Withholding tax and social contributions
In many countries, in specific situations, companies are legally required to retain payable income tax and/or social contribution from the payments of purchase invoices, and pay the amount directly to the tax collector’s office. For example, withholding income tax and social contributions can apply to services provided by subcontracting companies, employment agencies, and self employed workers.
The withheld tax and social contribution usually consists of a fixed percentage. In some countries, different rates apply to different portions of the transaction amounts. The amounts to be withheld can consist of combinations of income taxes and social contributions. Depending on local rules, the payment is due either when the invoice is paid, or periodically. Companies must periodically submit a report to declare the amount of withheld and paid tax and social contribution.
In addition, in some countries part of the social contribution must be paid by the customer. This part of the social contribution is charged over the invoice amount and must be posted as extra costs, or company expenses.
As a result, various kinds of tax can apply to an invoice. Separate tax codes are required to calculate the amounts of withholding income tax and social contributions, and to register the tax amounts of the invoice in the tax analysis. Group tax codes are used to link a number of tax codes to a transaction.
To register and declare withholding tax and social contributions
You can apply withholding tax and social contributions in combination with value added tax (VAT) and sales tax. The set up procedure is described in Setting up withholding tax and social contributions.
If you pay the tax periodically, the procedure to set up and prepare the withholding tax and social contributions declaration is similar to the set up and preparation of value added tax declarations.
Withholding tax payable at invoice payment
If the withholding tax and social contributions is payable immediately at invoice payment, you must specify the collection office and the settlement tax code for the tax code in the Steuercode nach Land (tcmcs0136s000) session.
When you generate a tax declaration, LN does not include tax codes for which you select Bei Rechnungszahlung. When you pay a purchase invoice with such a tax code, LN automatically generates a standing order in Zahlungswesen to pay the tax to the collection office.
The standing orders for withholding tax are created at the moment when the open invoice balance for the business partner is reduced.
In the Zahlungen/Lastschriften Unterwegs (tfcmg2504m000) session, on the appropriate menu, you can click . This command starts the Einbehaltene Steuerbeträge nach Beleg (tfcmg1517m000) session, which displays the details of the generated payment documents.
In the Einbehaltene Steuerbeträge (tfcmg2503s000) session, you can view the withholding tax amounts. You can use the USt-Analyse (tfgld1520m000) session to generate a report of the tax amounts paid at invoice payment.