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How is tax withholding calculated

how is tax withholding calculated

 Defining Withholding Tax Types 


In one business transaction, several kinds of withholding tax may have to be withheld. The SAP System uses withholding tax types to reflect this. Several withholding tax types can be defined in the system; one or more can be assigned in the vendor master record.

The withholding tax type governs the way in which extended withholding tax is calculated and is defined at country level. As far as the time of posting for withholding tax amounts is concerned, there are two different categories of withholding tax types:

  • Withholding tax type for posting at time of invoice
  • Withholding tax type for posting at

    time of payment


To make the settings for the withholding tax types, proceed as follows from the Implementation Guide for Financial Accounting. Financial Accounting Global Settings

® Withholding Tax ® Extended Withholding Tax ® Calculation ® Withholding Tax Types ® . .

Withholding Tax Type for Posting at Time of Invoice

Make the following entries:

Define the name of the withholding tax type.

Define the details for calculating the withholding tax base amounts and the rounding rules for the withholding tax amount.

You also determine whether the withholding tax amount is to be both calculated and posted or only calculated (the latter is the case in France, for example).

Category: Taxes

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