Basic Withholding Tax (for customers) Process

[rb2020]

Hello - We are in the USA and have foreign customers who withhold tax from their payments on our invoices. This causes them to pay less than we have invoiced.

I am looking for a basic best practice guide to handle this in the system.  Should tax codes be set up for these (countries, customers, materials?) so that the tax is recognized, and the amount sitting in A/R will match the payment when it comes in?

Do we not do any such configuration, and there is a method to post the short payment, and any difference to withholding tax to clear the item?  

I have struggled to find any clear documentation in the help. Most seems to speak about supplier side withholding tax, or already be deep into complexities - just looking for the basic initial setup and best practice process.

[HenrikeGrötecke]

forwarded to experts

[debasis_panda03]

Dear Customer,

Yes, you need to setup the withholding tax codes for customer side documents such that the incoming payments matches your A/R balances.

Steps:
Define WHT type for Payment posting
Define WHT code for the WHT type
Define a Condition type for WHT by Customers
Assign the Condition type to the WHT type
Make the necessary assignments such as WHT tax type to Company code, GL A/c determination etc.
Maintain the Condition type in SD Pricing procedure as statistical
Maintain the Condition record in VK11 with the Withholding tax code.
Maintain the tax code in Customer Master

Best Regards,
Debasis

[Anthony_Santoro]

Hi @rb2020. There's also US-specific withholding tax information for the United States on the Help Portal that may help.

If not, please reply here and we'll take it for expert clarification. We can then post our findings here in this thread and will of course make the necessary changes to the product assistance.

Thanks very much for your time and patience.

[rb2020]

Thanks @Anthony_Santoro. That section of the help portal is again about withholding tax from suppliers that we pay. @ouma_ronald and I are both looking for information regarding configurations and postings when our customers withhold tax from their payments to us.

[Anthony_Santoro]

Ok, @rb2020. Understood. I'll take this question back to the relevant experts and reply here when I have more information. Will also ensure that the relevant updates are made to the Help Portal documentation so that others, like @ouma_ronald, can find the information more easily in the future.