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White Paper
Withholding Tax (AWT) at both invoice and
payment time in Payables
Author: Sriram Ramanujam
Versions: 1.0
Create Date 1 November 2009
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INTRODUCTION .......................................................................................................................................................................... 3
Objective ............................................................................................................................................................................... 3
Scope..................................................................................................................................................................................... 3
Background........................................................................................................................................................................... 3
Terms .................................................................................................................................................................................... 3
Withholding Tax.............................................................................................................................................................. 3
Withholding Tax Point.................................................................................................................................................... 3
ABILITY TO WITHHOLD TAX AT BOTH INVOICE AND PAYMENT TIME IN PAYABLES .................................................................... 4
Overview ............................................................................................................................................................................... 4
SETUP REQUIRED TO GET THIS FEATURE .................................................................................................................................... 5
Payables Option.................................................................................................................................................................... 5
Business Rules ............................................................................................................................................................... 5
Supplier and Supplier Site level ............................................................................................................................................ 7
Business Rules ............................................................................................................................................................... 7
CHANGES IN APPLICATION TRANSACTION UI............................................................................................................................. 9
Invoice Workbench (APXINWKB) Form .............................................................................................................................. 9
Business Rules ............................................................................................................................................................... 9
Supplier and Payables Interfaces .............................................................................................................................. 10
USER PROCEDURES .................................................................................................................................................................. 11
Setup ................................................................................................................................................................................... 11
Setup Payables Option................................................................................................................................................ 11
Setup Supplier Site ...................................................................................................................................................... 12
User..................................................................................................................................................................................... 12
User Task Description ................................................................................................................................................. 12
Objective
To provide an overview of the ability to withhold tax at both invoice and payment time in Payables.
Intended to provide the reader a good understanding of the features, the setups and details of the
steps on how to process a transaction involving Withholding Tax at both invoice and payment
time.
Scope
This paper will cover the functional side of the ability to withhold tax at invoice and payment time in
Payables and discuss some of the options and their impacts.
Background
The ability to withhold tax at both invoice and payment time in Payables is a new feature in R12.1.
Note : The rules related to “Allow Manual Withholding” in Payables Option will not change.
Terms
Withholding Tax
Withholding Tax is a tax in which the tax authority is paid not by the supplier
(seller) himself but instead by the buyer on behalf of the supplier. The tax
authority requires the buyer (payer) to put aside a certain percentage of the
supplier's due payment and send it directly to the tax authority. Even though the
payer is the one who fulfills the tax authority requirement by sending the amount,
the liability of the amount still falls on the supplier since the amount is deducted
from his payment total. For the payer, the total amount paid is still the same, only
divided between two payees.
Overview
In some countries like Brazil there are various Withholding Tax regimes. Many of these regimes
will apply to a single transaction. The regimes will prescribe different rates and also the point at
which the Withholding Tax needs to be deducted. The point of deduction of the Withholding Taxes
may be Invoice or Payment. Companies need to apply the Withholding Taxes at the prescribed
point of time and deposit the amount to the corresponding fiscal authority.
Oracle delivered the ability to apply Withholding Taxes both at Invoice and Payment time on the
same transaction. This will allow some Withholding Taxes to be applied at the Invoice time and
some Withholding Taxes to be applied at the Payment time for the same transaction.
Further, we create a Withholding Tax invoice at the time of application of the Withholding Taxes.
Payables currently allows application of Withholding Taxes only at the time of Invoice or Payment.
There will be another option provided which, if selected, will allow the Withholding Taxes to be
applied both at the time of Invoice and Payment. If the user selects this option, he will be able to
attach two Withholding Tax groups/codes to the supplier/supplier site. One Withholding tax/group
will be applied at the time of Invoice and the other at the time of Payment.
The User will have to do the following set up:
• Select the option of applying Withholding Taxes both at the time of Invoice and Payment.
• At the Supplier/Supplier site level, the user will be able to attach two withholding groups
(currently he can attach only one). User will apply Withholding Group 1 at the time of
Invoice and Withholding Group 2 at the time of Payment. Whenever an invoice is entered
for the supplier, these Withholding Taxes will be defaulted from the supplier site and the
taxes will be applied at the appropriate points.
Payables Option
In Payables Option a new option will be provided to the user to enable him to apply the Withholding Tax At Invoice
Validation and Payment time. There will also be one more option added to enable the user to create withholding
invoices automatically at the time of application of Withholding Taxes.
In Payables, changing of the Withholding Tax region options is allowed at any point of time. It can be toggled
between ‘Never’, ‘At Invoice time’, ‘At Payment time’, and ‘At Invoice Validation and Payment time’ at any time. It is
to be ensured that whenever this is done the columns are also updated at the supplier site level and no defaulting
happens irrespective of the values at the supplier site level
Business Rules
In the Payables Options in the ‘Apply Withholding Tax’ region, one more
option will be added to the existing options of ‘Never’, ‘At Invoice Validation
Time’, and ‘At Payment time’. This option will be named ‘At Invoice Validation
and Payment time’.
