Oracle Applications

White Paper
Withholding Tax (AWT) at both invoice and
payment time in Payables
Author:

Sriram Ramanujam

Versions:

1.0

Create Date

1 November 2009

_____

Oracle/Client Confidential - For internal use only

Contents

INTRODUCTION .......................................................................................................................................................................... 3
Objective ............................................................................................................................................................................... 3
Scope..................................................................................................................................................................................... 3
Background........................................................................................................................................................................... 3
Terms .................................................................................................................................................................................... 3
Withholding Tax.............................................................................................................................................................. 3
Withholding Tax Point.................................................................................................................................................... 3
ABILITY TO WITHHOLD TAX AT BOTH INVOICE AND PAYMENT TIME IN PAYABLES .................................................................... 4
Overview ............................................................................................................................................................................... 4
SETUP REQUIRED TO GET THIS FEATURE .................................................................................................................................... 5
Payables Option.................................................................................................................................................................... 5
Business Rules ............................................................................................................................................................... 5
Supplier and Supplier Site level ............................................................................................................................................ 7
Business Rules ............................................................................................................................................................... 7
CHANGES IN APPLICATION TRANSACTION UI............................................................................................................................. 9
Invoice Workbench (APXINWKB) Form .............................................................................................................................. 9
Business Rules ............................................................................................................................................................... 9
Supplier and Payables Interfaces .............................................................................................................................. 10
USER PROCEDURES .................................................................................................................................................................. 11
Setup ................................................................................................................................................................................... 11
Setup Payables Option................................................................................................................................................ 11
Setup Supplier Site ...................................................................................................................................................... 12
User..................................................................................................................................................................................... 12
User Task Description ................................................................................................................................................. 12

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Introduction
Objective
To provide an overview of the ability to withhold tax at both invoice and payment time in Payables.
Intended to provide the reader a good understanding of the features, the setups and details of the
steps on how to process a transaction involving Withholding Tax at both invoice and payment
time.

Scope
This paper will cover the functional side of the ability to withhold tax at invoice and payment time in
Payables and discuss some of the options and their impacts.

Background
The ability to withhold tax at both invoice and payment time in Payables is a new feature in R12.1.
Note : The rules related to Allow Manual Withholding in Payables Option will not change.

Terms
Withholding Tax
Withholding Tax is a tax in which the tax authority is paid not by the supplier
(seller) himself but instead by the buyer on behalf of the supplier. The tax
authority requires the buyer (payer) to put aside a certain percentage of the
supplier's due payment and send it directly to the tax authority. Even though the
payer is the one who fulfills the tax authority requirement by sending the amount,
the liability of the amount still falls on the supplier since the amount is deducted
from his payment total. For the payer, the total amount paid is still the same, only
divided between two payees.
Withholding Tax Point
Withholding Tax Point refers to the moment when the withholding is calculated and made
effective, and when it should be accounted to be considered as a liability or a credit.

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Ability to withhold tax at both Invoice and Payment time in Payables

Overview
In some countries like Brazil there are various Withholding Tax regimes. Many of these regimes
will apply to a single transaction. The regimes will prescribe different rates and also the point at
which the Withholding Tax needs to be deducted. The point of deduction of the Withholding Taxes
may be Invoice or Payment. Companies need to apply the Withholding Taxes at the prescribed
point of time and deposit the amount to the corresponding fiscal authority.
Oracle delivered the ability to apply Withholding Taxes both at Invoice and Payment time on the
same transaction. This will allow some Withholding Taxes to be applied at the Invoice time and
some Withholding Taxes to be applied at the Payment time for the same transaction.
Further, we create a Withholding Tax invoice at the time of application of the Withholding Taxes.
Payables currently allows application of Withholding Taxes only at the time of Invoice or Payment.
There will be another option provided which, if selected, will allow the Withholding Taxes to be
applied both at the time of Invoice and Payment. If the user selects this option, he will be able to
attach two Withholding Tax groups/codes to the supplier/supplier site. One Withholding tax/group
will be applied at the time of Invoice and the other at the time of Payment.
The User will have to do the following set up:

Select the option of applying Withholding Taxes both at the time of Invoice and Payment.

At the Supplier/Supplier site level, the user will be able to attach two withholding groups
(currently he can attach only one). User will apply Withholding Group 1 at the time of
Invoice and Withholding Group 2 at the time of Payment. Whenever an invoice is entered
for the supplier, these Withholding Taxes will be defaulted from the supplier site and the
taxes will be applied at the appropriate points.

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Setup required to get this feature

Payables Option
In Payables Option a new option will be provided to the user to enable him to apply the Withholding Tax At Invoice
Validation and Payment time. There will also be one more option added to enable the user to create withholding
invoices automatically at the time of application of Withholding Taxes.
In Payables, changing of the Withholding Tax region options is allowed at any point of time. It can be toggled
between Never, At Invoice time, At Payment time, and At Invoice Validation and Payment time at any time. It is
to be ensured that whenever this is done the columns are also updated at the supplier site level and no defaulting
happens irrespective of the values at the supplier site level
Business Rules

In the Payables Options in the Apply Withholding Tax region, one more
option will be added to the existing options of Never, At Invoice Validation
Time, and At Payment time. This option will be named At Invoice Validation
and Payment time.

