Fusion Withholding Tax
Fusion provide two options when configuring Withholding Tax.
- A Simple configuration which is setup in Fusion Payables
- A Rule Based configuration is setup in Fusion Tax
- Fusion also provides a Tax Region within the Payables invoice which shows more details on the Withholding Tax that has been applied
The simple configuration uses Withholding Tax Group code on the Invoice to generate the withholding tax
The Withholding Tax Group is defaulted from the supplier or supplier site. This indicates if the supplier or supplier site is registered for Withholding Tax
If necessary, a user can select another Withholding Tax Group code on the invoice line or remove it completely if withholding tax is not applicable.
The simple configuration is setup using the Define Payables functional area and needs to be setup separately for each business unit.
The Manage Tax Reporting and Withholding Tax option are used to enable Withholding tax for the Business unit. The Calculation point is when the Withholding tax applied, either on the invoice or on payment amounts.
Manage Tax Rates is where Withholding Tax codes are created and these can be assigned to Tax Classification which are used for the Withholding Tax Groups
Exemptions from withholding tax are recorded separately for the supplier using Manage Withholding Certificates
The benefit of the simple configuration is that a full Withholding Tax Regime to rate is not needed. So setup is reduced. However, this limits the functionality that is available, as default tax codes are being used to determining the Withholding Tax and this is applied at the supplier or supplier site level.
This may be suitable if a supplier is always going the same Withholding Tax rate applied to all their invoices/payment. However, if the Withholding Tax Rate is variable say but product supplied then the rules based configuration may more suitable.
The uses the full power of Fusion Tax’s rules engine to determine the Withholding Tax rate to be applied. So for example the product type of services can be used as an Applicability rule if the Withholding Tax only applies to services.
Additional rules can then be applied to Status and Rates if, say the domestic Withholding Tax Rate is different to non-domestic. The Withholding Tax group field is not needed for the determination of Withholding Taxes
Supplier Withholding Tax Registrations are held on the Suppliers tax record, which can then be applied to tax rules
Supplier Exemptions are also held on the supplier’s tax record
The ruled based configuration is setup using the Define Tax functional area and a full regime to rate needs to be setup using Manage Regime, Manage Taxes and Manage Tax Rates and recovery Rate. However, within these tasks the Withholding tax button needs to be checked
The Tax controls the calculation point and the tax invoice point
Defaults need to be assigned to the Tax which will be used if no rule is found. Note in this example the default Tax applicability is set as not applicable
A tax authority also needs to be assigned to the Tax. This is a supplier with a type of Tax authority and is used to create Tax invoice
Tax rules can then be created to apply tax to the transaction.
For example, an Applicability rule can be defined so the tax is applicable for Registered Suppliers who are supplying Services
And a tax rate rule for a non-domestic rate
By utilizing the rules engine available with Fusion Tax, more complex Withholding Tax scenarios can be applied to Payables Invoice without the need for manual intervention of AP Clerks
Regardless of which configuration that is used to calculate the Withholding Tax. When the Tax is applied to a Payables Invoice detail of the tax rate, amount and other details are showing in the Withholding Taxes tab of the taxes section of the invoice
Furthermore, using the Edit Taxes button will display more Withholding Tax information. This includes details on the associated Tax Authority Invoice