Withholding tax
In some countries or regions, the buyer is legally responsible for paying withholding tax. Withholding tax is due on frequently serviced, non-inventory deliveries that a supplier who isn't an employee of the company delivers.
Withholding tax is:
A tax on vendors that doesn't create sales tax transactions.
A liability if it's calculated on vendor payments. Therefore, only balance sheet accounts or liability accounts are valid accounts for posting withholding tax.
Reported in fixed reports.
The buyer is legally responsible for withholding a certain percentage of the invoice amount at the time of payment.
The net amount (which equals the invoice amount, minus the withholding tax) is paid to the supplier. The withheld tax posts to a ledger account for withholding tax and is paid to the authorities periodically. The buying company is legally responsible for submitting a report to the tax authorities and to the supplier.
When you're dealing with global withholding tax, the capabilities of the system include:
Item withholding tax group (shows as WHT on the line level) for accounts payable
Withholding tax payment
Withholding tax in accounts receivable
Threshold on invoice amount
Withholding tax calculation for miscellaneous charges
Invoice amount to be paid in withholding currency
Withholding tax payment against vendor account of tax authority
For more information, see Set up withholding tax.