1.4 Processing Tax on a Contract

The taxes that apply on a contract can be of two types: Expense and Withholding. The tax that is borne by your bank is referred to as an Expense type of tax. This tax is booked to a Tax Expense account. The tax that is borne by counter party of a contract is referred to as a withholding tax, whereby you debit the counter party’s account, and credit the tax component into a tax payable account (to be paid to the government on the counter party’s behalf).

Example

A tax on a Letter of Credit (LC) can be levied either on the:

• Outstanding LC amount.
• On the commissions and charges that you earn to process the LC.

In both cases, it is the bank that bears the tax - this is an expense type of tax. The tax expense account should be debited and the tax payable account should be credited. From this liability account, the tax should be later on, paid to the government.

To capture details of tax details screen

Specify the User ID and Password, and login to Homepage.

From the Homepage, navigate to Loan and Commitment-Contract Input screen (OLDTRONL).

1. From the Loan and Commitment-Contract Input screen, click on Tax.
   The Tax Details screen is displayed.

   Note:

   The fields which are marked in asterisk red are mandatory fields.

   Figure 1-5 Tax Details

   
   

   
   Description of "Figure 1-5 Tax Details"

   
   
2. You have a choice of waiving tax due to all the tax rule(s) linked to the tax scheme applicable to the product (and hence the contract) or that which is only due to specific tax rule(s).

   Note:

   Only the tax that has not yet been liquidated can be waived.

   While processing the contract, the system picks the waiver details from Customer Tax Category Maintenance screen and tax category details from Tax Category Maintenance screen. Similarly the customer and customer tax category details are picked from Deal and Customer maintenance respectively. The value date specified in the deal is taken as the date for waiver check.
   This topic contains following sub-topics:

• Waiving of Tax in Sequence