This option can be selected only if the ‘Use Withholding Tax’ checkbox is
selected in the ‘Withholding Tax’ region of Payables Options.
One more option will also be added in the ‘Create Withholding Invoice’ region
called ‘At Withholding Application’. It will be ensured that this option can be
selected only if the option ‘At Invoice Validation and Payment time’ is selected
in the ‘Apply Withholding Tax’ region.
In Payables Options –> ‘Apply Withholding tax’ region, if the user tries to
select the option ‘At Invoice Validation and Payment’ without selecting the
checkbox ‘Use Withholding Tax’, then the error message saying ‘Field is
protected against update’ should pop up.
In the Payables Options ‘Apply Withholding Tax' region, if the option selected
is ‘Apply at Invoice Validation and Payment time’ and the user tries to select
any option in ‘Create Withholding Invoice’ other than the option ‘At
Withholding Application’ or ‘Never’, the error message saying ‘The apply,
create withholding combination specified is invalid’ should pop up.
Business Rules
In the Supplier/Supplier Site the current LOV of ‘Withholding Tax Group’ is
used for applying Withholding taxes at the time of Invoice. The current LOV is
renamed from ‘Withholding Tax Group’ to ‘Invoice Withholding Tax Group’. A
second new LOV is added to enable the user to apply Withholding Taxes at
the time of Payment. The label will be ‘Payment Withholding Tax Group’.
The current rules followed for allowing the checkbox 'Allow Withholding Tax'
to be editable at the Supplier and Supplier Site levels will continue to apply as
follows:
At Supplier level:
The ‘Allow Withholding Tax’ checkbox in the Tax Details tab
of the Supplier should always be editable at the Supplier level
irrespective of the Payables Option selected.
At the Supplier Site level:
The 'Allow Withholding Tax' checkbox should always be
displayed at the Supplier Site level, but it will be editable only
if the ‘Use Withholding Tax’ checkbox is enabled in the
Payables Option of the Operating Unit to which the supplier
site is attached, and the ‘Allow Withholding Tax’ checkbox is
selected at the Supplier level.
For the LOV’s to be shown and editable, the following rules will apply:
At the Supplier level:
If the ‘Allow Withholding Tax’ checkbox is not selected at the
Supplier level, no LOV’s will be shown.
If the ‘Allow Withholding Tax’ checkbox is selected at the
Supplier level, two LOV’s will be shown and will be editable:
o Invoice Withholding Tax Group
o Payment Withholding Tax Group
Business Rules
In the Invoice Workbench the existing column of ‘Withholding Tax Group’ will
be renamed to ‘Invoice Withholding Tax Group’. This will be now used for
applying Withholding Taxes at the time of Invoice. One more new column will
be added called ‘Payment Withholding Tax Group’. This will be used to apply
Withholding Taxes at the time of Payment. These columns will be shown at all
the following levels:
If the option selected in the Payables Option -> 'Apply Withholding' region is
‘At Invoice Validation’ then:
o At the time the invoice is entered for the Supplier, the Withholding
Taxes to be applied at the time of invoice validation will default from
the Supplier Site to the column ‘Invoice Withholding Tax Group’.
o The column ‘Invoice Withholding Tax Group’ will be editable until the
invoice is validated.
o The column ‘Payment Withholding Tax Group’ will not be editable at
all.
If the option selected in the Payables Option -> 'Apply Withholding' region is
‘At Payment Time’ then:
o At the time the invoice is entered for the Supplier, the Withholding
Taxes to be applied at the time of payment will default from the
Supplier Site to ‘Payment Withholding Tax Group’.
o The column ‘Payment Withholding Tax Group’ will be editable until
Oracle/Client Confidential - For internal use only 9
the invoice is paid.
o The column ‘Invoice Withholding Tax Group’ will not be editable.
If the option selected in the Payables Option -> 'Apply Withholding' region is
‘Never’ then:
o At the time the invoice is entered for the Supplier, nothing will default.
o Both the columns ‘Invoice Withholding Tax Group’ and ‘Payment
Withholding Tax Group’ will be non-editable.
Figure 7 : Payables Option: set 'Apply Withholding Tax' to BOTH Invoice Validation and Payment time
Figure 8 : Supplier Site populated with Withholding Tax group of INV and PAY for invoice and payment time
withholding.
User
Figure 9 : Invoice Workbench defaults the Withholding Tax groups for both Invoice and payment time withholding.
At the time of validation the following withholding lines for 650 will be generated.
Now if the payment of 5000 is made, then the payment of 4786.1 would be made.
To summarize :
a) Invoice amount – 10000
b) AWT on Validation (AWT Code ‘INV’ 6.5%) = 10000*6.5% >> 650
c) AWT on Payment (AWT Code ‘PAY’ 4%) = 10000*4% >> 400
(Deducted in 2 payments ( 213.9+186.1) )
d) Payments made (a-b-c) = (10000 – 650 – 400) = 8950
(Paid in 2 payments (4786.1 + 4163.9)