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Administrator Guide
Last Updated: 2024-09-20
Set Up Tax Rates for Withholding Tax

Set Up Tax Rates for Withholding Tax

  • Create tax authorities for the country. See Set Up Tax Authorities.
  • Set up tax categories for withholding tax. See Set Up Tax Categories.
  • Security:
    Set Up: Tax
     domain in the Common Financial Management functional area.
Set up the withholding tax rates for each tax authority within a country and categorize them. Configure single or progressive tax rates. You can also configure individual thresholds to apply the withholding tax only when transactions cross the thresholds that you specify.
  1. Access the
    Create Withholding Tax Rate
     task.
  2. As you complete the task, consider:
    Option Description
    Withholding Tax Category
    Select a tax category that you enable for withholding tax.
    When you select a third-party tax category, you can no longer:
    • Select realization point types of
      Payment
      .
    • Enter tax rate details including tax base type, tax base percentage, rate type, and threshold type.
    • Configure threshold settings and progressive rate tiers.
    Realization Point
    Select when to calculate withholding tax and generate accounting:
    • Payment
      : Calculate estimated withholding tax amounts at invoice time for supplier invoices, but generate accounting at time of payment. Withholding tax amounts at time of payment include any discounts.
    • Invoice
      : Calculate withholding tax amounts and generate accounting at invoice time.
    • Customer Invoice Self Withholding
      : Calculate withholding amounts and generate accounting at invoice time for customer invoices. Record the accounting for withholding tax expense and payable for the company issuing the customer invoice.
    Third Party Tax Rate
    Workday populates this check box from the
    Withholding Tax Category
     that you select.
    Tax Base Type
    Select the base amount on which to calculate withholding tax to deduct from invoice payment:
    • Gross Amount:
       Withhold on the extended line amount and transaction tax amount.
    • Net Amount:
       Withhold on the extended line amount only. Excludes transaction taxes and discounts.
    • Tax:
       Withhold on the line amount only of the transaction tax.
    Tax Base Percentage
    Select to calculate the withholding tax on the percent of the tax base.
    Example: The withholding tax rate is 10%. The tax base is 50% of net amount. If the extended line amount is 1000 HKD, then the withholding amount is 10% of 500 HKD, 50 HKD.
    Rate Type
    Select single or progressive tax rate.
    Threshold Type
    Select the type of threshold to apply on the withholding tax rate:
    • Individual
      : Calculate withholding tax based on individual invoice or payment.
    • Accumulated
      : Calculate withholding tax based on accumulated invoice or payment.
    • None of the Above
      : Calculate withholding tax without thresholds.
      Select
      Net Amount
      to set up withholding tax rates with thresholds or to create a multitiered withholding tax rate. Workday calculates withholding tax amounts only when transactions meet the threshold amounts.
    Accumulation Schedule
    Specify the fiscal schedule for the withholding tax rate.
    Include In Progress for Accumulation
    Clear this check box to exclude all in-progress invoices when calculating the withholding tax rate using accumulated thresholds.
  3. Specify an
    Effective Date
    . The effective date is the initial invoice or payment date on which Workday applies the associated tax rate percentage, thresholds, or progressive rate tiers.
  4. Specify the tax rate percentage to calculate the withholding tax.
  5. Specify the individual or accumulated threshold limits on the withholding tax rate.
    • Transaction Threshold Amount
      : Withhold when the transaction amount meets the transaction threshold.
    • Threshold Combination
      : Calculate withholding tax rate when transaction threshold
      AND
       rate thresholds are met, or calculate when transaction
      OR
       rate threshold is met.
    • Rate Threshold Amount
       for individual threshold settings: Withhold when the rate amount meets the rate threshold.
      You can't add a threshold amount for a
      Realization Point
       of
      Payment
      .
    • Rate Threshold Amount
       for accumulated threshold settings: Enter the threshold amount for the withholding tax rate.
  6. Specify the values for progressive tiers and the tax rate percentage to calculate the withholding tax.
Configure withholding tax codes by country based on the tax rates.