This option can be selected only if the Use Withholding Tax checkbox is
selected in the Withholding Tax region of Payables Options.

One more option will also be added in the Create Withholding Invoice region
called At Withholding Application. It will be ensured that this option can be
selected only if the option At Invoice Validation and Payment time is selected
in the Apply Withholding Tax region.

In Payables Options > Apply Withholding tax region, if the user tries to
select the option At Invoice Validation and Payment without selecting the
checkbox Use Withholding Tax, then the error message saying Field is
protected against update should pop up.

In the Payables Options Apply Withholding Tax' region, if the option selected
is Apply at Invoice Validation and Payment time and the user tries to select
any option in Create Withholding Invoice other than the option At
Withholding Application or Never, the error message saying The apply,
create withholding combination specified is invalid should pop up.

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Figure 1: Payables Option > Withholding Tax tab

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Supplier and Supplier Site level

Before this feature, Supplier/Supplier Site level had only one LOV for attaching the Withholding Taxes. One more
LOV is added and the label of the existing LOV is modified so that the User can now attach two Withholding Tax
groups one of which will be applied at the time of Invoice and the other will be applied at the time of Payment.
Business Rules

In the Supplier/Supplier Site the current LOV of Withholding Tax Group is

used for applying Withholding taxes at the time of Invoice. The current LOV is
renamed from Withholding Tax Group to Invoice Withholding Tax Group. A
second new LOV is added to enable the user to apply Withholding Taxes at
the time of Payment. The label will be Payment Withholding Tax Group.

The current rules followed for allowing the checkbox 'Allow Withholding Tax'
to be editable at the Supplier and Supplier Site levels will continue to apply as
follows:

At Supplier level:

At the Supplier Site level:

The Allow Withholding Tax checkbox in the Tax Details tab

of the Supplier should always be editable at the Supplier level
irrespective of the Payables Option selected.

The 'Allow Withholding Tax' checkbox should always be

displayed at the Supplier Site level, but it will be editable only
if the Use Withholding Tax checkbox is enabled in the
Payables Option of the Operating Unit to which the supplier
site is attached, and the Allow Withholding Tax checkbox is
selected at the Supplier level.

For the LOVs to be shown and editable, the following rules will apply:

At the Supplier level:

If the Allow Withholding Tax checkbox is not selected at the

Supplier level, no LOVs will be shown.

If the Allow Withholding Tax checkbox is selected at the

Supplier level, two LOVs will be shown and will be editable:
o Invoice Withholding Tax Group
o Payment Withholding Tax Group

At the Supplier Site level:

Irrespective of the Payables Option, the following LOVs will

always be shown at the Supplier Site level:
o
o

Invoice Withholding Tax Group

Payment Withholding Tax Group

For the LOVs to be editable, the following rules will apply:

If the option selected in the Payables Option is At Invoice

Validation and Payment Time, then in the Supplier Site two
LOVs will be editable:
o Invoice Withholding Tax Group
o Payment Withholding Tax Group

If the option selected in the Payables Option is At Invoice

Validation Time, only one LOV will be editable:
o Invoice Withholding Tax Group

If the option selected in the Payables Option is At Payment

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Time then only one LOV will editable:

o Payment Withholding Tax Group

If the option selected in Payables Option is Never then no

LOV will be editable.

The LOVs will show the same Withholding Tax groups as are being shown in
the current Withholding Tax group LOV.

Figure 2: Supplier Header If 'Allow Withholding Tax' checkbox is selected.

Figure 3: Supplier Site If 'Allow Withholding Tax' checkbox is selected.

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Changes in application transaction UI

Invoice Workbench (APXINWKB) Form
The Invoice Workbench will show two columns Withholding tax groups to be applied at the time of Invoice
validation and Withholding Tax groups to be applied at the time of Payment. The values here will be defaulted from
the Supplier/Supplier Site. The User can also enter/edit the values here depending on the Business Rules
described below.
Business Rules

In the Invoice Workbench the existing column of Withholding Tax Group will
be renamed to Invoice Withholding Tax Group. This will be now used for
applying Withholding Taxes at the time of Invoice. One more new column will
be added called Payment Withholding Tax Group. This will be used to apply
Withholding Taxes at the time of Payment. These columns will be shown at all
the following levels:
o
o
o

Invoice Header Level

Invoice Line Level
Invoice Distribution Level

At the Invoice Header level the values for both Invoice Withholding Tax
Group and Payment Withholding Tax Group will default from the respective
values in the Supplier Site. This default will happen only if the Supplier Site for
which the invoice is entered is enabled for Withholding Tax.

At the Invoice Line level the values will default from the Invoice Header.

