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The withholding tax is any amount that must be paid, in money or in kind, to obtain the right to use certain tangible or intangible assets:
you must pay this tax so you may use any of the following:
copyright, any patent, trademark, franchise, project, design, plan, secret formula, manufacturing process software, know-how, the name or image of any individual, any direct or indirect broadcasting via cable, satellite,or fiber optics, any right to record or broadcast performances, shows, sporting events as well as any industrial, commercial or scientific equipment and transportation.
this must be paid by transferring the right to use, through a concession contract, of the goods of public or private property of the state, county, town or village, as well as of activities and public services at national or local level.
In Romania, this type of tax is paid by resident companies to the state budget for certain transactions with foreign, non-resident companies for the following categories of acquisitions (at the time of payment thereof):
Royalties - Usage rights for tangible or intangible assets;
Interest;
Commissions;
Other Services;
Gambling.
The tax must be paid to the state budget by the 25th of the next month following the payment to the external beneficiary. Dividends that have been calculated but unpaid by the end of the year must be paid by January 25th of the following year.
Withholding window
Withholding window
The Withholding window, found by following the path Partner Relations -> Business Partner Rules -> Business Partner Setup, is used to define the withholding rules used in the relationship with certain partner countries and for certain products, product categories or charges. In order to define a withholding rule, click on the New Record button found in the main toolbar and fill in the following fields:
Name - enter a name for the withholding;
Description - optionally, you may also enter a description;
Active - select this checkbox to indicate that the record is active;
Country - select the partner country for the withholding rule;
Valid from - mandatory field, used to indicate the start date of the validity period of the withholding;
Valid to - optional field, used to indicate the end of the withholding validity period;
Convension Name - enter a name for the convention defined for the respective country;
Has Convention - select this checkbox if there is a convention with the respective country;
Percent withholding - select this checkbox to indicate that the amount withheld is a percentage from the invoice amount;
Percent - the percentage applied to the invoice balance in order to calculate the withholding amount, if there is a convention with the respective country and the business partner holds a valid certificate;
Default Percent - the percentage applied to the invoice balance in order to calculate the withholding amount, if there is either no convention with the respective country or the business partner does not hold a valid certificate;
Payment Term - indicate the method and way the payments are done.
If you want the system to automatically apply the defined withholding rule for certain product categories, products or charges, you can enter lines in the Details tab and fill in the following fields:
Product Category - fill in this field with the product category you want the withholding rules to be applied to;
Product - fill in this field with the product you want the withholding rules to be applied to;
Charge - fill in this field with the charge you want the withholding rules to be applied to.
Go to the Accounting tab to select the account you want to use for the Withholding field for each defined and active accounting schema.
Business Partner window
Business Partner window
Starting with version 14.03, a new tab was activated in the Business Partner window: Withholding. Here is where you can select the pre-defined withholding rule that will be used in the transactions with this business partner. Follow the path Partner Relations -> Business Partner Rules -> Business Partner and fill in the following fields in the Withholding tab:
Withholding - select the withholding defined in the Withholding window;
Active - select this checkbox to indicate that the record is active;
Has Certificate from Vendor - select this checkbox to indicate that the business partner has a valid certificate;
Valid from - mandatory field, used to indicate the start date of the validity period of the withholding;
Valid to - optional field, used to indicate the end of the withholding validity period;
Comments - optional field, you can use this to enter a short description.
Go to the Beneficiaries tab in the situation where the reporting of the withholding tax or part of it is done on business partners other than the one we have transactions with. Select the Beneficiary and enter a numerical value in the Percent field to indicate the percentage of the tax that will be reported on the defined beneficiary. If the sum of the percentages in all the Beneficiary lines is different than 100%, then the rest of it will be reported on the business partner from the master window.
When registering the withholding, you may also attach scanned copies of the received certificates (by using the Attachment button in the main toolbar).
Vendor Invoice window
Vendor Invoice window
There are now two new fields in the Reference section of the Invoice (Vendor) window (found in Procurement -> Vendor Invoice):
Withholding Total - this indicates the total due withholding amount;
Total Open Amount - this indicates the total open amount left after subtracting the due withholdings.
Starting with version 14.03, a new tab was activated in the Invoice (Vendor) window: Withholding. This tab is ReadOnly and displays the details linked to the withholding amounts associated to the respective invoice:
Withholding - displays the withholding defined in the Withholding window;
Valid - indicates if there is a valid certificate;
Withholding Base Amt - displays the base amount used to calculate the withholding tax;
Withholding Amt - displays the withholding amount calculated as the percentage defined in the Withholding window applied to the Withholding Base Amt.
