In SAP FI CIN configuration withholding tax plays a vital role in collecting tax on behalf of government authority, then which need to pay to the government. In SAP FI CIN configuration withholding Tax means the tax deducted by payer for a payment transaction like rent, interest, dividends, salary, sales of goods etc. and has to remit deducted Tax amount to government. Withholding tax also known as Tax Deducted at Source (TDS). Withholding tax includes surcharge and education cess.
In SAP CIN configuration, we define withholding Tax codes to specify tax amount and non taxable amount (exemption amount) to calculate when business transaction happened. We can specify automatic tax entries by specifying Withholding Tax code in vendor’s master data. We can see total withholding Tax for all open items.
Menu Path for Withholding tax
SPRO > Financial Accounting > Financial Accounting Global Settings > Withholding Tax
There are two procedures to calculate withholding tax in SAP CIN configuration:
- Standard withholding tax
- Extended withholding tax
In SAP CIN configuration Extended withholding tax is having additional features than standard withholding tax like, multiple withholding taxes, withholding tax for partial payments. We can use withholding tax keys to identify withholding tax types; we can use these withholding tax keys for reporting purposes. It is also suggested to use Extended Withholding Tax as per the business requirement.
In SAP FI, Withholding tax also processed when we issue credit or debit memo, tax payable or receivable account debit or credits automatically. Withholding tax entries reverse automatically when we reverse entries related to Withholding tax. SAP allows us to remit Withholding tax to the government and maintain the tax remittance receipts with printing withholding tax certificates.
In case you need assistance in SAP FI Withholding Tax, please contact us. Please send us your questions, comments or assistance request, and our team would be glad to assist you.
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