What is the different between withholding tax type and
withholding tax code?
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Answer Posted / pathurivenki
Hello,
Withholding tax:-
The withholding tax for an invoice or a down payment is
calculated at header level. That is, only one withholding
tax code can be used for a down payment or invoice. This
implies that an invoice cannot contain items with different
withholding tax rates. It can, however, contain one or more
items with the same withholding tax rate and one or more
items with no withholding tax. This can be handled by
specifying the base amount on which withholding tax is to
be calculated. On account of calculation at header level,
companies have to instruct their suppliers not to include
items with different withholding tax rates in a single
invoice, but issue separate invoices for different tax
rates.
With extended withholding tax, you can process withholding
tax from both the vendor and customer view.
In Accounts Payable, the vendor is the person subject to
tax, and the company code is obligated to deduct
withholding tax and pay this over to the tax authorities on
the vendor’s behalf. In Accounts Receivable, the company
code itself is subject to tax, and the customers that do
business with this company code deduct withholding tax and
pay this over to the tax authorities on the company code’s
behalf. In both cases, the business partner of the
person/entity subject to tax deducts the tax and pays it
over to the tax authorities.
Regards,
Venkat
pathurivenki@gmail.com
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