Payables provides flexibility in defining withholding tax rates with specific controls. When you define a withholding tax code, you indicate first whether you will have any amount or rate controls by selecting one of the following rate structures:
Period Limit. After you pay a certain amount for withholding tax in a period, Payables stops withholding taxes. For example, for each special calendar period, Payables will withhold no more than $10,000.
Flat Rate. The withholding tax has no amount or period limits.
Amount Ranges. The tax rate depends on how much you have already paid during a time period. Base the paid amount on the gross amount of total paid invoice amounts, or on the total amount of tax withheld. The time period can be either per withholding tax calendar period or per invoice. For example, define a tax that for each year will withhold at a rate of 10% until you pay $100,000 in invoices, and then it withholds at a rate of 15% after you pay $100,000.
In addition to these controls, the same withholding tax code can have different rates depending on the effective date. For example, a withholding tax has a rate of 10% one year and 11% the following year.
Prerequisites
(Optional) Define AWT Rate Types. See: Lookups.
Important: Payables uses only the Standard AWT Rate Type. If you want to use an AWT rate type other than Standard, such as Penalty, then you may want to customize Automatic Withholding Tax to perform special behavior based on the AWT rate type. See: Customizing Automatic Withholding Tax.
Define accounts. See: Defining Accounts, Oracle General Ledger Implementation Guide.
Define your tax authorities as Tax Authority type suppliers. See: Classification Region of the Suppliers window, Oracle iSupplier Portal User's Guide.
Define Withholding Tax Periods if you want to be able to review online period-to-date amounts for a Withholding Tax code. See: Special Calendar.
To define tax codes for withholding taxes:
In the Withholding Tax Details window, enter a tax code.
Enter the account to which you will charge this tax.
Specify the tax authority by entering either its supplier name or supplier number. Enter the tax authority supplier site.
Important: If your Create Withholding Invoice Payables option is set to Never, then you can create a Withholding type tax code without entering a tax authority. However, if you change your Create Withholding Tax Payables option to a value other than Never, you will then need to manually ensure that each Withholding type tax code has a tax authority associated with it.
Select one of the following values for Rate Structure, then complete the associated fields:
Period Limit: To limit the amount of tax withheld during a withholding tax calendar period select Period Limit. Then enter values for Calendar and Period Limit.
Flat Rate: If you do not want to control the tax based on amounts paid, then select this option.
Amount Ranges. To base the rate on the amount of the total invoices paid to date or the amount withheld to date, choose Amount Ranges. Then enter values for Amount Basis (Gross or Withheld Amount) and Period Basis (Invoice or Period). If you choose Period for Period Basis, also enter a value for Calendar. If you choose the Amount Basis option, you can enter values in the Amount Range fields below.
To review online period-to-date withheld amounts for this tax code, then enter a special calendar name, if you haven't already.
If you do not want Payables to create accounting entries for zero amount withholding tax distributions, enable the Don't Create Zero Amount Accounting or Invoices option. Also, when this option is enabled, Payables does not create tax authority invoices for zero amount distributions.
To automatically create a tax withholding group for this tax code, select the Create Withholding Tax Group check box.
To use a Withholding Tax type tax, you must assign it to a withholding tax group. You can define a Withholding Tax Group with multiple Withholding Tax type tax codes in the Withholding Tax Groups window.
In the Tax Rates region, enter the withholding tax rate details. Enter the rate type, effective dates, and rate.
If you selected Amount Basis for the rate type, enter one or both Amount Range fields to set upper and/or lower amount limits for taxable amounts or tax amount.
Related Topics
Automatic Withholding Tax Overview, Oracle Payables User's Guide
Withholding Tax Groups
Use this window to define withholding tax groups that include multiple Withholding Tax type tax codes. You can assign the same tax code to more than one group. When you assign a withholding tax group to an invoice or distribution, Payables calculates invoice withholding tax based on every tax code in the withholding tax group. For example, you assign a withholding tax group to an invoice or distribution if you need to withhold taxes at both the local and country level, each withheld at different rates and remitted to different tax authorities. You define and assign to the invoice or distribution a Withholding Tax Group that includes both taxes.
You rank all of the tax codes in a withholding tax group when you define the group. When you enter an invoice and enter a withholding tax group, Payables calculates the taxes in order of rank. Lower ranked taxes are applied to the amount of the invoice or distribution amount less the previous withholding tax amounts. For example, you define a withholding tax group with two tax codes, and you give tax A (rate = 10%) a rank of 1 and tax B (rate = 5%) a rank of 2. When you assign this group to an invoice, Payables calculates the withholding tax for a $100 invoice as follows: tax A = $10, tax B = $4.50 (.05(100 - (100 * .10))).
If you want to define a withholding tax group with only one Withholding Tax type tax code, you can enable the Create Withholding Tax Group option in the Withholding Tax Details window to automatically create a withholding tax group with the one Withholding Tax type tax code.
You can assign a default withholding tax group in the Payables Options window. Payables automatically assigns the Payables default withholding tax group to all new suppliers. The suppliers value defaults to any new supplier sites for the supplier. Supplier sites assign the default to any new invoices you enter for the supplier site. You can override any withholding tax group default at any time.
Creating Withholding Tax Groups
Prerequisites
Define Withholding Tax type tax codes. See: Tax Codes.
To create withholding tax groups:
In the Withholding Tax Groups window, enter a unique name for your withholding tax group, and enter a description of the group. The name and description will appear on a list of values whenever you need to select a withholding tax group.
If you want to inactivate this withholding tax group on a certain date, enter an Inactive Date.
Assign a rank to each tax code in the tax group. 1 is the highest rank. You can assign the same rank to more than one tax code. For example, if you want to use the gross invoice amount to calculate withheld amounts for each tax code, assign each tax code a rank of 1.
Enter each Withholding Tax type tax code that you want to assign to this group.
Payables automatically displays the Description, Tax Authority Name, and Tax Authority Site that are associated with each tax code.
Related Topics
1099 Reporting Overview, Oracle Payables User's Guide
Automatic Withholding Tax Overview, Oracle Payables User's Guide
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