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Administrator Guide
Last Updated: 2023-06-23
Configure Withholding Tax Exemptions

Configure Withholding Tax Exemptions

You can create a withholding tax exemption on a withholding tax rate for a supplier.
  1. Access the
    Maintain Withholding Tax Exemptions
    task. As you complete the task, consider:
    Supplier
    Select a supplier from the list to restrict results to withholding tax exemptions related to that supplier.
    Company
    Select a company from the list to restrict results to withholding tax exemptions related to that company.
    Tax Exemption Name
    Specify a tax exemption name to restrict results to withholding tax exemptions with this tax exemption name.
    Tax Exemption Number
    Specify a tax exemption number to restrict results to withholding tax exemptions with this tax exemption number.
    Affected Tax Rate
    Select an affected tax rate from the list to restrict results to withholding tax exemptions with that affected tax rate.
    Filter by Status
    Specify the status of existing withholding tax exemptions you want to include from these options:
    • All
    • Active
    • Inactive
  2. To add a new withholding tax exemption, add a row to the
    Withholding Tax Exemption
     grid. Alternatively, you can update existing withholding tax exemptions. As you complete the row, consider:
    Supplier
    Specify the supplier the withholding tax exemption applies to.
    Exemption Limit
    Specify the maximum amount the exemption applies to. Amounts over this are charged at the standard withholding tax rate. You can’t apply an exemption limit to withholding tax rates that have:
    • an individual or accumulated threshold.
    • a payment realization point.
    • a
      Tax Base Type
       of
      Gross Amount or Tax
      .
    Tax Exemption Name
    Specify a descriptive name.
    Tax Exemption Number
    Specify an identifying number.
    Affected Tax Rate
    Select a tax rate, with a
    Single
     rate type, from the dropdown list. This is the standard withholding tax rate that the exemption applies to.
    You must select an
    Affected Tax Rate
     when you select a
    Company
     or
    Exemption Limit
    .
    Effective Tax Percentage
    The withholding tax rate that is applied instead of the
    Affected Tax Rate
     when an exemption is applied.
    Tax Exemption Start Date and Tax Exemption End Date
    You must select a start and end date when you add an
    Exemption Limit
    . The maximum period between these dates must be 3 years or less.
    Inactive
    Select for exemptions that are no longer applicable.
    In Use
    This is a read-only field, true if the exemption is actively in use on an existing transaction.
  3. To add an attachment, access the
    View Withholding Tax Exemption
     report and select
    Withholding Tax Exemption
    Add Attachment
     from the related actions menu. You can select or drop files.
  4. (Optional) Select
    Remove Row
     to delete a withholding tax exemption.
Workday automatically applies the exemption on the supplier invoice, or supplier invoice adjustment, when calculating the withholding tax. You can view withholding tax exemptions on:
  • The
    View Withholding Tax Exemptions
     report.
  • From the
    Tax Information
     tab on the
    View Supplier
     task.
Given that the Standard Rate of tax is 10%, and the Exemption Rate is 2%, and an Exemption Limit of $100,000 applies between 01 Jan 2025 and 31 Mar 2025.
This is how Workday applies the rates as the cumulative taxable amount from invoices surpasses the exemption limit within the defined period:
Date
Invoice Number
Taxable Amount
Cumulative Taxable Amount
Taxed at 2% (Up to Limit)
Taxed at 10% (Over Limit)
Total Withholding Tax
Result
01/15/25
Invoice 1
$80,000
$80,000
$80,000
$0
$1,600
The cumulative amount is within the $100,000 exemption limit. Workday taxes the entire taxable amount at the 2% exemption rate.
02/20/25
Invoice 2
$120,000
$200,000
$20,000
$100,000
$10,400
This invoice causes the cumulative amount to cross the exemption limit. Workday taxes the portion of the amount that falls under the $100,000 limit, $20,000, at the 2% exemption rate and taxes the remaining $100,000 at the 10% standard rate.
3/10/25
Invoice 3
$60,000
$260,000
$0
$60,000
$6,000
The exemption limit has been fully used. Workday taxes the entire taxable amount at the 10% standard rate.