Difference between Withholding Taxes and Extended Taxes

What is the difference between Withholding Taxes and Extended Withholding Taxes?

Please read this for the same. I have mentioned prominant difference between the two.

Withholding Tax
Classic Withholding Tax (All release)
Extended Withholding Tax (from release 4)

Difference between the two

S.No

Individual Function

Classic

Extended

Withholding Tax on Outgoing payment

Yes

Yes

TDS on Incoming payment

Yes

TDS at the time of Invoice

Yes

TDS on partial payment Yes

No. of withholding tax from each document

TDS basis

Max 1

Several

- Net amount

Yes

Yes

-Gross amount

Yes

Yes

-Tax amount x

Yes

Rounding rule

Yes

Cash discount consideration

Accumulation

10

Minimum/Maximum amt and exemption

11

Certification Numbering

12

Calculation Formula

SAP FI Tips by : Kapil

Yes
Yes
Yes
Yes
Yes

Yes

Withholding tax is calculated and posted to the appropriate withholding tax accounts at different stages,
depending on the legal requirements in each country. As a rule, withholding tax is posted at the same
time that the payment is posted, in other words the outgoing payment (Accounts Payable) or incoming
payment (Accounts Receivable), is reduced by the withholding tax amount.

In certain countries, such as Brazil, the Philippines, and Spain, withholding tax can or must be posted
when the invoice is posted. This means that the amount receivable or payable is reduced by the
withholding tax amount.
Extended withholding tax supports both concepts.

The key concept in extended withholding tax is the distinction between withholding tax type and
withholding tax code. While withholding tax types represent basic calculation rules, specific features of
these rules - in particular the percentage rate are represented by the withholding tax code. You can define any number of withholding tax codes for a
given withholding tax type.

If a particular transaction requires more than one kind of withholding tax, this is covered in the SAP
System by defining more than one withholding tax type.

When entering a line item, you can enter withholding tax data for each of these withholding tax types.

SAP FI Tips by : Rahul Gupta

How To Configure Withholding Tax?

Steps for extended withholding tax :

1. Check withholding tax countries
2. Define Ex. Withholding tax types for invoice postings
3. Define Ex. Withholding tax codes
4. Formula for Ex. Withholding tax calculation
5. Assign Ex. Withholding tax types to Company code

6. Activate Ex. Withholding tax

8. Create a G/L a/C for Ex. Withholding tax
9. Define A/C for Ex. Withholding tax (DBWW)
10. Make changes in Vendor master (XK02)
11. Maintain Company Code Settings:
Path: IMG -> Logistic -> General -> Taxes on goods movement -> India -> Maintain company code
settings
12. Activate country version for specific fiscal year position
Path: IMG -> FA -> -> FAGS -> Taxes on sales purchases -> Basic Setting -> India -> Activate country
specific for fiscal year position