounding tax lines to the taxable basis.
  • Subtract Minimum: Subtract the minimum taxable basis amount of the compounding tax lines from the taxable basis.
  • Subtract Maximum: Subtract the maximum taxable basis amount of the compounding tax lines from the taxable basis.
  • Add: Add the taxable basis amount of the compounding tax lines to the tax taxable basis. 
  • Subtract: Subtract the taxable basis amount of the compounding tax lines from the tax taxable basis.

In the example below, the system calculates the taxable basis for the BR_WHT_REP_ONLY1 tax and the BR_WHT_REP_ONLY2 tax and uses the maximum amount as the taxable basis for the BR_WHT_FINAL_TAX tax.

Withholding Taxable Basis Formula example

Withholding Taxable Basis Formula example

Withholding Tax Calculation Formula

The tax calculation tax formula is used to determine the calculation methodology that is applied to derive the basic tax amount on a transaction line. The tax amount on a transaction is generally calculated by multiplying the derived tax rate by the taxable basis. In some cases, the tax amount is required to be altered by adding other taxes that are applicable on the same transaction line. Use a tax calculation formula defined with compounding criteria to address this requirement.

The tax details specified in the tax formula compounding region are added to the calculated tax that is associated with the tax formula. These compounded tax details can also be enforced when you select the Enforce Compounding option. When the compounded tax is enforced and not calculated on the transaction, the tax associated with this tax formula is not applicable.

The computing rules for the taxable formula are as follows:

  • Minimum: Use the minimum tax amount of the compounding tax lines.
  • Maximum: Use the maximum tax amount of the compounding tax lines.
  • Add Minimum: Add the minimum tax amount of the compounding tax lines to the tax amount.
  • Add Maximum: Add the maximum tax amount of the compounding tax lines to the tax amount.
  • Subtract Minimum: Subtract the minimum tax amount of the compounding tax lines from the tax amount.
  • Subtract Maximum: Subtract the maximum tax amount of the compounding tax lines from the tax amount.
  • Add: Add the tax amount of the compounding tax lines to the tax amount. 
  • Subtract: Subtract the tax amount of the compounding tax lines from the tax amount.

Business benefits include:

  • Create reporting-only withholding taxes to generate intermediate tax amounts that can be used for the final withholding tax calculation.

  • Use the withholding taxable basis formula and tax calculation formula to address complex withholding tax calculations, including the use of the assessable value as the taxable amount basis.

  • Calculate the Argentina SUSS withholding using a withholding taxable basis formula with assessable value taxable amount basis type.

Steps to Enable

You don't need to do anything to enable this feature.

Key Resources