One of the most difficult configuration in FI System, is the withholding tax, and this has nothing to do with configuration skills or understanding of the SAP System, but because the understanding of what withholding tax does in SAP is blurry sometimes.
The withholding tax is a tool that SAP gives in order for you to retain law mandated tax in some cases like transportation or export sales, and is as simple as the Tax implementation made in FTXP.
You just need to create an indicador, specify the percentage or amount to be with retained and you are ready to go.
So, where is the problem?
There are two main reasons because the withholding tax configuration, may not work, and those are listed below:
- You have to assign the withholding tax to the vendor or customer in the master data. There you have to assign the indicator that holds the percentage that you want to retain, and activate the vendor or customer for retention.
- The second is very simple, but you will be surprised how common this understanding causes problems in implementations. There are two moments where you can retain the withholding tax, one is at the moment of the invoice, and the second is at the time of payment. You have to be very clear at what time do you want to retain this, because if you don’t, then you may expect to have one result and get another.
The configuration in SAP done well, simplifies things. If you need any more information feel free to ask.