Define Account for Withholding Tax Configuration in SAP

     Withholding Tax account is automatically generated while posting by system. It’s mean that you have to define account for withholding tax to let system know which account should be pick up for posting. In SAP, there are 4 types of withholding tax can be set.

1. Define Accounts for Withholding Tax to be Paid Over

2. Define Accts for W/hold.Tax for "Gross.Up" Offsetting Entry

3. Define Accounts for Self-Withholding Tax

4. Define Accounts for Withholding Tax Offsetting Entry

     What I gonna explain today is a basic setting which is “Define Accounts for Withholding Tax to be Paid Over”. This function is used to define account for common withholding tax. Basically, account for withholding tax can be defined at level of withholding tax type. It’s mean that different type can post to different account.

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When withholding tax account is posted?

Assume that you post vendor invoice which has 3% of withholding tax at payment. System will record accounting journal as below:

Dr. Expense

Dr. Input Vat (optional)

Cr. Vendor à this is an open item (withholding tax based is entered here)

     On due date of this invoice, you post an outgoing payment by choosing vendor open-item from document above. Below is accounting journal of payment document.

Dr. Vendor

Cr. Bank

Cr. Withholding Tax Account (This account is automatically generate by system.)

     The configuration that I gonna explain next is how to define withholding tax account that automatically generate while posting by system. It’s very easy and simple. There are only 3 steps to define account for withholding tax

How to define account for withholding tax in SAP

Menu Path: SPRO -> Financial Accounting (New) -> Financial Accounting Global Settings (New) -> Withholding Tax -> Extended Withholding Tax -> Posting -> Accounts for Withholding Tax -> Define Accounts for Withholding Tax to be Paid Over

T-Code: OBWW

1. Enter Chart of Account

2. Enter Withholding Tax Type and Account

3. Press <Save Button>

It's easy right? ^____^ hope this help and useful.

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