Withhold Taxes in Payables
You may be required to withhold taxes from your employee expense reports and supplier invoices. Once you set up Payables to automatically withhold tax, you can withhold tax either during Invoice Validation or during payment processing. You can control all withholding tax options in the Withholding Tax region of the Payables Options window.
Companies that use withholding taxes calculate these taxes and deposit them to the corresponding fiscal authority. There can be various regimes applicable to a single transaction. These regimes have different rates that are predefined when the withholding tax is deducted. The time when the withholding taxes are deducted could be at invoice time, payment time, or both. Companies must apply the withholding taxes at the specified time and deposit the amount to the corresponding fiscal authority.
Oracle Payables allows you to calculate withholding taxes at invoice validation time, at payment time, or both invoice validation and payment time. In addition, you can create a withholding tax invoice at the following times:
• At invoice validation time if withholding taxes are calculated at invoice time.
• At payment time if withholding taxes are calculated at payment time.
• At withholding application time if withholding taxes are calculated at both invoice validation and payment time. This means that withholding invoices will be created at both invoice validation and payment time since the withholding taxes would be calculated at both these times.
For example, assume that withholding tax is calculated at Invoice Validation and the withholding tax rate is 20%. If you have a Prepayment Invoice for $250 with no withholding tax, an Invoice for $1555, and a Payment Amount of $1305. Then the calculated withholding tax is $311 (1555 * 20%). However, if the withholding tax is calculated at Payment Time, then the calculated withholding tax is $261 ($1305 * 20%).
To enable the requirement of applying withholding taxes at the time of invoice and payment, an option, At Invoice Validation and Payment Time, is included in the Apply Withholding Tax region of the Withholding Tax Tab of Payables window which when selected lets you apply the tax both at the time of Invoice and Payment. Another option, At Withholding Application, is added in the Create Withholding Invoice region. This option can be selected only when the Apply Withholding Tax option is selected At Invoice and Payment time.
Withholding tax invoice
Payables can automatically create withholding tax invoices, or you can perform this task manually. If you choose to automatically create withholding tax invoices, you must choose whether to do this during Invoice Validation or during payment processing. Indicate this choice in the Withholding Tax region of the Payables Options window.
Important: Payables does not give invoice detail on the Tax Authority Remittance Advice for manually created withholding amounts.
If you choose to create withholding tax invoices manually, create an invoice for each Withholding Tax type invoice distribution on an invoice. Create the invoice for the taxauthority supplier and site assigned to the Withholding Tax type tax code and for the amount of the Withholding Tax type invoice distribution.
If you specify that you want to create withholding tax invoices during Invoice Validation, Payables creates unvalidated withholding tax invoices for tax authority suppliers assigned to tax codes.
If you specify that you want to create withholding tax invoices during payment processing, Payables creates unvalidated withholding tax invoices (for those invoices where you have applied withholding tax) during the Confirm program of payment batch processing, or during processing of a Quick payment.
Important: Payables does not automatically withhold taxes if you pay with a manual payment or a refund.
