Configure Withholding Tax Rules for Countries

Create withholding tax item groups.

Security: Set Up: Tax
domain in the Common Financial Management functional area.

You can create rules for Workday to populate withholding tax codes on spend and revenue transaction lines that meet certain criteria by country or region. These criteria include attributes of the:

Payee or payer on the transaction:

Role	Spend Transaction	Revenue Transaction
Payee	Supplier on the supplier invoice	Company on the customer invoice
Payer	Company on the supplier invoice	Customer on the customer invoice

Goods or services on transaction lines.

To prevent conflicting rules and ensure that Workday applies rules consistently on all taxable documents:

Select the withholding tax status for the payer or payee on all rules, and ideally both.

Optionally select a payee supplier or a payee company; don’t select both, as Workday evaluates only 1 of these criteria depending on whether the document is a customer or supplier invoice.

Access the

Create Withholding Tax Rule for Country

task.

In the

Source Country

prompt, select the ship-to country for the supplier or customer invoice.

When the invoice doesn't specify a ship-to country, select the country for the primary address of the payer.

Complete the task:

Option	Description
Payee Supplier	Workday uses the payee supplier only when evaluating rules on supplier invoices. Don't create rules that differ only by the payee supplier: Workday ignores this field on customer invoices and will evaluate the rules as duplicates, leading to the inconsistent application of withholding tax codes. The prompt doesn't include contingent workers.
Payee Company	Workday uses the payee company only when evaluating rules on customer invoices. Don't create rules that differ only by the payee company: Workday ignores this field on supplier invoices and will evaluate the rules as duplicates, leading to the inconsistent application of withholding tax codes. The payee company refers strictly to the payee company on customer invoices, not the company on other documents such as supplier invoices. The prompt doesn't include contingent workers.
Payee Country	Workday uses the primary business address of the: Supplier for supplier invoices. Company for customer invoices.
Payer Withholding Tax Status	Select a tax status for Workday to compare against the withholding tax status of the: Company for supplier invoices. Customer for customer invoices.
Payee Withholding Tax Status	Select a tax status for Workday to compare against the withholding tax status of the: Supplier for supplier invoices. Company for customer invoices.

Add rule lines:

Option	Description
Region	You can specify rules at the regional level.
Classification	You can restrict the rule to transaction lines with items or categories that are either goods or services.
Default Tax Code	Select the withholding tax code to populate on transaction lines.
Tax Rule for Spend Items Tax Rule for Revenue Items	When you select an item-specific withholding tax rule, Workday evaluates the items within the transaction. If the items match the withholding item-level tax rule, Workday uses the withholding tax code from that rule instead of the default tax code.

Order rule lines from from the most specific use cases at the top to the less specific cases at the bottom.

You're a multinational with 2 companies operating in 2 different countries:

Company A is located in Country A and frequently contracts technical services from suppliers in Country B.

Company B is located in Country B and frequently delivers other services to customers in Country A.

The organizations have these tax statuses in Country A:

Organization	Tax Status in Country A
Company A	company-tax-status-1
Company B	company-tax-status-2
Supplier A	supplier-tax-status-1
Supplier B	supplier-tax-status-2
Customer A	customer-tax-status-1
Customer B	customer-tax-status-2

You’ve already configured these withholding tax rules for items:

Withholding Tax Rule for Item	Considerations
Technical-Services-WHT-20	Applies a 20% withholding tax rate for technical services.
Technical-Services-WHT-10	Applies a 10% withholding tax rate for technical services.
Other-Services-WHT-20	Applies a 20% withholding tax rate for other services.
Other-Services-WHT-10	Applies a 10% withholding tax rate for other services.

On supplier invoice lines, you want Workday to apply a:

20% withholding tax rate for technical services for suppliers with the tax status supplier-tax-status-1.

10% withholding tax rate for technical services for Supplier B.

On customer invoice lines, you want Workday to apply a:

20% withholding tax rate for other services for customers with the tax status customer-tax-status-1.

10% withholding tax rate for other services for customers with the tax status customer-tax-status-2 when they transact with Company B.

You configure these withholding tax rules for Country A as the source country:

To populate withholding tax codes on supplier invoices:

Section	Option	Spend Rule 1	Spend Rule 2
Header	Payee Supplier		Supplier B
Header	Payee Company
Header	Payer Withholding Tax Status	company-tax-status-1	company-tax-status-1
Header	Payee Withholding Tax Status	supplier-tax-status-1	supplier-tax-status-2
Rule Line 1	Tax Rule for Spend Items	Technical-Services-WHT-20	Technical-Services-WHT-10

To populate withholding tax codes on customer invoices:

Section	Option	Revenue Rule 1	Revenue Rule 2
Header	Payee Supplier
Header	Payee Company		Company B
Header	Payer Withholding Tax Status	customer-tax-status-1	customer-tax-status-2
Header	Payee Withholding Tax Status	company-tax-status-2	company-tax-status-2
Rule Line 1	Tax Rule for Revenue Items	Other-Services-WHT-20	Other-Services-WHT-10