At the Invoice Distribution level the values will default from the Invoice Line.

These columns will show the same Withholding Tax Groups as are being
currently shown for the column 'Withholding Tax Group'.

If the option selected in the Payables Option -> 'Apply Withholding' region is
At Invoice Validation and Payment Time then:
o

o
o

If the option selected in the Payables Option -> 'Apply Withholding' region is
At Invoice Validation then:
o

o
o

The values in the Invoice Withholding Tax Group and Payment

Withholding Tax Group will be defaulted from the respective columns
in the Supplier Site.
The column Invoice Withholding Tax Group will be editable until the
invoice is validated.
The column Payment Withholding Tax Group will be editable until
the invoice is paid.

At the time the invoice is entered for the Supplier, the Withholding
Taxes to be applied at the time of invoice validation will default from
the Supplier Site to the column Invoice Withholding Tax Group.
The column Invoice Withholding Tax Group will be editable until the
invoice is validated.
The column Payment Withholding Tax Group will not be editable at
all.

If the option selected in the Payables Option -> 'Apply Withholding' region is
At Payment Time then:
o

At the time the invoice is entered for the Supplier, the Withholding
Taxes to be applied at the time of payment will default from the
Supplier Site to Payment Withholding Tax Group.
The column Payment Withholding Tax Group will be editable until
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o

the invoice is paid.

The column Invoice Withholding Tax Group will not be editable.

If the option selected in the Payables Option -> 'Apply Withholding' region is
Never then:
o
o

At the time the invoice is entered for the Supplier, nothing will default.
Both the columns Invoice Withholding Tax Group and Payment
Withholding Tax Group will be non-editable.

Figure 4 : Invoice Header

Figure 5: Invoice Lines

Figure 6 : Invoice Distribution

Supplier and Payables Interfaces

Similar changes have been done in the Supplier Import interface to get the
Withholding Tax groups populated for the suppliers.

Similar changes have been done in the Payables Open interface import to get
the Withholding Tax groups populated for the imported invoices.
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User Procedures
Setup
Setup Payables Option
In the Payables Option set Apply Withholding Tax to At Invoice Validation and
Payment Time.

Figure 7 : Payables Option: set 'Apply Withholding Tax' to BOTH Invoice Validation and Payment time

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Setup Supplier Site

Setup at Supplier Site Tax Details Page

Attach the Withholding Tax code for Invoice and Payment time
withholding.

Figure 8 : Supplier Site populated with Withholding Tax group of INV and PAY for invoice and payment time
withholding.

User
User Task Description
Business Examples:
Withholding Tax code INV - 6.5%
Withholding Tax code PAY - 4%
Let us assume that the User enters an Invoice for 10,000 for Supplier SRAMANUJ
and Site SRAMANUJ.
INV and PAY will default at the header, line and distribution levels, though the user
can edit this field at any level. There is only one line of 10,000.

Figure 9 : Invoice Workbench defaults the Withholding Tax groups for both Invoice and payment time withholding.

At the time of validation the following withholding lines for 650 will be generated.

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Figure 10 : Validation of invoice creates withholding distribution lines

Now if the payment of 5000 is made, then the payment of 4786.1 would be made.

Figure 11 : Partial Payment made

An additional withholding line of 213.9 would be created.

Figure 12 : Payment time withholding distribution created

Calculation of AWT at payment time is done as follows :

a) Invoice amount - 10000

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b) AWT on Validation (AWT Code INV 6.5%) = 10000*6.5% >> 650

c) Net payable after AWT on validation (a-b) = ( 10000 650 ) >> 9350
d) Partial Payment amount of 5000 is made.
AWT would be = ((d/c) * a) AWT % at payment time (AWT code PAY 4%)
((5000 / 9350) * 10000) * 4% = 213.9
Payment made = 5000 213.9 = 4786.1

Let us make the remaining payment for the invoice. .

Payment of 4163.9 would be made.

Figure 13 : Remaining payment made

An additional withholding line of 186.1 would be created.

Figure 14 : Payment time withholding distribution created

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Calculation of AWT at payment time is done as follows :

a) Invoice amount - 10000

b) AWT on Validation (AWT Code INV 6.5%) = 10000*6.5% >> 650
c) Net payable after AWT on validation (a-b) = ( 10000 650 ) >> 9350
d) Partial Payment amount of 5000 is made.
AWT would be = ((d/c) * a) AWT % at payment time (AWT code PAY 4%)
((4350/ 9350) * 10000) * 4% = 186.1
Payment made = 4350 186.1 = 4163.9

To summarize :
a) Invoice amount 10000
b) AWT on Validation (AWT Code INV 6.5%) = 10000*6.5% >> 650
c) AWT on Payment (AWT Code PAY 4%) = 10000*4% >> 400
(Deducted in 2 payments ( 213.9+186.1) )
d) Payments made (a-b-c) = (10000 650 400) = 8950
(Paid in 2 payments (4786.1 + 4163.9)

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