SAP S/4HANA Cloud Public Edition Taiwan Localizati...

LucyLu · ‎2025 Mar 14

Introduction: Since the SAP S/4HANA Cloud Public Edition standard does not provide withholding tax functionality localized for Taiwan, this blog is based mainly on references from other countries, and readers are welcome to make additional comments and suggestions.

Catalog:

Withholding Tax Introduction
Scenario for Posting Withholding Tax
Configure Withholding Tax in the System
Withholding Tax Demos
Report for Withholding Tax
Conclusion
Reference Information

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Withholding Tax Introduction

Withholding Tax deduction is dictated by the statutory requirements of the applicable country and hence it is purely a localization topic. In SAP S/4HANA Cloud Public Edition it is addressed through the scope item 1J2- Advance Compliance Reporting.

Withholding tax is the tax that is charged when the payment flow starts in some countries/regions. Generally, the taxable party does not pay withholding tax directly to the tax authority. When a customer authorized to deduct withholding tax pays a vendor invoice that is subject to withholding tax, the customer subtracts the withholding tax amount from the payment amount. The customer then pays the withholding tax directly to the tax authority. However, for self-withholding, suppliers subject to taxes have the right to pay taxes directly to the authorities in this case.

In Taiwan, withholding tax is the amount of resident or non-resident income payments (payers) withheld by your company. If you are paying a non-local (foreign) supplier, you need to withhold a certain percentage of the invoice amount and pay the tax form to the tax office, as well as the balance to be paid to the foreign supplier.

The following payments are covered:

Dividends
Interest
Rental Income
Royalties
Payments for technical fees, services
Wages and Salaries
Commissions

Taiwan's withholding tax system applies to the various income earned by residents and non-residents, determining tax rates and regulations by income type and residence status of taxpayers. Different withholding tax rates apply for each type of payment and if there is a double tax agreement between Taiwan and a country in which a non-resident (foreign party) is a tax resident, the reduced tax rate may apply. The following table details the relevant forms for the different payments in the Taiwan withholding tax system.

Reference link [3]

Withholding tax example: Taiwan companies purchase professional services from foreign companies with an amount of $5,000 before tax, foreign companies will bear withholding tax, so Taiwan companies only need to pay US$4,000 to foreign companies, and the deduction of 1,000 US dollars (20% of $5,000 USD) should be paid to the tax authorities.

Scenario for Posting Withholding Tax

Depending on the legal requirements of each country/region, withholding tax is calculated at different stages and posted to the corresponding withholding tax accounts. As a rule, withholding tax is posted at the same time as the payment is posted. In other words, the payment (payable) or incoming payment (receivable) is reduced by the withholding tax amount.
In accounts payable, the supplier is excisable and the company is obliged to deduct withholding tax and pay it to the tax authorities on behalf of the supplier. In accounts receivable, the company itself is subject to tax. Customers who do business with this company deduct withholding tax and pay them to the tax authorities on behalf of the company. In both cases, the business partner of the taxable person/entity deducts the tax and pays it to the tax authority.
In some countries/regions, such as Brazil, the Philippines, and Spain, withholding tax can or must be posted when the invoice is posted. This means that the receivable or payable amount is reduced by the withholding tax amount.
In some countries/regions, such as Argentina and Italy, some business transactions require other types of postings. Withholding tax is posted as an offsetting entry to the expense account instead of the payment amount reduced by the withholding tax amount. You make the relevant settings for this when maintaining withholding tax codes.
When resetting cleared items, the clearing document is automatically reversed if it contains withholding tax data. For withholding tax types with accumulation, the accumulated base amount is adjusted if the payment document is reversed.
In this blog, the two scenarios of posting withholding tax at point of payment and posting withholding tax at point of payment are shown in the examples for Account Payable.

Configure Withholding Tax in the System

1. Activate Withholding Tax - 104228

To use withholding tax in SAP S/4HANA Cloud, public edition (also known as extended withholding tax), you must first activate it.

2. Define Withholding Tax Keys – 106576

Withholding tax codes are used to identify different withholding tax types.

3. Define Withholding Tax Type for Payment Posting – 104226

Withholding taxes can be deducted at two points in time; they can be deducted at the time of invoicing or at payment. Therefore, for this withholding tax type, one withholding tax type is created for payments and one for invoices.

4. Define Withholding Tax Type for Invoice Posting – 104225

Withholding taxes can be deducted at two points in time; they can be deducted at the time of invoicing or at payment. Therefore, for this withholding tax type, one withholding tax type is created for payments and one for invoices.

5. Assign Withholding Tax Types to Company Code – 103914

6. Define Withholding Tax Codes - 104227

In the withholding tax codes, maintain different tax rates and maintain the basis for the corresponding deductions.

7. Define Min/Max Amounts for Withholding Codes– 103915

If required, you can define a minimum/maximum limit amount for which the withholding tax code is valid, or, if no amount is specified, there is no limit to the lower and lower amount for withholding tax.