Note: The rate defined in the Percent field is only used if there are both a valid convention with the respective country and a certificate from the business partner.
In this case, the withholding amount is subtracted from the invoice balance to obtain the total open amount. Otherwise, in the absence of a certificate or of a convention, the Default Percent will be used and the invoice open amount is left unchanged.
There is now a new field in the Allocation tab: Withholding Amt. This indicates the withholding amount corresponding to the respective payment. As such, this is proportional to the net payment amount.
Note: If the open amount of an invoice is covered by multiple payments, the amount in the Withholding Amt field will not be equal to the payment amount multiplied by the withholding percent, but is obtained by multiplying the total open withholding amount with the percentage of the net payment from the total open amount.
Due Withholdings window
Due Withholdings window
The Withholding Base Total and Withholding Total fields will be automatically filled in by the system after using the Create Due Withholding Lines process. This process will generate lines for all the withholding taxes corresponding to the vendor invoices paid in that period. The Delete Due Withholding Lines process can only be used if the Due Withholdings document has not been completed.
If the document has been completed and there are modifications that could influence the calculated due withholdings for the respective period, then you must void the document and create a new one.
In the Details tab you will find the allocations and invoice lines for which the withholding tax was calculated, broken down on withholding type, country and business partner, with FIFO allocation if there are multiple withholding types on the same invoice and the line date = allocation date = account date. Furthermore, the lines for which the withholding amount was not calculated on the allocation (either because the business partner does not have a certificate or because there is no convention with the country) will also be added, however they will be marked distinctly as they have a different posting rule compared to that of the other lines!
The Allocations tab is used to display the payment allocations corresponding to the Due Withholdings document.
Due Withholdings Correction process
Due Withholdings Correction process
As part of the Withholding functionality, a new window was created: Due Withholdings. This can be found by following the path Performance Analysis -> Accounting Rules -> Taxes and is used to display the total withholding amount due to be paid for a certain period and business partner (the state budget). Fill in the following fields:
Organization - select the organization that will be paying the withholding amount;
Document Type - select Withholding - the document type must be predefined in the Document Type window and the corresponding period must be opened in the Calendar Year and Period window;
Business Partner - select the business partner that the withholding amount will be paid to;
Currency - this will be automatically filled in by the system based on the main accounting schema of the organization;
Period - select the period you want to calculate the withholding amount for;
Account Date - select the account date you want to calculate the withholding amount for;
Description - optionally, you may also enter a description.
The Due Withholdings Correction process can be found in Performance Analysis -> Accounting Rules -> Taxes and is used in situations where you have determined that, for a certain closed period, the withholdings amount was calculated wrongly. In this case, all the allocations and invoices need to be corrected, the open amounts need to be recalculated and the differences need to be posted. In order to run the process, you must enter the following parameters:
Organization - select the organization you want to run the process on;
Document Type - select Withholding;
Business Partner - select the business partner you want to run the process for;
Date - select the time interval you want to correct the withholding amounts for.
The process will result in writing/erasing the withholdings on the invoices and generating a distinct Due Withholdings document. This latter will contain all the previously calculated records with changed sign and new lines with newly calculated withholding amounts.
Payment Allocation form
Payment Allocation form
Starting with version 14.03, the following modifications have been brought to the Payment Allocation form:
The open amount (Converted Open Amount) diminished with the withholding amount.
The Withholding Total column was brought to the Invoice section.
The Due Withholdings documents that will be used for the payments to the state budget will also be brought in the Invoice section.
Accounting Consequences
Accounting Consequences
Starting with version 14.03, the Withholding Expense field was brought in the Tax section of the Defaults tab of the Accounting Schema window.
The table below displays, based on the presence or lack thereof of a certificate or convention, the posting rules of the withholding tax, as well as if the business partner open amount is diminished with the withholding amount and the percentage applied to the open amount to determine the withholding amount:
All the open balance reports will display the open amount that has been affected by the withholding tax.
The currency exchange differences that are automatically calculated by the system at allocation posting level will take into account calculated due withholdings, the exchange difference being applied to the entire amount (paid amount + withholding amount). The invoice revaluation process also takes into account the withholdings on the invoices so that the revaluation is done for the entire open amount (invoice open balance + withholding open balance).
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