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Administrator Guide
Last Updated: 2023-06-23
Concept: Withholding Tax Accounting

Concept: Withholding Tax Accounting

You can use Workday to:
  • Create accounting for the withholding taxes on supplier and customer invoices.
  • Set up withholding tax account posting rules that define the ledger accounts where Workday posts withholding tax based on dimensions such as:
    • Realization Point
    • Tax Authority
    • Tax Base Type
    • Tax Rate

Withholding Tax Realization Point

When you create withholding tax rates, you must select 1 of these withholding realization points to specify how and when you pay tax:
Realization Point
Supported Document Types
Considerations
Example
Invoice
  • Supplier Invoice
  • Customer Invoice
For supplier invoices, your company withholds the tax on supplier invoices and pays the remaining amount to the supplier. Workday credits the withholding tax account as a withholding tax liability on the supplier invoice.
For customer invoices, your company accounts for potential withholding tax by your customer and collects only the remaining amount from the customer. Workday debits the withholding tax account as a withholding tax expense.
A supplier issues a 1,000 USD invoice to your company with 100 USD withholding tax. You:
  • Pay the supplier 900 USD.
  • Account for a 100 USD liability on the supplier invoice.
You issue a 1,000 USD customer invoice. You anticipate that your customer will withhold 100 USD and pay you 900 USD. You account for 100 USD as a withholding tax expense on the customer invoice.
Payment
Supplier Invoice
Your company withholds the tax on supplier invoices and pays the remaining amount to the supplier. Workday credits the withholding tax account as a withholding tax liability on the supplier payment.
A supplier issues a 1,000 USD invoice to your company with 100 USD withholding tax. You:
  • Pay the supplier 900 USD.
  • Account for a 100 USD liability on the payment.
Customer Invoice Self-Withholding
Customer Invoice
You collect the full amount from your customer and pay the withholding tax to the tax authority. Workday debits the withholding tax account as a withholding tax expense and credits the withholding tax account as a withholding tax liability.
You issue a 1,000 USD customer invoice and self-assess 100 USD withholding tax. You agree with your customer that you'll pay the tax authority. Your customer pays you the full 1,000 USD. You:
  • Credit 100 USD as withholding tax liability.
  • Debit 100 USD as withholding tax expense.

Withholding Tax Account Posting Rules

To set up withholding tax account posting rules, access the
View Account Posting Rule Set
 report and edit the
Withholding Tax Payable
posting rule.

Withholding Tax Accounting

This table summarizes the different realization points, document types, accounting, and account posting rules.
Withholding Tax Realization Point
Document Type
Accounting
Account Posting Rule Condition
Invoice
  • Supplier Invoice
  • Customer Invoice
  • Supplier Invoice: Credit - Withholding tax liability.
  • Customer Invoice: Debit - Withholding tax expense.
  • Supplier Invoice:
    Tax Type
     =
    Tax Collected
    .
  • Customer Invoice:
    Tax Type
     =
    Tax Paid
    .
Payment
Supplier Invoice
  • Supplier Invoice: No accounting for withholding tax.
  • Payment of Invoice: Credit - Withholding tax liability.
Tax Type
 =
Tax Collected
.
Customer Invoice Self-Withholding
Customer Invoice
  • Debit - Withholding tax expense.
  • Credit - Withholding tax liability.
  • Debit -
    Tax Type
     =
    Tax Paid
    .
  • Credit -
    Tax Type
     =
    Tax Collected
    .