8. Assign Withholding Tax key to Withholding Tax Code – 105553

9. Assign Exchange Rate Type for Withholding Tax Type - 104400

10. Automatic Account Determination for Withholding Tax Code– 100297

11. Check Withholding Tax Configuration

①Check Company Code

②Check Business Partner

③Check Withholding Tax Type

④Simulate Calculation

Withholding Tax Demos

Withholding tax in SAP S/4HANA Cloud Public Edition is also called extended withholding tax and contains withholding tax types and withholding tax codes. The withholding tax type represents the base calculation rule. The withholding tax code represents a specific feature of these rules, especially the percentage rate.

If more than one withholding tax is required for a particular transaction, this is covered in the SAP system by defining several withholding tax types. When you enter line items, you can enter withholding tax data for each withholding tax type. Note, however, that if you have two or more sets of withholding tax codes and types in an invoice, you must decide whether all the proposed withholding tax codes and types are relevant for the transaction. If you do not calculate and post some of the proposed withholding tax, you must remove the transaction-independent withholding tax code.

1. Scenario: Post Withholding Tax at Point of Invoice

1). Maintain Business Partner Master Data

From the screenshot above, you can see that the vendor withholding tax type is set as the point in time of invoice posting to generate withholding tax line items with withholding tax code T1 that is 20% withholding tax rate.

2). Post Supplier Invoice

View the financial entries generated by the simulation:

You will see that a withholding tax document entry was generated to deduct the payable amount.

2. Scenario: Post Withholding Tax at Point of Payment

1). Maintain Business Partner Master Data

From the screenshot above, you can see that the vendor withholding tax type is set as the point of payment to generate withholding tax line items with withholding tax code T1, which is 20% withholding tax rate.

2). Post Supplier Invoice

View the financial entries generated by the simulation:

3). Payment of Supplier Invoice

Simulate the payment document and you can see that at the time of payment generates the withholding tax line items in the following figure.

Currently, for the withholding tax posting point in Taiwan, customers can choose the corresponding scenario as per their requirements.

Report for Withholding Tax

For some countries/regions, the withholding tax report is generated based on the information collected from supplier and customer documents, such as cleared invoices, supplier credit memos, down payments, and cleared credit memos. The system generates a text file that can be submitted to the government authorities. Once the Document and Reporting Compliance (DRC) feature is active for some countries/regions, you can use the Run Statutory Reports to generate withholding tax report.

For example, the withholding tax report for the United States is as follows:

Withholding Tax (1099-MISC) Report for the US

The withholding tax reporting information for Belgium is as follows:

Withholding Tax Report in Belgium

However, SAP S/4HANA Cloud Public Edition does not yet provide a standard withholding tax declaration report for Taiwan and user can use the following CDS View to get the corresponding withholding tax information:

I_SupplierWithHoldingTax: Supplier Withholding Tax
I_CustomerWithTax: Customer Withholding Tax
I_WithholdingTaxCode: withholding tax code
I_SuplrInvcHeaderWhldgTaxAPI01 : Withholding Tax on Supplier Invoice

Customers already sent requirement of withholding tax declaration reports to SAP S/4HANA Cloud Public Edition product departments and look forward to the withholding tax declaration report delivered by SAP in the future localization functionality for Taiwan. Please refer to the following link to check detail request on customer influence portal:

Improvement Request Details - Customer Influence

Starting with CE2502, SAP S/4HANA Cloud Public Edition offers a new application, Withholding Tax Calculation Analysis, which answers the question, “How do you calculate withholding tax for this transaction?”, as follows is an example of a German company code:

For information about the app, refer to the help document: Withholding Tax Calculation Analysis | SAP Help Portal

However, the app is currently not supported for Taiwan and prompts the following information:

Hope the app will be open for Taiwan in the future.

Conclusion

In the Taiwan region, withholding tax is applicable for different income types, such as dividends, rents, interest, and royalties generated internally in Taiwan. It is important to ensure timely taxation, simplify tax management, and enforce compliance.

The withholding agent shall, prior to the tenth day of each month, pay to the Treasury the taxes withheld the previous month and make out withholding certificates and submit them to the tax offices not later than the January of the following tax year, specifying the payment made and the tax withheld in the previous year. In the case that three national holidays occur in immediate succession in January the period for the submission of the withholding certificates shall be extended to February 5 .For income paid to non-residents or foreign businesses having no permanent establishment in the ROC, the withholding agent shall pay to the Treasury the taxes withheld and file a withholding report and the receipts with the tax offices within ten days after withholding.

Reference link [4]

Like many tax types in Taiwan, misunderstandings of tax declarations or missed deadlines can cause economic losses for foreign companies inside and outside Taiwan.

Reference Information

SAP S/4HANA Cloud Public Edition Taiwan Localization - Workaround Solution for Withholding Tax