How is Stoppage or Withholding Tax Treated?

Tax Details (TXD) can calculate stoppage or withholding tax, so that a portion, or indeed all, of the tax amount can be identified and transferred to a separate account.

You can identify a percentage of tax, royalties or other deductions which is written to the input or output stoppage account. Two additional transaction lines are generated; one which posts the amount to the input or output stoppage account, and an offset of this amount which is posted to the account on which the tax is generated, i.e. the account associated with the transaction line where the tax analysis code is entered.

You can also identify the account to which the stoppage amount is posted. The use of the input/output account is determined by the Tax Type setting in Journal Types (JNT). If this field is set to Input, then the input accounts are used for that journal type. If this field is set to Output, then the output accounts are used for that journal type.

It is required for countries where withholding tax applies. For example, tax can be applied to a purchase invoice, but is withheld and paid directly to the Government by the company paying the invoice.