How is Withholding Tax Calculated?

Withholding tax is calculated when you post a transaction or a payment. It is calculated on the group of transactions that are selected for processing providing they are eligible for withholding tax according to the rules defined for each type of tax. These are referred to as the source transactions.

The withholding tax rules identify the taxable accounts and transactions, and the rates of withholding tax that apply.

The withholding tax calculation process performs these steps:

1. The source transactions are grouped by account and date, and by which, if any, types of withholding tax should be calculated for each account.
2. If the tax is being calculated on a non-cumulative basis it is calculated either for each individual transaction or on the total of the transactions for the account. Whereas, if the tax is being calculated on a cumulative basis it is calculated on the total taxable value for the tax time frame. If the tax is being calculated on an Invoice Cumulative (Argentina) basis it is calculated by the sum of transactions over the 12 months prior to payment, including any unpaid transactions.