Withholding tax
Requirement
In Israel, the withholding rate is determined by ITA and varies based on the activity, date range, and individual supplier.
The management of withholding taxes occurs at the time of payment by the buyer, and the process involves the following steps:
- The buyer is responsible for calculating, reporting, and paying the tax on behalf of the supplier.
- The calculation is based on the paid amount.
- The buyer is required to report all transactions and provide details of the tax deductions made from payments to these suppliers to the government.
- As part of this process, the supplier receives a tax certificate as evidence that the tax has been paid to the authorities on their behalf.
M3 Solution
By employing Withholding Method 2, which involves deducting taxes at the time of supplier payment, M3 enables the selection of a flexible service code. This code allows for the definition of a specific date range as required. The designated date range is then verified against the payment date to ensure compliance with the withholding process.
Configuration guidelines
| Program ID | Program name | Description or Comment |
|---|---|---|
| APS905 | Settings – Account payable | Parameter 260 set to 3 |
| CRS624 | Supplier Financial |
Withheld Method 2 (payment entry) Service code from CRS063 |
| CRS063 | Service codes |
Certificate series (type 84) from CRS165 Withheld Service Code classification such as "01" Interest, "02" insurance, "03" Royalties, "06" Services… |
| CRS663 | Flexible service code |
Reporting level set to 0-Payment Base type is 0-Gross Amount (including VAT) Alternative 4 – Date limits Official service code set equal to service code. |
| CRS664 | Connect flexible service codes to supplier |
One Flexible service code per supplier for normal rate. Another flexible code can be connected in case of exemption (0%). Related option 11 to access CRS668 |
| CRS668 | Flexible service code. Open date Limits | Only From date is defined. The End date is set using a second record having the end date of the range plus one day. |
| APS120 | Supplier payment | Handle payment date to retrieve rate |
| APS130 | Supplier batch payment | Handle payment date to retrieve rate |
| CRS395 | Accounting setup | Accounting type 396 must be set with an WHT account. |
| CRS630 | Chart of accounts |
WHT account must be created per type of tax. VAT account type must be set to 5-9 (user defined having VAT account type 5 to 9 (user defined to permit its integration into TXS100 VAT Report |