| # Withholding tax - concepts and components Business partner tax classification The Business partner tax classification is a way to indicate that payments of invoices from an invoice-from business partner are subject to withholding tax. You must use the business partner tax classification to group business partners that have the same tax aspects for your company. For the TDS declaration, you must define the various categories as tax classifications. For example, you must define a tax classification for Company, for Association of Persons, for Registered Partnership, and so on. If you set up tax exceptions, you can only set up tax exceptions for a group tax code if you use the tax classification as a selection criterion. In the Invoice-from Business Partners (tccom4122s000) session, you can select your suppliers'tax classification. Fiscal number Payers of withholding income tax must obtain the following tax registration numbers from the Income Tax department: Permanent Account Number (PAN) Tax Deduction Account Number (TAN) The PAN and the TAN must be printed on the tax declaration, the payments, the TDS certificate, and all TDS-related documents and reports. In addition, you must record your business partner's tax registration number, which must also be printed on the mentioned documents. Withheld income tax and social contributions must be registered with the supplier's fiscal number. Your business partners must supply you with their fiscal number. This number can differ from their tax number. You can specify the business partner's fiscal number in the Business Partner Withholding Tax Data (tccom4127s000) session. Tax base amount In some cases, withholding income tax must be calculated over part of the invoice amount rather than over the full amount. To calculate the tax amounts correctly, you can define a tax base formula which is the algorithm SSA ERP uses to calculate the base amount for the withholding income tax. You can optionally define the tax base formulas for the various kinds of withholding income tax in the Tax Base Value Formulas (tctax0111m000) session. If you do not define a tax base formula, SSA ERP bases the tax calculations on the net invoice amount or the net advance payment amount. To ensure that the tax base value is the same for the Withholding Social Contribution and the Social Contribution (Company Expense) component, the tax base value formula must be the same for each combination of tax country and tax category. Tax category You can use tax categories to distinguish and/or group kinds of withholding income tax for inquiries, reporting, and tax payment selections. For the TDS declaration, you must use the tax category to indicate the section code and the TDS type so that this data is printed on the tax declaration. You can define specific tax declaration masters for each combination of: Tax Country Collection Office Tax Declaration Type Tax Category You can perform tax analysis, tax reports, and tax payment selections by tax category. Tax Settlement tax codes This kind of tax code is only used to post the tax declaration in the general ledger. If you pay the tax, SSA ERP links this tax code to the reversal postings of the tax amounts on the interim accounts and to the tax payments you make to the collection office. On the tax analysis reports, tax payments to the collection office are represented by the Tax Settlement tax code. You cannot assign Tax Settlement tax codes to transactions or add them to a group tax code. You cannot define tax rates and posting data for Tax Settlement tax codes. Related topics To set up withholding tax |