Setting up withholding tax and social contributions

To set up withholding tax and social contributions:

1. Set up the parameters

   In the Implemented Software Components (tccom0100s000) session, select the Withholding Income Tax and Social Contribution check box.

2. Define the tax categories

   If you must distinguish various types of withholding tax and social contributions on your reports, define the tax categories required for your country in the Tax Categories (tctax0115m000) session.

3. Define tax base value formulas

   For tax categories for which the tax amounts are not based on the net goods value amounts, you can define the algorithm used to determine the tax base value. For details, refer to To define tax base value formulas.

4. Define the tax codes

   Define the tax codes, the tax rates, and the tax posting data as described in To set up tax registration. These details are especially important:

   • Kind of Tax

     Define separate tax codes, as required, for:

     • VAT
     • Withholding Income Tax
     • Withholding Social Contribution
     • Social Contribution (Company Expense)
     • Exclude from Withholding

     For details, refer to Kinds of tax.

   • Tax rates

     If the tax consists of a single rate, define a singular tax code. If the tax consists of different rates on separate parts of the amount, define a multiple tax code. For example, you must define a multiple tax code for social contributions to which one or more threshold amounts apply.

   • Tax Base Value Formula

     For the tax codes for which you defined a tax base value formula as described in Step 3, in the Tax Codes by Country (tcmcs0136s000) session, select the tax base formula in the Tax Base Value Formula field. In one country, tax codes of the same tax category must have the same tax base value formula.

   • Payable periodically or at invoice payment

     In the Pay Tax field of the Tax Codes by Country (tcmcs0136s000) session, select the time at which you must pay the withholding tax and social contributions to the tax authorities. If the tax is payable at invoice payment, you must enter the collection office to which you pay the withholding tax and social contributions and the tax settlement tax code.

     LN does not include tax codes for which you select At Invoice Payment in a tax declaration. If you pay a purchase invoice for which the withholding tax is payable at invoice payment, LN automatically generates a standing order to pay the tax to the collection office.

5. Approve the tax codes

   Before you can link the tax codes to a group tax code, in the Tax Codes by Country (tcmcs0136s000) session, you must select the Approved check box for each tax code.

6. Define a group tax code

   In the Tax Codes by Country (tcmcs0136s000) session, define a tax code and select the Group Tax check box to indicate that the tax code is a group tax code. For a group tax code, you cannot enter other tax details.

7. Approve the group tax code

   Before you can link the tax codes to a group tax code, in the Tax Codes by Country (tcmcs0136s000) session, you must select the Approved check box for the group tax code.

8. Add the tax codes to the group tax code

   In the Tax Codes by Country (tcmcs0536m000) session, from the appropriate menu, select Tax Codes by Group. The Tax Codes by Group Tax Code (tctax0139m000) session starts.

   In the Tax Codes by Group Tax Code (tctax0139m000) session, click New to add the tax codes that you defined in Step 3 to the group tax code.

   You must link one tax code of the VAT kind. The tax codes must have the Approved status. If you click the browse arrow of the Tax Code field, LN only lists tax codes that you can add to the group tax code.

9. Set up default group tax codes for your business partners

   Link the group tax code to the tax classification in one of these sessions:

   • Tax Exceptions by Country (tctax1100m000)
   • Tax Exceptions by Country Set (tctax1101m000)

   You can only select a group tax code if you enter these details:

   • The Order Origin must be Purchase or Purchase Invoice.
   • The Tax Classification field must be filled.

   If you save the data, LN verifies that the group tax code contains tax codes of the kinds of tax that correspond with the selected tax classification.

   In the Tax Parameters (tctax0100m000) session, select Exceptions by Country or Exceptions by Country Set, as applicable, in the Search Sequence 1 field.

10. Set up the business partners for withholding tax and social contributions

    Set up the details for your business partners as described in To set up business partners for withholding tax and social contributions.