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Basic Withholding Tax (for customers) Process

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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.

Product and Topic Expert
Product and Topic Expert
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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.

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,

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Hi @rb2020 

Did you get any clear answer or documentation to this? I am also interested in a clear documentation that explains from the customer side how the deduction can be automated so that we don't have to post another document for the withholding tax bit